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I think the danger is that if you then give both A and B an incentive to increase GDP and tell them that the GDP measures wealth, then they will start paying ea

I think the danger is that if you then give both A and B an incentive to increase GDP and tell them that the GDP measures wealth, then they will start paying each other $20, then $40, then $100. In and of itself that isn't harmful, but if you conclude from this that you are getting wealthier and wealthier then you might end up lying to yourself and making bad decisions based on this. As a concrete example, women have slowly moved out of the domestic sphere and into the workplace. At the same time, child care and rearing have become booming industries. Both these things increase GDP. But the question is whether all the increase in GDP is real economic value, or whether a significant portion of it is just recording value that used to have $0 attributed to it (e.g. domestic housework, rearing and educating children, home-cooked meals). And a secondary question is whether continuing to push women to work even if they would rather stay at home is the right approach, because if you are a government policymaker, the latter choice will lower your economy's recorded GDP and might make you look bad/incompetent, even if the real value generated by domestic housework is very high. Problems with metrics create problems with incentives, which eventually may lead to skewed or wrong choices.

dragonwriter 9y ago
> I think the danger is that if you then give both A and B an incentive to increase GDP and tell them that the GDP measures wealth, then they will start paying each other $20, then $40, then $100. Prior to the headline of this article, I've never seen the idea that GDP measures wealth as opposed to activity anywhere. And I don't think anyone is going to be convinced that spending more money for no stuff and ending up with no more money in the bank at the end of the day is increasing their wealth, no matter what you tell them about GDP. In fact, I suspect the main outcome of what you suggest would be to convince people that you were wrong that GDP is a wealth measure (although people with a strong pre-existing belief that GDP does measure wealth might incorrectly be convinced that you just don't know what GDP means).
- smallnamespace 9y ago
  Replace 'wealth' with 'value-generating economic activity'. The basic point is that GDP fails to measure very well whatever it is claimed to measure, whatever language you prefer to use to call it. Economics is fraught with this sort of semantic debate because what one person calls 'wealth' another will disagree with.
FabHK 9y ago
> Problems with metrics create problems with incentives, which eventually may lead to skewed or wrong choices. Goodhart's law: "When a measure becomes a target, it ceases to be a good measure." https://en.wikipedia.org/wiki/Goodhart's_law https://en.wikipedia.org/wiki/Goodhart's_law

dragonwriter 9y ago

> I think the danger is that if you then give both A and B an incentive to increase GDP and tell them that the GDP measures wealth, then they will start paying each other $20, then $40, then $100. Prior to the headline of this article, I've never seen the idea that GDP measures wealth as opposed to activity anywhere. And I don't think anyone is going to be convinced that spending more money for no stuff and ending up with no more money in the bank at the end of the day is increasing their wealth, no matter what you tell them about GDP. In fact, I suspect the main outcome of what you suggest would be to convince people that you were wrong that GDP is a wealth measure (although people with a strong pre-existing belief that GDP does measure wealth might incorrectly be convinced that you just don't know what GDP means).

smallnamespace 9y ago
Replace 'wealth' with 'value-generating economic activity'. The basic point is that GDP fails to measure very well whatever it is claimed to measure, whatever language you prefer to use to call it. Economics is fraught with this sort of semantic debate because what one person calls 'wealth' another will disagree with.

FabHK 9y ago

> Problems with metrics create problems with incentives, which eventually may lead to skewed or wrong choices. Goodhart's law: "When a measure becomes a target, it ceases to be a good measure." https://en.wikipedia.org/wiki/Goodhart's_law https://en.wikipedia.org/wiki/Goodhart's_law