42 ms·

Gross domestic product is a misleading measure of national success (2014)

• FunnyBadger 4y ago
• knaekhoved 4y ago
  "... and replace it with a metric which explicitly optimizes for all the policies I personally like."
  • tabtab 4y ago
    GPD is also personal choice. There's no Grand Law of the Universe which says GDP should be the primary metric. Its importance is an invention of human minds, out of either human nature and/or historical happenstance.
  • mola 4y ago
    Of course. that's the meaning of politics. GDP is not a natural law. Economics it s not a hard science it is full with ideology. The configuration space allowing a functioning society, while constrained, is still very large. we make choices to navigate that space. These choices are based on preferences. It's been a while since a very specific ideology gained a hegemony in economic thinking. As hegemony often does, it pretends to be a natural law, inevitable and unchangeable. It's not.
• rav 4y ago
  Needs (2014) in the title.
• deltree7 4y ago
  Nobody makes any policy decisions based on GDP. It's just a proxy of economic activity. Nobody ever said, We (won't) need policy X because we are at Y GDP. Companies make decision based on supply/demand. So, this whole research is kinda pointless. In fact the worst thing anyone could do is have a metric and make the entire nation focus on that.
  • transcriptase 4y ago
    Tell that to the Canadian government. It currently considers massive deficits fine because of our debt-to-GDP ratio, despite GDP being driven by a real estate bubble for the last several years.
    • opportune 4y ago
      The Canadian government is also growing their tax base/GDP quickly due to high levels of working-age immigration, not just real estate
    • bee_rider 4y ago
      Is there a requirement to keep the debt-to-GDP ratio below some cap or something? Or is this just the reason the give when questioned about it by the media, etc?
      • transcriptase 4y ago
        It’s the reason given, usually in comparison to other G7 countries.
    • kornhole 4y ago
      It is not just Canada. The US and other countries justify their debt levels by this and it is used by bond traders to measure health of bonds issued. Military spending as percentage of GDP is also cited. So if military spending and borrowing ability is pegged to GDP, you can see why we pump it up as much as we can as distorted as it is on a nation's internal well being.
    • deltree7 4y ago
      Once again show me an economic policy that is tied to GDP
      • deleted 4y ago
        [deleted]
  • 4y ago
• deleted 4y ago
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• nonrandomstring 4y ago
  Reading an earlier thread on Perl I was thinking about how concepts, language and behaviour relate (as Wittgenstein and Ayer might have it). Someone mentioned how, as a Python user, they barely had to think about pointers/references. Things get magically referenced when needed. Seems like progress. When concepts get coded into a language, in this case "economics" (which is a tool for trying to see the world), they put down roots. Other concepts "hang off" them. So, we could certainly try to supplant GDP as a metric. But then what of all the other economic structures that people have built on GDP? Who will let go of those? You have to tear down entire branches of thought and replace them with new utility concepts that make using old ones as anachronistic as using pointers in Python.
  • dragonwriter 4y ago
    > So, we could certainly try to supplant GDP as a metric. This is very apparent, because it was only about 30 years ago that GDP itself replaced GNP as the preferred metric for the same purposes in the US. The article mentions the use of GDP internationally for longer, but the US preferred GNP until 1991. Its also worth noting that the creator of the GDP, a decade before it became dominant (internationally), also warned against overfocusing on it as a measure of welfare, in terms that really apply to any simple unidimensional measure: “The valuable capacity of the human mind to simplify a complex situation in a compact characterization becomes dangerous when not controlled in terms of definitely stated criteria. With quantitative measurements especially, the definiteness of the result suggests, often misleadingly, a precision and simplicity in the outlines of the object measured. Measurements of national income are subject to this type of illusion and resulting abuse, especially since they deal with matters that are the center of conflict of opposing social groups where the effectiveness of an argument is often contingent upon oversimplification” [0] The state of the economy is complex and multidimensional, and we need a set of measures which reflect that. [0] https://fraser.stlouisfed.org/title/national-income-1929-1932-971 https://fraser.stlouisfed.org/title/national-income-1929-193... , pp. 5-6
    • pishpash 4y ago
      Has anyone used the growth of national wealth, or is that equivalent to GNI/GNP somehow? (I don't think so but maybe?)
• mind-blight 4y ago
  This should be marked as [2014]
• xnx 4y ago
  GDP might be the ultimate example of Goodhart's Law: https://en.wikipedia.org/wiki/Goodhart%27s_law https://en.wikipedia.org/wiki/Goodhart%27s_law
  • tabtab 4y ago
    A common example is "lines of code". If you pay by lines of code, then coders will bloat up code to pad their metrics, making it verbose and redundant.
    • wildrhythms 4y ago
      More common is some mostly pointless (or annoying) new feature that an overzealous project manager wants to get users to 'use' (thus boosting some metric they can point at to secure a promotion), so they have the engineers implement a gigantic popup pointing at it. Or worse, they put the entrypoint to the feature in some high touch area so all of the power users accidentally click on it, thus logging an interaction and making the line go up. https://en.wikipedia.org/wiki/Goodhart%27s_law https://en.wikipedia.org/wiki/Goodhart%27s_law
  • tootie 4y ago
    Yup. There is simply no way we can replace GDP with another metric. There's always a thousand smartasses who say the unemployment rate is fake. It's not fake, it's an indicator and can never tell a complete story. Employment, economic activity, inflation, trade are all drowning in data points that inform some specific minutiae. The solution is to not base policy on indicators but politics needs to keep things simple.
    • Ambolia 4y ago
      Unemployment would be less misleading if it was just "total people working" / "total people in the country".
      • strangeattractr 4y ago
        No it wouldn’t. It would be bloated by the number of people with serious disabilities, health conditions and retirees. As your population ages you would get a bump in unemployment that tells you nothing about the demand for labour. In my first Economics subject in high school they told us to never look at unemployment without looking at the participation rate with it.
• rajeshp1986 4y ago
  It is interesting how western countries want to change the metric for economic progress when they are lagging on it. They wouldn't leave GDP as metric if all was well.
  • systemvoltage 4y ago
    It's similar to redefining what 'recession' means when things aren't going well.
  • geysersam 4y ago
    That may be so. Interesting observation. But GDP might still be a flawed measure, for the reasons mentioned in the article.
  • abeppu 4y ago
    You're saying western countries want metrics which show that they're doing well and GDP no longer fits the bill? My intuition is that the opposite is the case; people in countries which have high GDP per capita who still _feel_ that they're suffering want numbers that validate their problems as real and serious. Americans are on top from the GDP perspective, in the top 10 for GDP per capita, but it doesn't make them live longer or healthier, doesn't make them happy or less stressed, doesn't give them good schools or stability or fulfilling work or optimism about the future or confidence in institutions. I want the leading metric to show that things are _bad_ so politicians stop pretending that they're good at governing just because of the success of an economy they have little to do with.
  • allemagne 4y ago
    Whatever attitudes there are in regards to GDP across a diverse set of societies is essentially a deliberate and sinister choice by someone. That much is obvious. However, the thrust of the article is actually pretty much the opposite, that Western/developed countries stubbornly want to keep the metric of GDP due to "vested interests".
• tabtab 4y ago
  One problem with this idea is that if you don't grow your GDP, countries that do grow it will stomp you militarily and/or diplomatically.
  • bee_rider 4y ago
    Military spending (possibly PPP adjusted) seems like a better metric for that sort of thing anyway.
• chrisweekly 4y ago
  I like Bhutan's constitutional adoption of "Gross National Happiness" as an alternative: https://en.m.wikipedia.org/wiki/Gross_National_Happiness https://en.m.wikipedia.org/wiki/Gross_National_Happiness
  • sporadicallyjoe 4y ago
    The Human Development Index is another good alternative: https://en.wikipedia.org/wiki/Human_Development_Index https://en.wikipedia.org/wiki/Human_Development_Index
    • tormeh 4y ago
      I don’t personally like it. It measures input factors rather than outcomes. I think surveyed happiness multiplied by life expectancy is a better measure.
      • robocat 4y ago
        “Input factors” have many imperfections, but at least they can lead to more objectively comparable metrics. When comparing between populations, subjective measures such as surveyed happiness make for very poor and very noisy metrics - you often can’t even simply compare answers between different populations within a country. It is even dependent upon your age demographic https://archive.ph/sAzDA https://archive.ph/sAzDA and there are some surprisingly counterintuitive properties to reported happiness: https://en.m.wikipedia.org/wiki/Hedonic_treadmill https://en.m.wikipedia.org/wiki/Hedonic_treadmill https://en.m.wikipedia.org/wiki/Easterlin_paradox https://en.m.wikipedia.org/wiki/Easterlin_paradox I would think that life expectancy is a poor metric, because: (1) the differences become smaller as it rises so it becomes dominated by noise, (2) it overvalues the last few years of life compared to the rest of a life, and (3) expectancy is highly dependent on how it is calculated along with parameters such as input factors, similar to those that you dislike! In summary: intuition can often be a very poor substitute for research, and before relying on your intuition it is a good idea to look at the basics.
  • bootsmann 4y ago
• jamesgill 4y ago
  The silliness of GDP is one of the worst-kept secrets in politics and economics. It's like measuring the quality of a car by how fast it's going.
  • hansvm 4y ago
    Is that the reason GDP is silly though? Under the assumption that the car will attempt to go as fast as capable (not usually true for cars, plausibly true for an economy) and that the capability is a measure of quality (true for both), GDP serves as a nice proxy for something we do care about.
  • JohnJamesRambo 4y ago
    Or how good your wine is by the alcohol percentage.
  • SantalBlush 4y ago
    GDP means income. That's it. There is no secret, no grand conspiracy.
  • refurb 4y ago
    That’s a terrible analogy. GDP is like measuring how useful the car is.
    • lmm 4y ago
      Measuring how useful the car is would be perfect. GDP is like measuring how useful the car is by its market value.
      • refurb 4y ago
        Right, and usefulness (however defined - hauls cargo, go fast, fuel efficient, looks sexy) determined demand which influences market prices (assuming supply isn’t overly restricted). So market price tends to be a pretty good proxy for usefulness. People who complain about GDP as a measure are usually just complaining about things they don’t like that go into GDP like pointless (to them) consumer goods.
• eterevsky 4y ago
  As the article correctly mentions, GDP is analogous to a company revenue. It doesn't directly reflect the profit, but it is an objective metric which is relatively easy to reason about.
• Guthur 4y ago
  Preparing the ground for a complete collapse in your standard of living... "Don't worry your happiness was only an idea and didn't really exist anyway"
  • drekipus 4y ago
    While it's fair to mention that, I don't think it's really of relevance. One could argue that GDP is objectively bad, whether there is a boom or bust going on or about to happen. Things will naturally get worse before it gets better. Just strap in and enjoy the ride.
• osterwood 4y ago
  I was surprised to learn that, in the US, health care is part of GDP. How messed up is that? Health care costs are not a productive output of an economy and to include them in GDP is ludicrous.
  • Retric 4y ago
    By that token why not exclude entertainment spending as useless. In reality people devote surplus to things they want rather than pure needs.
    • Nullabillity 4y ago
      Entertainment is positive value ("I want to watch/play/whatever this because I enjoy it"), healthcare is compensation for negative value ("I got injured and want to feel a little less shit"). Nobody goes to the doctor just because they felt like doing it that day. Counting the positive contribution of healthcare without counting the negative contributions of the injuries that lead people to seek healthcare is going to lead to a metric that looks better the more injuries there are!
      • Retric 4y ago
        First do you really think people will get more injured to game GDP? Anyway the metric is capacity to fulfill peoples wants. If the population has injuries then it will be less productive and therefore have a lower GDP. See the broken window fallacy.
        • Nullabillity 4y ago
          > First do you really think people will get more injured to game GDP? Death squads going out and punching people to get them into hospitals? Probably not. Lowering safety/emissions/etc standards in ways that both lead to increased immediate profit and (hopefully unintentionally) causes an increase in injuries over time? Absolutely.
          • 4y ago
• a-dub 4y ago
  p50 standard of living seems like the obvious one to me.
  • akomtu 4y ago
    If I were an ultra-rich who owns 10% of the entire nation's wealth, it would be rational to promote GDP as the main indicator of success, because 10% of that GDP belongs to me. On the other hand, if I were the collective consciousness of the people, I'd define success in the percentile terms, like you said.
• Bubble_Pop_22 4y ago
  Given the established link between energy consumption and human welfare and happiness...why not use BTU consumed per capita? Or even Barrels of oil equivalent.
• steven_noble 4y ago
  It's grossly misleading to suggest that economists use GDP as a measure of national success
  • blooalien 4y ago
    Nope economists may not, but politicians often do (when it suits them), and many "corporate bean counters" use similar measures of "success" (when it suits them), and "Average Joe" takes whatever their favorite politician or corporation tells them as "Gospel Truth"…
• lkrubner 4y ago
  Robert Kennedy, on the campaign trail in 1968: "Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans." https://www.theguardian.com/news/datablog/2012/may/24/robert-kennedy-gdp https://www.theguardian.com/news/datablog/2012/may/24/robert...
  • fedreserved 4y ago
  • nullc 4y ago
    Any idea who wrote that speech for Robert Kennedy?
    • humanistbot 4y ago
      Most likely Ted Sorensen, JFK's chief speechwriter and also very involved in RFK's 1968 campaign. Edit: He also wrote the "We choose to go to the Moon" speech
    • lkrubner 4y ago
• QuarterReptile 4y ago
  As another great example of this: hurricane Katrina was a huge stimulus for economic activity in New Orleans, measured in terms of GDP.
• javajosh 4y ago
  So if passive income is the rational goal, shouldn't that be the measure of national success - numbers that express the shape and scale or aggregate passive income. It's also worth assuming that the equity barons (to borrow a term from The Diamond Age) hire capable administrators close to home, who get cushy office jobs and even small profit to invest and get a little equity themselves. One can also discuss more and less desirable distributions between the equity barons and admins. The rest of the world gets nothing, or as little as is necessary to keep the peace, and America remains in undisputed charge until some natural disaster ends human life. And absent any particular reason to spread life beyond our thin and fragile biosphere, we won't. Rather than paper over the ugliness I think we should accept it and see what can be made of it. A nation will have succeeded if it can spread life beyond Earth. It will have succeeded if it can protect it's citizens capacity for a calm, creative, productive life filled with wonder and joy long enough for enough people to realize this, and get to work. It's not going to be easy, and our time is limited.
• nostromo 4y ago
  It's hard to overstate how terrible this idea is. GDP is a concrete measure that is difficult to fake. Once you start arguing about the economic value of volunteering, divorce, income inequality, and crime -- you've opened the door to never being able to trust GDP again. Should we create new metrics to track progress? Sure. Should we stop tracking GDP? No way.
  • epgui 4y ago
    Is it more unreasonable to assume the value of these things is >0, or to assume that the value of these things is ==0? I don't think anybody is arguing that we should stop measuring or looking at GDP entirely. The article argues that we need to recognize that we can't just close our eyes to the value of these things. It's kind of like talking about the value of a human life in dollars. We know this number is more than 0$, and we know this number is less than __POSITIVE_INFINITY__$, and we're probably never really going to agree on a number somewhere in the middle, but it's still an important number to consider.
    • nostromo 4y ago
      It's more reasonable to say that determining the value of divorce is beyond the scope of GDP.
      • epgui 4y ago
        • ravel-bar-foo 4y ago
          > Did you really read the article? Please don't do this. It's against the rules, doesn't contribute any new insight, and the answer is plain from the conversation: they did. (Divorce stats being included into new metrics of economic health was specifically mentioned in the article and AFAICT not previously in the comments.)
  • scotty79 4y ago
• em500 4y ago
  The title/article seems to be a bit of a strawman, AFAICT countries (or their governments / citizens) do not consider the GDP as the one and only measure of national success. Politics are driven by tons of different interest groups (in the broadest sense, ranging from corporate interests, environmental activists, minority representatives, medical or teaching professionals, farmers, retirees living on state pensions, etc, etc.), not by whether some policy might give a boost to GDP. I could argue that it would probably be better if they actually did, but that's for another thread. In truth, pretty much nobody really knows for sure what policies actually will increase GDP, or what causes the short term fluctuations (business cycle / recession) or variation in long term divergense between different countries in the first place. The more honest academic economists will freely admit this. (I was explicitly thaught so in my graduate macro-economics courses). So I think it's a strawman to think that countries/governments are engating in some kind of myopic GDP maximization plan. I think the appropriate analogy is household or personal income. (GDP is just all incomes in a country summed up and corrected for inflation.) It's probably not the most important thing in the world, and probably not the most important determinant of personal happyness or life satisfaction. But a severe lack of it (especially compared to the people around you) or an unexpected large drop will probably be considered problematic by most people.
  • DontTrustOver25 4y ago
  • cryptonector 4y ago
    > In truth, pretty much nobody really knows for sure what policies actually will increase GDP [...] Increase GDP?
  • roenxi 4y ago
    > In truth, pretty much nobody really knows for sure what policies actually will increase GDP... Have they tried securing access to large amounts of cheap energy? It is a bit of a win-win because either GDP goes up and case closed or they can sit back and relax in luxury mulling why GDP didn't go up despite massive increases in the general prosperity. Energy isn't the entire story because there also need to be people around who know how to transform it into whatever you want, but it is a rather important part of the puzzle. After that, freedom and education are probably going to make up the rest. What else is there? I suppose land ownership. The puzzle isn't that complicated. We all know what comfort looks like. Asking how to make GDP go up is the wrong question, it is just a tool to point out when policies are wasting resources. More waste -> less GDP -> notice that and waste less -> reorient to secure prosperity.
• bohadi 4y ago
  Next peer-reviewed journal debunks that measure of man his bank account.
• fleddr 4y ago
  "The philosopher John Stuart Mill noted more than 200 years ago that, once decent living standards were assured, human efforts should be directed to the pursuit of social and moral progress and the increase of leisure, not the competitive struggle for material wealth" Yes, we took the wrong turn. Most people are subjected to a life long rat race of economic relevance/volatility where most of their waking hours are spent just trying to make a living, by any means necessary. What makes the state of humanity extra sad is that all this raping of the planetary resources that we do still does not elevate us out of this misery. It's unclear who this destructive machine is serving. Consider the point of view of an ordinary citizen. Who genuinely has your best interest at heart? A business? No. A bank? No. A country? No.
  • RichEO 4y ago
    > A business? No. A bank? No. A country? No. In a modern democracy, only one of those three could conceivably have your interests at heart. Lumping them all together damages participation in democracy, which exacerbates the problem.
    • kortilla 4y ago
      Democracy absolutely does not care about you and thinking it does is damaging to democracy. Democracy is just executing the will of the majority. If your interests don’t align with thah majority, the country is not acting on your behalf. Knowing that an participating in democracy without tying up your identity in the outcomes is critical.
      • MichaelZuo 4y ago
        Well it does care about you, just that the level of care you receive is roughly what hundreds of millions of others also get. 1/250000000 is a pretty small amount in the grand scheme. We typically round down small fractions to zero so a very niche opinion with a few hundred folks is still approximately zero.
        • kortilla 4y ago
• paxys 4y ago
  I don't think there is any agreed upon measure of "national success". GDP as a measure pretty closely tracks the economic condition of a country, and that is what it is used as.
• dongobongo 4y ago
  From Luke Smith's post on GDP: https://lukesmith.xyz/articles/why-its-bad-to-have-high-gdp/ https://lukesmith.xyz/articles/why-its-bad-to-have-high-gdp/ "GDP is only a measurement of how reliant a place or country is on the global economy. Self-sufficiency has a GDP of 0. Wasteful consooomerism has an extremely large GDP."
  • hot_gril 4y ago
    Wasteful consumerism, if it's truly wasteful, will also lead to lower future GDP growth. It's not a bad long-term metric. But I won't care if the US president claims to have moved the GDP by X%, even across two terms. The market can stay irrational for a long time. To use Luke's example, say buzzsaws introduce planned obsolescence. People buy more saws for no good reason, which is "good for the GDP." More fixed income goes to buzzsaws instead of eventually being spent on something more useful. The buzzsaw industry expands a bit, pulling people and resources from other endeavors. Society is collectively spending its effort producing then throwing away buzzsaws when it could have created future growth through technology etc, which the GDP would eventually measure.
  • paxys 4y ago
    I have no idea who Luke Smith is but none of that article makes any sense. GDP is the measure of economic activity. A self-sufficient community would not have a GDP of 0 because they would still have transactions among themselves. Perfect self-sufficiency would actually generate a very high GDP number because of how diverse and specialized the community would have to be to take care of itself. Outside of that everything in it is just a generic "companies are bad" "fiat currency is bad" "government is bad" spiel that has been said a billion times already.
    • hot_gril 4y ago
      Initially, he means that a single self-sufficient person contributes 0 to the GDP. Then it seems like he means people in this village don't trade with each other, but I'm not sure. If they trade without money, first of all that's very inefficient, secondly there's still a GDP of sorts but maybe he means it's not measured. But he doesn't care about efficiency. He's not saying GDP is a poor indicator of economic growth. He's more saying that economic growth is bad, globalism is bad, and maybe hinting that *skims other article on site* an ancient, simple life according to Orthodox Christianity is the true path to happiness. And this is too off-topic for me to discuss, I'm just laying out what the dude is saying.
• refurb 4y ago
  People love to rail against GDP as a bad measure, but what do you think pays for all those social programs and healthcare? It doesn't grow on trees. More GDP = more money for things you want.
• deleted 4y ago
  [deleted]
• bovermyer 4y ago
  So... not to denigrate Bhutan or anything, but how and why did Bhutan come up with the global happiness index?
• kornhole 4y ago
  The gig economy boosts GDP. If I work as an employee, I am just an expense to a company. If I setup an S corporation and contract my services to that same company, I am now growing the services sector and increasing GDP. I am still doing the same amount of work but just increasing transactions. I seem to be incentivized by pay and taxes to work as contractor, and this may be because the government is trying to pump GDP.
  • ummonk 4y ago
    No, if you contract your services to that company, your contribution to GDP gets cancelled out by the intermediate consumption of that company purchasing your services. The GDP is the same either way.
    • kornhole 4y ago
      How does it get cancelled out? Take this example: Company A has $1M revenue from creating services or products. Then my company B invoices company A for $250K. GDP is $1.25M. I do not report who I billed to the government who compiles GDP. So I don't see how they can not include my services as part of GDP.
      • ummonk 4y ago
        Company A reports $250K in non-employee-compensation expenses to the government. This intermediate consumption gets removed from their share of the GDP, so the total is ($1M-$250K) + $250K = $1M.
• paxys 4y ago
  It's funny to argue on one hand that GDP is broken because it tracks only economic metrics and not social ones, and then push another index (GPI) which claims that "genuine progress" peaked in the 70s and went only downhill from there. If "back in my day..." was an index this would be it.
• photochemsyn 4y ago
  To use an ecological analogy, it's about as meaningul as the gross biological productivity of an ecosystem, which in the vast majority of systems means the amount of carbon converted to biomass by plant photosynthesis. However this tells you very little about the health of the system - it could mean a river choked with invasive weeds and toxic algal blooms, or it could mean a river full of insects fed on by trout that local humans harvest regularly as a local source of protein. Additionally, some ecosystems (like deserts) have low gross productivity, but as deserts go, are healthy ecosystems that just support less life than tropical rainforests do. Hence, you just need a lot of other numbers besides GDP to make sense of how an economic system is doing overall. Proably about a dozen at least, but that's too many for simplistic propaganda and click-bait headline purposes.
• pasabagi 4y ago
  This whole question of 'are material things really all that matters' is kind of boring, but the article does provoke an interesting question: how do you handle bubbles? If you have a colossal GDP, but it's all hinging on a very hot tulip (or housing) market, does that really do all the things a colossal GDP that's, say, service economy based? One of the things people like about GDP is you can sort of get a good guess about how, when the rubber hits the road and countries start pushing and shoving each other, or a calamity like COVID occurs, how it's going to turn out. I wonder how the extremely bubbly (almost foam-like) post-70's economy factors into this.
• ttkari 4y ago
  Of course it is, as a measure of national success it should be replaced with the number of girls who ride their bikes to school.
• andrewmutz 4y ago
  Can we update the title to reflect that this is 8 years old? (2014)
• Jedd 4y ago
  I accept that fiat money is entirely supported by the notion of perpetual growth, but in the abstract it's hard to come to terms with the idea our society is so fundamentally committed to, and reliant upon, growth.
  • ummonk 4y ago
    An economy can function without growth. Stagnation is perfectly viable. But why should a society not be fundamentally committed to growth and aspire to increasing greatness?
    • H12 4y ago
      Relying on growth generally means taking on debt and risking large sums of capital on projects with the hope that it brings a return. Some projects will work out, and some won't. When you're a company this is largely fine -- the worst case is that the company goes under, dissolves, and employees move on to new positions at new companies. When you're a city, failure is not an option. Chicago officials can't simply say "welp, that investment didn't pay off like expected", shut down the water lines, and ride a golden parachute into the sunset while its citizens fend for themselves. What's more, at the local level, the city's revenue is largely unaffected by successful growth-targeting projects. Any revenue that comes from GDP is largely in the form of sales and income taxes, which largely go to the state and the fed. So if a city is tracking GDP as a key metric they're in for a rough time. It means they're getting saddled with 100% of the maintenance liability of projects, and (usually) 0% of the revenue. Unless a project is bringing in more citizens and growing the tax base, it's going to operate in the red no matter what. Most commonly, the project will be a road or highway that ends up displacing people, spreading them out, and diluting the tax base. So at least at the local level, focusing on growth, specifically as measured by GDP, is a recipe for disaster (e.g. Detroit). I'd much rather my city focus on some other metric that's tied to sustainability.
  • refurb 4y ago
    No it’s not. Fiat money can easily be used for a 0% growth economy.
• ummonk 4y ago
  Does anyone think GDP is a measure of national success? What it is is an indispensable measure of the strength of a nation's market economy - which is a major limiting factor in tackling actual end goals such as the well-being of the population.
• bartimus 4y ago
  It's just one of many indicators and I will most certainly not leave it behind.
• BenGosub 4y ago
  The higher the GDP, the more taxes for the government. This is I think the main reason why this number is the main target.
• bawolff 4y ago
  I thought it was obvious that gdp isn't the be all and end all. "All models are wrong, some are useful" and all that.
• imoreno 4y ago
  GDP, like many economic metrics, is of course not an absolute indicator of anything significant. You can set up two shell companies and have them buy and sell the same paper clip between them thousands of times a second, for a million dollars each. It will boost GDP by quite a lot. Of course historically, such deception has not always dominated, and the apparent GDP has been a good proxy for total genuine economic activity. Economic activity is in turn a proxy for confidence: If everyone is spending more money, it means they're confident they see value being produced that they want to capture. Consumers presumably feel they'll be comfortable for years to come. Businesses think it's time to hire staff, increase production and focus on growth. These things by themselves can be seen as positive effects, but also it means GDP is effectively a crowdsourced predictor of future economic outlook. So GDP by itself isn't that interesting, but it correlates with many economic phenomena that are of interest, which is why it's been a popular measure. I'm sure the article's authors are well aware of this. If you look at the title closely, there's a bit of sleight of hand: It is not common to claim (save perhaps for uneducated laypeople) that GDP is a measure of national success. It is commonly understood as a measure of economic health. Most people will readily grant that economic health does not necessarily mean national success, since they can decouple in crucial ways. For example, if your previously poor country suddenly becomes colonized by major imperialist powers, the GDP will certainly be bolstered, but the social and geopolitical effects may be detrimental. But when you attack the idea that GDP measures economic success, of course it sounds insightful, since it's the kind of misapprehension that is tempting to ascribe to others and not yourself. "Everyone has made a mistake- but not me!"
  • tuatoru 4y ago
    > You can set up two shell companies and have them buy and sell the same paper clip between them thousands of times a second, for a million dollars each. In the case of used goods, the only effect on GDP comes from the transaction fees paid to the broker. Same with buying an already existing house: the GDP contribution is the real estate and legal fees. And with the stock and bond markets: a trillion dollars' worth of stock changing hands only affects GDP to the extent of the brokerage fees, maybe a billion, maybe less.
    • 4y ago
• club_tropical 4y ago
  salus populi suprema lex The primary measure should be the physical health of the humanstock. If your "line goes up" but you have obese, mentally fragile, neurotic people on your hands, you're doing something wrong. Many things will follow naturally once you make peak physical health the top goal.
  • club_tropical 4y ago
    Not complaining but I have to say, being downvoted because I value actual health over some synthetic econometric measure that our managerial overlords tell us is "what akshually matters" is indefensible, y'all!
• joshe 4y ago
  Here's a good explanation about why gdp is important. https://noahpinion.substack.com/p/four-reasons-why-gdp-is-a-useful https://noahpinion.substack.com/p/four-reasons-why-gdp-is-a-... It is only one measure of success, but it is not misleading. You can just use it and 6 other measures. Then if infant mortality goes way up you can still say let's figure out how to manage that and if it costs some gdp, that's fine. In fact real policy is saying we should spend more of that gdp on prenatal care for example. Doing that will neither make gdp go up or down. And it's unclear who they're even talking about here. In the democracies politicians hardly talk about it at all. It's usually healthcare, some group is bad, or something should be regulated differently (like energy). Here's even more depth: https://ourworldindata.org/what-is-economic-growth https://ourworldindata.org/what-is-economic-growth
• RcouF1uZ4gsC 4y ago
  I am sure the Afghan Taliban and the Iranian Mullahs agree: You can't put a price on female virtue/modesty/chastity. So while keeping our women locked away at home depresses the GDP, it is a misleading measure of national success anyway.
  • lmm 4y ago
    Are they wrong?
• lamename 4y ago
  The Growth Delusion covers the pros, the cons, & the alternatives https://www.goodreads.com/book/show/36130581-the-growth-delusion https://www.goodreads.com/book/show/36130581-the-growth-delu...
• NaturalPhallacy 4y ago
  I've thought the Gini coefficient was better than GDP ever since I learned of it: https://en.wikipedia.org/wiki/Gini_coefficient https://en.wikipedia.org/wiki/Gini_coefficient
  • lmm 4y ago
    The Gini coefficient is a pure measure of inequality, you can "improve" it while making literally everyone worse off (e.g. destroy all things of value in your country, now everyone has nothing and you have perfect equality).
    • NaturalPhallacy 4y ago
      I mean if you "destroy all things of value in your country" I don't think you're going to be concerned about economic measures whether GDP or Gini, so isn't that kind of a red herring?
      • lmm 4y ago
        You wouldn't do something so extreme, but if you were trying to improve the Gini you might adopt measures that seemed to "succeed" but were actually reducing everyone's wealth.
• lifeplusplus 4y ago
  i agree but timing is too suspicious to not see it as political
• yrgulation 4y ago
  A bit like how pretax salary doesnt measure income. Too few understand that.
• astatine 4y ago
  When the G20 looks like it will (in a decade?) have 15 countries who were not part of the original lot, naturally GDP as a metric will lose favor /s
• DeathArrow 4y ago
  >GDP measures mainly market transactions. It ignores social costs, environmental impacts and income inequality. But GDP's role was never to measure income inequality, environmental impacts, diversity, affirmative actions. It was always an economic tool, not a SJW tool. As an economic tool it just measures how well a country is able to produce and sell goods and services. And for that purpose I know no other better tool than it and it's derivative, GDP per capita adjusted for PPP.
  • didibus 4y ago
    > GDP per capita adjusted for PPP What's the point of per-capita here? I've found personally this is the part that cause confusion. The per-capita makes it look like each person is equally participating in the gross production and receiving an equal income from it. Obviously that's false, the distribution is very uneven, so I've always wondered why we want it per-capita? If 1 out of 100 people produces 100% of the GDP and it's the same total GDP as some 10 person neighbor country, why adjust it by capita?
    • DeathArrow 4y ago
      >why adjust it by capita Because we might want to measure efficiency and compare two economies of different sizes.
      • didibus 4y ago
        But what if capita doesn't map to efficiency? I feel the idea of making it per-capita seems a bit dubious, I really doubt that you get an even per-capita distribution, it's probably very skewed.
• nitwit005 4y ago
  This has been known since the idea was first conceived: https://en.wikipedia.org/wiki/Gross_domestic_product#Limitations_at_introduction https://en.wikipedia.org/wiki/Gross_domestic_product#Limitat... The real issue is simply that, a lot of the things we want to convert to simple metrics can't be. Suppose I hand you a list of the exact rate each crime in a country was committed, and I ask you to convert that list to a single number, how would you do so? You could assign a weight to each crime, but how would you know which weights to use? What's the "true cost" of each crime? Of course, in reality we won't know the real rate of any crime. We will have estimates, which are likely quite far from the truth.
  • mjevans 4y ago
    Hypothetical; somehow the total dollar impact of the divergence from an ideal timeline, including the cost of detection, correction, and the related punishments / restitution etc is totaled. For figures that are emotionally priceless the actuarial figures used in major disaster calculation will be used. However the crime example also isn't very useful. Crimes aren't discouraged based on money cost, but a cost that is emotional and related to maintaining order and stability for society.
  • misnome 4y ago
    When I was first taught what GDP was at school we covered that it had limitations and biases, alongside other metrics that attempted to correct this. Apparently my high school teacher should have written a nature paper, instead.
    • em500 4y ago
      Same here. These well known drawbacks of the GDP measure are covered in a standard Dutch VWO high school economics textbook (comparable to UK GCSE A-level).
• rongopo 4y ago
  And economists do not care about the problem. Often because they were not told so at college.
• c7b 4y ago
  Needs a (2014) tag. Also, I am baffled that this is apparently a Nature publication, sounds more like an op-ed for a newspaper. What was the research result that was communicated in the article? It's barely exhaustive enough to count as a literature review.
  • MagnumOpus 4y ago
    It's a "comment" for Nature, not a journal article. They are basically the op-eds of the journal, along with "correspondence" and "column" pieces, as far as I understand - and very much not held to the same standards as the journal articles.
• black_13 4y ago
• 627467 4y ago
  IMO the main limitation preventing GDP from being a much better indicator of national success is due to its inability to show how growth - or more importantly - wealth is distributed. Obviously, wealth distribution is critical part of making progress and comfort more distributed and this is what in fact makes nations more successful than others in long term.
• Zigurd 4y ago
  This is one of the papers cited: https://www.semanticscholar.org/paper/Beyond-GDP%3A-Measuring-and-achieving-global-genuine-Kubiszewski-Costanza/d33cb5bf58e0ee1bfadd2f4f65f54546036857e2 https://www.semanticscholar.org/paper/Beyond-GDP%3A-Measurin... The graphs are very interesting, especially the divergence of GDP from GPI in China. While the theory that GDP is a poor measure of delivering real improvement to human lives is believable, the numbers for China may also indicate they may have been cooking the GDP books since about the early 2000s. Unfortunately there is a lot of anti-China disinfo going around. But untrustworthy data from China is a thing. I wonder if this research will reveal that not only has quality of life stagnated in China, but also the GDP numbers are not as good as has been claimed for over a decade, which affects assessments of sovereign and private debt, etc.
• thomasfl 4y ago
  ...and it is destroying our planet fast. GDP was never ment to be used as tool for measuring anything other than how fast the British economy grew after the recession. A lot has happened since then, almost 100 years ago. GDP has unfortunately stuck as a tool.
• incomingpain 4y ago
  GDP is a poor metric. Of course it's not going anywhere. They'll be measuring GDP 1000 years from now; but perhaps we have a better metric that gets the spot light instead. It's upon folks like nature to find the new metric. After this movement in 2014, there was a even worse attempt to use 'happiness' as a measurement but that sure fell on its face badly. To me there are a few immediate problems with GDP that if addressed and measured may start showing a different picture of the world. RAW GDP in 2021 for the USA is about 23 trillion; an increase from 21 trillion. You have to exclude unfunded debt. Which is roughly 2 trillion in 2021. Then you also have to exclude, NOT include public administration. So a 4 trillion shift. We are roughly at 15 trillion. Then you also have to exclude inflation; which at these measurement points was roughly 7%. So we're about 14 trillion from the original 21 trillion. So in 2021, the claim was 6% gdp growth, but true GDP was more along the lines of -30%. This is shocking, but mainly because we're looking at a fake 21 trillion. So we would have to do the same transform on the 2020 numbers. Basically what I'm illustrating is government deficit spending, real gdp, and public administration are some significant negatives to GDP.