7 ms·

Why we should't judge a country by its GDP

48 points by plumeria 11y ago

dredmorbius 11y ago
Direct video link: http://fixyt.com/watch?v=N8Votwxx8a0 http://fixyt.com/watch?v=N8Votwxx8a0
aryehof 11y ago
Some alternative social indexes to the Social Development Index discussed in the video: 1. Democracy Index (http://en.wikipedia.org/wiki/Democracy_Index http://en.wikipedia.org/wiki/Democracy_Index) 2. Human Development Index (http://en.wikipedia.org/wiki/Human_Development_Index http://en.wikipedia.org/wiki/Human_Development_Index) 3. OECD Better Life Index (http://www.oecdbetterlifeindex.org http://www.oecdbetterlifeindex.org)
dribnet 11y ago
GDP is like measuring calories burned without any other context. Expenditure is a means, not an end. As engineers I think we are aware of the danger of optimizing around the wrong fitness function. The GDP is used as shorthand for "the economy" in federal policymaking, so now there are many ways to "stimulate" the economy by creating various forms of inefficiencies and misery. [1] [1] http://jonathanrowe.org/the-gross-domestic-product http://jonathanrowe.org/the-gross-domestic-product
- hueving 11y ago
  How is gdp used in federal policy making?
  - ddebernardy 11y ago
    It's not merely used in policy making: GDP as a metric basically emerged for policy making in the contexts of resource allocation during the Great Depression and war planning during WWII. (And arguably during prior wars before that: http://www.google.com/search?q=invention+of+gdp http://www.google.com/search?q=invention+of+gdp .)
  - dribnet 11y ago
    Certainly you've heard a government official frame an issue he didn't like as "bad for the economy"? In the US, it's basically the first page in the playbook for both sides of the aisle because very few issues are as sacred as a healthy economy. But if hurting the economy just means bringing down the GDP, then there are countless reasons why the underlying issue might still be beneficial to the welfare of its citizens. Want to boost your country's GDP? Here's some tips. Become terminally ill. Get involved in a costly divorce. Try gambling or drinking habitually. Take a job where you commute long hours wasting gas in traffic. Hell, open a strip mine - every resource extracted is a net positive on the national ledger. Bonus points if you can coerce your fellow citizens into compulsory spending - a nasty coal plant triggering asthma in the local population is a great example. Even worse, a focus on GDP directly contributes to income inequality because as a measure it is blind to the distribution. If the top 1% gain more than every one else loses in a year, GDP still rises. For this reason Rowe calls GDP a "statistical laundry operation that hides the suffering at the bottom". Measuring and tracking GDP is a splendid idea, but using it as even a proxy for national welfare is insanity. I encourage anyone interested to read the linked article, which is as true today as when Rowe testified before the US senate 8 years ago. Also at the end he takes a first pass at laying out principles around new metrics to fix the situation.
blfr 11y ago
For all its flaws, I like GDP better than those new indexes. It's less judgemental. It (not so) simply counts the value of goods and services produced while leaving (most of) value judgements to buyers. Whereas HDIs and progress indexes give (undue imho) weight to things valued by the creators of the index: higher ed, access to information, discrimination, democracy.
- 1stop 11y ago
  Given we are talking about how to judge a "Successful" country. There is a value judgement already at play. GDP to judge success is a value judgement. Defining success in a more utilitarian "Greater good for greater number of people" sense does seem more sensible than counting money coming in. EDIT: To give an absurd example: If a country has HUGE GDP but a government policy of destroying so many tons of dollars/gold/oil every year (i.e wealth destruction). It would still rank highly... even though being absurdly bad.
  - blfr 11y ago
    The value judgement in a progress index extends far beyond conflating GDP with success. Creators decide what is the "greater good." And of course it's coloured by their tastes so higher education is included and luxury cars are not even if they're both just tokens in status games. Your absurd example is how signalling often works. In this case, if they can afford to waste gold and oil for no reason then they're clearly doing well. It's like lighting a cigar with a $100 bill, or buying a diamond ring for your fiancée.
    - jonex 11y ago
      I think no one could argue that the creators index does not in any way reflect their values. But that doesn't make GDP any better as a measure. Think of it this way, what country would you have liked to be randomly born into the most? The one where you will be able to participate in society no matter who you are, or the one where a subset of the population makes the most money? Would you like to be born into Saudi Arabia as a woman?* They have a great GDP per capita. I think we have to accept that there is no objective measure of success of a country. In fact we haven't even figured out how to measure success of a company reliably, even if we constrain our self to measuring shareholder value. The best we can do is try finding measures that somehow correlates with quality of life and be explicit about what we are measuring. * In case you are not sure, you don't want to be born into Saudi Arabia as a woman.
otec 11y ago
The fact that Russia is not on the list kinda tells that this is yet another phony index that means absolutely nothing.
andor 11y ago
I'm having a few doubts about this ranking. Freedom of speech in Finland is supposed to be the same as in Afghanistan? I'm sure they theoretically have it in Afghanistan if the table says so, but the consequences will be very different. Health and Wellness: Life expectancy is a good overall indicator, but how can you quantify the situation of people who fell ill? Cheap access to good medical care varies a lot between countries. Globally ranked universities: how about normalizing this by size of population, e.g. Switzerland vs. Germany? Personal Freedom of Choice/Early marriage: where's the freedom of choice part in this? I don't think the relatively early marriages in the US, Canada and New Zealand are all arranged.
- vacri 11y ago
  I'm having some difficulty looking at their site. UAE is #1 for tolerance of immigrants? They're a modern-day slave state! Similarly the UAE placed as high as 20th in the rankings for 'discrimination against minorities'. Similarly Belarus gets a top score for religious tolerance, while western Europe gets second bottom. Belarus's form of religious tolerance is 'you're free to be whatever religion, as long as it's the state religion' (Orthodox). You don't get any protections from the state if you're not Orthodox. There's quite a few spots where things look iffy in their rankings.
  - notahacker 11y ago
    Algeria, where homosexual acts are illegal, is more "tolerant of homosexuality" than Thailand, which might not be a liberal paradise but embraces homosexuality and transgenderism as part of cultural norms like few other places. The highest level of religious tolerance is exhibited in the Islamic Republic of Mauritania, which handed out a death sentence to a blogger for apostasy at the end of last year. Western Europe, apparently, should look towards them to as an example. This is not just a bit iffy. This is dangerously bad ranking.
lumberjack 11y ago
Which pair of western countries have the property of one having a higher GDP than the other and also a lower standard of living for some demographic of people preset in both countries?
- notahacker 11y ago
  GDP per capita rankings vary hugely according to who's doing the calculations, and precisely when, so Western countries frequently swap places. That's a quick reminder that GDP really isn't that much more neutral and objective than other development rankings, especially when you have to choose between vast arrays of possible baskets of relevant goods, intra-country price variations and inter country purchasing habit differences to construct purchasing power parity measures. That said, Ireland still performs very well in recent nominal GDP rankings, even relative to the likes of Germany, yet has huge unemployment problems and is universally agreed to be in a worse economic state than Germany. The poor in the US are usually regarded as being far worse off than the poor in most Western European countries, but the US almost invariably comes out on top.
  - disgruntledphd2 11y ago
    Just as an FYI with regards to Ireland - GDP is not actually an appropriate measure in the presence of large multinationals and their tax-avoidance schemes. The money flows through the country, but doesn't actually have much impact on the economy. In general, GNP is better for countries such as Ireland and Luxembourg.
mark_l_watson 11y ago
Catherine Austin Fitts has a happiness and social health measurement that she calls the "popsicle index". This a measure of how comfortable a parent is giving their child money to walk to a neighborhood store by themselves to buy a popsicle. I would add a general "comfort index" of how people feel about the future. In the USA we have a strange situation. We have lots of raw materials, good education systems, and we are relatively geographically isolated. All nice advantages. Yet, we have very poor governance. A huge majority of our population does not trust Congress and the office of the President. Statistically, people respect our military and the Supreme Court and that is about it. Couple this with a general uneasy feeling about the future of the dollar vs. SDRs, etc. and lack of confidence our ability to be highly productive, and I would have to give my own country a mediocre "comfort index."
lazyant 11y ago
All indexes or rankings are "biased" in the sense that they are a weighted sum of different parameters that often have little to do with each other (adding apples and oranges). As such no index could be perfect for all since we have different values. For example if you value freedom of speech a lot, the US would be way up compared to say, Germany (illegal to deny the Holocaust), if you value human rights, the death penalty is an aberration and the US would be at the bottom part of the index. If you value safety over rights, Singapore would have a high index, otherwise low etc.

48 points by plumeria 11y ago

Direct video link: http://fixyt.com/watch?v=N8Votwxx8a0 http://fixyt.com/watch?v=N8Votwxx8a0

Some alternative social indexes to the Social Development Index discussed in the video: 1. Democracy Index (http://en.wikipedia.org/wiki/Democracy_Index http://en.wikipedia.org/wiki/Democracy_Index) 2. Human Development Index (http://en.wikipedia.org/wiki/Human_Development_Index http://en.wikipedia.org/wiki/Human_Development_Index) 3. OECD Better Life Index (http://www.oecdbetterlifeindex.org http://www.oecdbetterlifeindex.org)

dribnet 11y ago

GDP is like measuring calories burned without any other context. Expenditure is a means, not an end. As engineers I think we are aware of the danger of optimizing around the wrong fitness function. The GDP is used as shorthand for "the economy" in federal policymaking, so now there are many ways to "stimulate" the economy by creating various forms of inefficiencies and misery. [1] [1] http://jonathanrowe.org/the-gross-domestic-product http://jonathanrowe.org/the-gross-domestic-product

hueving 11y ago
How is gdp used in federal policy making?
- ddebernardy 11y ago
  It's not merely used in policy making: GDP as a metric basically emerged for policy making in the contexts of resource allocation during the Great Depression and war planning during WWII. (And arguably during prior wars before that: http://www.google.com/search?q=invention+of+gdp http://www.google.com/search?q=invention+of+gdp .)
- dribnet 11y ago
  Certainly you've heard a government official frame an issue he didn't like as "bad for the economy"? In the US, it's basically the first page in the playbook for both sides of the aisle because very few issues are as sacred as a healthy economy. But if hurting the economy just means bringing down the GDP, then there are countless reasons why the underlying issue might still be beneficial to the welfare of its citizens. Want to boost your country's GDP? Here's some tips. Become terminally ill. Get involved in a costly divorce. Try gambling or drinking habitually. Take a job where you commute long hours wasting gas in traffic. Hell, open a strip mine - every resource extracted is a net positive on the national ledger. Bonus points if you can coerce your fellow citizens into compulsory spending - a nasty coal plant triggering asthma in the local population is a great example. Even worse, a focus on GDP directly contributes to income inequality because as a measure it is blind to the distribution. If the top 1% gain more than every one else loses in a year, GDP still rises. For this reason Rowe calls GDP a "statistical laundry operation that hides the suffering at the bottom". Measuring and tracking GDP is a splendid idea, but using it as even a proxy for national welfare is insanity. I encourage anyone interested to read the linked article, which is as true today as when Rowe testified before the US senate 8 years ago. Also at the end he takes a first pass at laying out principles around new metrics to fix the situation.

blfr 11y ago

For all its flaws, I like GDP better than those new indexes. It's less judgemental. It (not so) simply counts the value of goods and services produced while leaving (most of) value judgements to buyers. Whereas HDIs and progress indexes give (undue imho) weight to things valued by the creators of the index: higher ed, access to information, discrimination, democracy.

1stop 11y ago
Given we are talking about how to judge a "Successful" country. There is a value judgement already at play. GDP to judge success is a value judgement. Defining success in a more utilitarian "Greater good for greater number of people" sense does seem more sensible than counting money coming in. EDIT: To give an absurd example: If a country has HUGE GDP but a government policy of destroying so many tons of dollars/gold/oil every year (i.e wealth destruction). It would still rank highly... even though being absurdly bad.
- blfr 11y ago
  The value judgement in a progress index extends far beyond conflating GDP with success. Creators decide what is the "greater good." And of course it's coloured by their tastes so higher education is included and luxury cars are not even if they're both just tokens in status games. Your absurd example is how signalling often works. In this case, if they can afford to waste gold and oil for no reason then they're clearly doing well. It's like lighting a cigar with a $100 bill, or buying a diamond ring for your fiancée.
  - jonex 11y ago
    I think no one could argue that the creators index does not in any way reflect their values. But that doesn't make GDP any better as a measure. Think of it this way, what country would you have liked to be randomly born into the most? The one where you will be able to participate in society no matter who you are, or the one where a subset of the population makes the most money? Would you like to be born into Saudi Arabia as a woman?* They have a great GDP per capita. I think we have to accept that there is no objective measure of success of a country. In fact we haven't even figured out how to measure success of a company reliably, even if we constrain our self to measuring shareholder value. The best we can do is try finding measures that somehow correlates with quality of life and be explicit about what we are measuring. * In case you are not sure, you don't want to be born into Saudi Arabia as a woman.

otec 11y ago

The fact that Russia is not on the list kinda tells that this is yet another phony index that means absolutely nothing.

andor 11y ago

I'm having a few doubts about this ranking. Freedom of speech in Finland is supposed to be the same as in Afghanistan? I'm sure they theoretically have it in Afghanistan if the table says so, but the consequences will be very different. Health and Wellness: Life expectancy is a good overall indicator, but how can you quantify the situation of people who fell ill? Cheap access to good medical care varies a lot between countries. Globally ranked universities: how about normalizing this by size of population, e.g. Switzerland vs. Germany? Personal Freedom of Choice/Early marriage: where's the freedom of choice part in this? I don't think the relatively early marriages in the US, Canada and New Zealand are all arranged.

vacri 11y ago
I'm having some difficulty looking at their site. UAE is #1 for tolerance of immigrants? They're a modern-day slave state! Similarly the UAE placed as high as 20th in the rankings for 'discrimination against minorities'. Similarly Belarus gets a top score for religious tolerance, while western Europe gets second bottom. Belarus's form of religious tolerance is 'you're free to be whatever religion, as long as it's the state religion' (Orthodox). You don't get any protections from the state if you're not Orthodox. There's quite a few spots where things look iffy in their rankings.
- notahacker 11y ago
  Algeria, where homosexual acts are illegal, is more "tolerant of homosexuality" than Thailand, which might not be a liberal paradise but embraces homosexuality and transgenderism as part of cultural norms like few other places. The highest level of religious tolerance is exhibited in the Islamic Republic of Mauritania, which handed out a death sentence to a blogger for apostasy at the end of last year. Western Europe, apparently, should look towards them to as an example. This is not just a bit iffy. This is dangerously bad ranking.

lumberjack 11y ago

Which pair of western countries have the property of one having a higher GDP than the other and also a lower standard of living for some demographic of people preset in both countries?

notahacker 11y ago
GDP per capita rankings vary hugely according to who's doing the calculations, and precisely when, so Western countries frequently swap places. That's a quick reminder that GDP really isn't that much more neutral and objective than other development rankings, especially when you have to choose between vast arrays of possible baskets of relevant goods, intra-country price variations and inter country purchasing habit differences to construct purchasing power parity measures. That said, Ireland still performs very well in recent nominal GDP rankings, even relative to the likes of Germany, yet has huge unemployment problems and is universally agreed to be in a worse economic state than Germany. The poor in the US are usually regarded as being far worse off than the poor in most Western European countries, but the US almost invariably comes out on top.
- disgruntledphd2 11y ago
  Just as an FYI with regards to Ireland - GDP is not actually an appropriate measure in the presence of large multinationals and their tax-avoidance schemes. The money flows through the country, but doesn't actually have much impact on the economy. In general, GNP is better for countries such as Ireland and Luxembourg.

mark_l_watson 11y ago

Catherine Austin Fitts has a happiness and social health measurement that she calls the "popsicle index". This a measure of how comfortable a parent is giving their child money to walk to a neighborhood store by themselves to buy a popsicle. I would add a general "comfort index" of how people feel about the future. In the USA we have a strange situation. We have lots of raw materials, good education systems, and we are relatively geographically isolated. All nice advantages. Yet, we have very poor governance. A huge majority of our population does not trust Congress and the office of the President. Statistically, people respect our military and the Supreme Court and that is about it. Couple this with a general uneasy feeling about the future of the dollar vs. SDRs, etc. and lack of confidence our ability to be highly productive, and I would have to give my own country a mediocre "comfort index."

lazyant 11y ago

All indexes or rankings are "biased" in the sense that they are a weighted sum of different parameters that often have little to do with each other (adding apples and oranges). As such no index could be perfect for all since we have different values. For example if you value freedom of speech a lot, the US would be way up compared to say, Germany (illegal to deny the Holocaust), if you value human rights, the death penalty is an aberration and the US would be at the bottom part of the index. If you value safety over rights, Singapore would have a high index, otherwise low etc.