Gee, Maybe the GDP Isn't Enough

Longer ago than I’d like to admit (6 months?), I read a long excerpt of Congressional testimony on the Gross Domestic Product (GDP). I read it the old-fashioned way (in a printed magazine), and I can’t find it online or my copy of the magazine. Had I looked closer to the time I read it …

Before I go off on a tangent about how I look for things like a guy – i.e., not very well, according to my wife and my experience – I’ll do my best to describe said Congressional testimony. I should’ve written about it a while ago. But … I can’t stop thinking about it, particularly in the current financial climate.

The testimony focused on the need to change the role/meaning of GDP. The thesis is that we misuse GDP as a measurement — that it’s viewed today as a kind of an end-all be-all economic indicator. And that the problem with using it that way is that the GDP attaches no value beyond the economic output. (I may not be phrasing that right/accurately.)

One example is that it’s better for GDP growth if a kid is unhealthy because of all of the medical costs associated with him/her. Yet as a society (and for long-term economic interests), we want healthy kids. He had other compelling examples of “bad” things that nonetheless translate positively on GDP. An economist friend of mine mentioned that hurricanes can have positive impacts on GDP, yet we know hurricanes are not a “good” thing to the people in their paths.

I’m sorry I can’t remember who provided the testimony – at minimum to better understand his perspective and background. He went into some detail about the history of the GDP as a way to indicate its original intent and how it’s (in his opinion) misused now. There were some excellent points, and he had some suggestions (as I recall) on how to develop economic measures that account for economic activity that positively/negatively affects us.

The piece really resonated with me at the time I read it. Now I’m thinking about it in the context of the economic fiasco we’re dealing with. I can’t help thinking that our economic measures of success/failure contributed mightily to where we are. The measures focus on the short-term, and they reward negative behavior.

They’re also detached from most our daily lives. As a result, the “leading economic indicators” can mask what people are experiencing. And without recognizing what people are experiencing, we can’t understand what people are experiencing. And without understanding it, we doom ourselves to policies and choices that lead us to where we are today.

I hope we’ve learned our lessons …