Map of life expectancy at birth from Global Education Project.

Friday, November 04, 2016

Gross Domestic Problem

Back when I was a 22 year old Nader's Raider I heard Hazel Henderson speak at one of our conferences and she was already saying what Edoardo Campanella apparently thinks is a radical new idea, which is that Gross Domestic Product is not a valid measure of well-being, and not even a valid measure of economic activity.

Hazel was not the only person to figure this out 40 years ago and plenty of people have kept hammering on the fairly obvious truth of it since, but it's just pissing into the wind. The corporate media and political leaders continue to treat GDP growth as the measure of a "healthy" economy.

The reasons why this is wrong are so many and so gross that nobody should be arguing about it, but apparently we have to do it anyway. Here are a few:

GDP does not account for externalities. You know, air pollution, stuff like that.

It treats resource extraction as production, even though the resource is gone.

It treats harms as goods. For example, a hurricane that destroys houses becomes economic growth because the cost of rebuilding them is counted as a positive while their destruction is ignored. Same with automobile crashes, disease (which leads to health care spending), basically anything that goes wrong and has to be fixed.

As a corollary, saving money is bad. Preventing disease, avoiding disasters, improving public safety - these are all negative for GDP.

It doesn't properly account for the value of technological advances. As the same goods and services get cheaper, we still have the value, or even greater value, but the contribution to GDP goes down.

It takes no account of inequality. If one person gets all the loot and the rest starve, it doesn't matter.

It takes no account of any activity that doesn't involve exchange of money -- from household work to volunteering. Take care of your elderly parent yourself, zero contribution. Hire somebody to do it, GDP. 

More money flowing around does not translate into human happiness. No account of community, friendship, the value of common space, free concerts on the green, mutual respect, you name it.

Do we really need to keep having this pointless discussion?

1 comment:

Anonymous said...

But ... it's easy to calculate, all it takes is addition. And the result is a concrete quantity - money. Also, where ever money is moving there is the opportunity for somebody to get rich; no matter the pain it may cause others.

Better measures of human well-being and happiness use factors that are hard to measure, or even quantify. And the appropriate factors to use are open to debate. And you have to depend on science, especially the social sciences. And estimates. And sophisticated statistics.

Let the rest of the world be run by sophisticated adaptive algorithms; we got a hammer - the only things we can see are nails.