A Note On GDP (Part 2)
At this point, I hope that I have proven that GDP is a poor measurement of a society's well being. It is a highly flawed statistic in that it weighs damaging and negative costs equally the beneficial costs. What is so frustrating is that economists have known about this imbalance since the inception of GDP as a measurement tool in the 1930s (it used to be called GNP then).
Why then is there so much reluctance on the part of economists to take a critical look? The sad reality is that there is too much money to be made in the "negative" factors that hurt society. Big Business is happy with GDP as it is. That way, the public at large is left in the dark about the damage being done to the environment or the widening gap between rich and poor.
When war always ends up in the economic win column, why not stage a few every couple of decades?
Fortunately, the good folks at Redefining Progress have created an Index that actually measures all of these costs appropriately. Called the GPI or Genuine Progress Indicator, it is based on the economic reality of all of these costs that consumers and business incur throughout the years.
Suffice it to say the the GPI has not painted a flattering picture of America's economic growth over the last 30 years. When plotted against GDP, GPI has been trending downward even though GDP growth has been plodding along consistently for 50 years. Take a look:
The chart indicates that since 1970, the GPI has been heading south. The facts on the ground bear this out. It was easier for a family to buy a house in the 70's than it is today. Real wages are down. The gap between rich and poor is widening. Is it merely just a coincidence that all of these factors seem to move in cadence with the GPI?
You can read more on the Redefining Progress website, but I will highlight some of the factors that GPI subtracts from its wealth index that the GDP adds to its calculation.
Why then is there so much reluctance on the part of economists to take a critical look? The sad reality is that there is too much money to be made in the "negative" factors that hurt society. Big Business is happy with GDP as it is. That way, the public at large is left in the dark about the damage being done to the environment or the widening gap between rich and poor.
When war always ends up in the economic win column, why not stage a few every couple of decades?
Fortunately, the good folks at Redefining Progress have created an Index that actually measures all of these costs appropriately. Called the GPI or Genuine Progress Indicator, it is based on the economic reality of all of these costs that consumers and business incur throughout the years.
Suffice it to say the the GPI has not painted a flattering picture of America's economic growth over the last 30 years. When plotted against GDP, GPI has been trending downward even though GDP growth has been plodding along consistently for 50 years. Take a look:
The chart indicates that since 1970, the GPI has been heading south. The facts on the ground bear this out. It was easier for a family to buy a house in the 70's than it is today. Real wages are down. The gap between rich and poor is widening. Is it merely just a coincidence that all of these factors seem to move in cadence with the GPI?You can read more on the Redefining Progress website, but I will highlight some of the factors that GPI subtracts from its wealth index that the GDP adds to its calculation.
- Income Distribution
- Housework, Volunteering, and Higher Education (these non-transactional-based exchanges are added in)
- Crime
- Resource Depletion
- Pollution
- Long-Term Environmental Damage
- Decline in Leisure Time
- Defensive Expenditures
- Lifespan of Consumer Durables & Public
- Infrastructure
- Dependence on Foreign Assets
posted by Golden Boy at
10:10 PM
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