GDP: Vital Gauge or Testosterone Supercharged Distraction?
Last Sunday’s New York Times made our Wall of Fame on Monday with an intelligent op-ed about how declining fertility rates is more good news than bad. Our global obsession with economic growth, however, joins overpopulation on the list of humankind’s suicidal behaviors. So my delight on Sunday was tempered somewhat by the Off the Shelf book review of G.D.P.: A Brief but Affectionate History, also in the Sunday Times. By my judgment, apparently the book is too brief, and overly affectionate.
Fred Andrews’ pro-growth perspective is apparent throughout his review. This probably means the book doesn’t offer the important and enlightened view of GDP we so badly need: Our obsession with GDP, left unchecked, will be the death of us. The book title also gives me little hope. But today I am putting the spotlight on the book review, itself. If the book gets it wrong, Andrews does nothing to point that out. The premise of the review, and I would therefore assume the book, is laid out in his first paragraph:
“A vital gauge of any nation’s prosperity, the G.D.P. has its strengths and its limitations.… The measure’s acolytes in Washington now struggle to adapt this all-important count to fit our Internet economy, where innovation is rampant and so many benefits are free.”
Andrews and the book’s author, Diane Coyle, seem to share a sense that GDP has in some ways outlived its usefulness, which is correct. But I guarantee you the main limitation of GDP is not that it fails to measure the benefits of our “Internet economy.”
We’re told “nothing in nature corresponds to ‘gross domestic product.” This reflects a basic misunderstanding of the fact that our economy is a wholly owned subsidiary of nature (completely dependent on it, and subject to its laws).
It also reveals the reviewer’s unfamiliarity with science’s best effort to measure the well-being of nature. Instead of GDP, scientists at the Global Footprint Network calculate humanity’s ecological footprint, to gauge whether we are consuming and emitting at a rate the Earth can handle year-in, year-out, or at a rate that impairs the planet’s ability to meet our needs and sustain life. Earth’s annual report, published each year by the WWF, is – I daresay – considerably more important than the quarterly estimates of GDP put out by the economic statisticians. On a full planet, every increase in GDP is a decrease in the resilience of our life-support systems.
Andrews’ pro-growth paradigm is revealed throughout the review:
“Yet no one doubts that the G.D.P. is essential. Both public and private decision makers need some idea of how well the overall economy is doing.”
Looking at GDP to determine “how well the overall economy is doing,” is like watching the speedometer of your car to determine how your trip is going. You could be heading south when you meant to travel north. Your oil pressure could be dropping, your engine temperature rising, and your speedometer won’t tell you that. In fact, the faster you go, the greater the risk of your trip going very poorly. Our singular focus on GDP, and our insistence that it be rising – without regard for how that impacts the life-support systems our planet provides, is leading us in a very unsustainable direction. THAT is what is wrong with GDP. But that idea is nowhere to be found in this review, and I would guess not advanced in the book.
“Dr. Coyle concludes that while imperfect, the G.D.P. is good enough as a measure of how fast the economy is growing and better than any alternative. It is closely correlated with things that do contribute to happiness. (Nobody is happy in a recession.)”
This statement sums up well the mythology that has grown up around GDP and economic growth since we put that instrument on national dashboards. GDP has proven to have very little correlation with happiness. The fact that it is destructive nonsense is, unfortunately, not part of this review and – I must infer – not a theme visited in G.D.P.: A Brief but Affectionate History.
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