Saturday, 5 July 2014

GDP - Greatly Distracting Piffle?

There's a brilliant discursive piece by David Pilling in the Financial Times (registration required) about gross domestic product (GDP), which draws on some excellent research and economic philosophising by (among others) Ha-Joon Chang, Diane Coyle, Jeremy Rifkin and Robert Skidelsky.

The piece looks at the severe limits of GDP as a statistical construct, and a pretty arbitrarily and dubiously constructed one at that. It also questions the measure's dominance. As Pilling puts it:
"Gross domestic product has become a ubiquitous term. It is how we measure economic success. Countries are judged by how much they have of it. Governments can rise and fall according to how effectively their economies create it ...In fact, the more you delve into the whole concept of GDP – one of the most centrally important ideas in modern life – the more slippery it becomes."
GDP is indeed "ubiquitous" and has also became hegemonic but, as the financial sector crash should have taught us, quality is sometimes more important than quantity. A point made by Diane Coyle whose new book looks at GDP, and who backs a more diverse range of measures.

Is the tide turning? The return to GDP growth may be fuelling George Osborne's hyperbole about a recovery - but to many people it rings hollow, precisely because of its failure to tell us what really matters to us - confirmed by other data that shows most are still worse off.

As Andrew Fisher puts it in his new book The Failed Experiment ... and how to build an economy that works,
"... instead of measuring badly what matters less, why not prioritise measuring what matters most: the change in average living standards, whether inequality and poverty are reducing or increasing, and whether unemployment is up or down. In a civilised society these things matter more."

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