The title/article seems to be a bit of a strawman, AFAICT countries (or their governments / citizens) do not consider the GDP as the one and only measure of national success. Politics are driven by tons of different interest groups (in the broadest sense, ranging from corporate interests, environmental activists, minority representatives, medical or teaching professionals, farmers, retirees living on state pensions, etc, etc.), not by whether some policy might give a boost to GDP. I could argue that it would probably be better if they actually did, but that's for another thread.
In truth, pretty much nobody really knows for sure what policies actually will increase GDP, or what causes the short term fluctuations (business cycle / recession) or variation in long term divergense between different countries in the first place. The more honest academic economists will freely admit this. (I was explicitly thaught so in my graduate macro-economics courses). So I think it's a strawman to think that countries/governments are engating in some kind of myopic GDP maximization plan.
I think the appropriate analogy is household or personal income. (GDP is just all incomes in a country summed up and corrected for inflation.) It's probably not the most important thing in the world, and probably not the most important determinant of personal happyness or life satisfaction. But a severe lack of it (especially compared to the people around you) or an unexpected large drop will probably be considered problematic by most people.
> In truth, pretty much nobody really knows for sure what policies actually will increase GDP...
Have they tried securing access to large amounts of cheap energy? It is a bit of a win-win because either GDP goes up and case closed or they can sit back and relax in luxury mulling why GDP didn't go up despite massive increases in the general prosperity.
Energy isn't the entire story because there also need to be people around who know how to transform it into whatever you want, but it is a rather important part of the puzzle. After that, freedom and education are probably going to make up the rest. What else is there? I suppose land ownership.
The puzzle isn't that complicated. We all know what comfort looks like. Asking how to make GDP go up is the wrong question, it is just a tool to point out when policies are wasting resources. More waste -> less GDP -> notice that and waste less -> reorient to secure prosperity.
Every country tries securing cheap energy; that's what energy markets are for.
There is no such thing as a trivial win here. And trying to secure it could end up costing significant GDP, as demonstrated by wars fought over securing energy.
GDP is a concrete measure that is difficult to fake. Once you start arguing about the economic value of volunteering, divorce, income inequality, and crime -- you've opened the door to never being able to trust GDP again.
Should we create new metrics to track progress? Sure. Should we stop tracking GDP? No way.
It is not difficult to fake (e.g. China for the last 20 years).
But I agree with you, we should add new metrics (and targets) but keep a GDP as one of them, also for the other indicators to mature (how they are measure, methodologies, transparency, etc...). Maybe one day GDP would be able to be left behind...
GDP is not what people randomly think it is. It is a measure of the economic output of a country. It isn’t about equality or productivity or did the money build a ghost town etc. If we had the magical mathematics to encode that much in a single number, we’d be traveling the stars.
If you control the media like China does, you can fake every metric if you want. In any place with a free press, economists could easily approximate GDP and report it if it were fake.
> Once you start arguing about the economic value of volunteering, divorce, income inequality, and crime
Who is saying we should do that? These items have value, that is not debatable. It might not be economic value, but that's not the point. The point is, these items are not being valued on a national scale, or at least extremely undervalued against GDP. If you have extreme wealth inequality, GDP is a pretty poor measure of basically anything.
Is it more unreasonable to assume the value of these things is >0, or to assume that the value of these things is ==0?
I don't think anybody is arguing that we should stop measuring or looking at GDP entirely. The article argues that we need to recognize that we can't just close our eyes to the value of these things.
It's kind of like talking about the value of a human life in dollars. We know this number is more than 0$, and we know this number is less than __POSITIVE_INFINITY__$, and we're probably never really going to agree on a number somewhere in the middle, but it's still an important number to consider.
GDP is super easy to fake. Just sell something on the black market. Just trade a service for a service instead of paying for it.
Or, to push it in the other direction: sell a service back and forth. I sell you a message for 1 billion and then you sell me one for 1 billion. Now we’ve increased gdp by 2 billion (although you need to live in a zero VAT and zero income tax country to do that as a private person and still have it count)
Changing the included values and operands, then calling it a new standard, is common in the US. GDP has been an unreliable metric for decades.
I noticed when the multitude of chip fabs, across california, closed down had coincided with the president announcing the stockmarket gains were being rolled into the accounting. I thought it was obvious that it was not a meaningful metric for measuring production.
Actually we can get better metrics than GDP by measuring amount of light on satellite night images. It fits GDP more or less for western democracies, but it it better measure for other countries.
Possibly, but also assuming it's an actually sophisticated analysis and not an naive one, like the Martinez Democracy vs Autocracy study that western MSM loves to peddle. NBER (one of top eco think tanks) did a sophisticated night lights study of PRC in 2017 - same year as OG Martinez study using naive methodology as Henderson original work from early 2010s - and found PRC's reported GDP was actually _underestimated_ using night light data. But for obvious reasons this study by multiple staff economists at the FED doesn't get any attention in western MSM, but one by an assistent prof of public policy somehow does. Almost as if it's good self marketting considering Martinez keeps updating study with same rudimentary methodology every few years to get clicks.
> GDP is a concrete measure that is difficult to fake
The best counter to that I've ever heard:
"Let's say I pay you $10M to eat a pile of shit, then for kicks you pay me $10M to eat a similar pile of shit.
You know what the end result is? The GDP has increased $20M, and we both have huge shit-eating grins".
> "Let's say I pay you $10M to eat a pile of shit, then for kicks you pay me $10M to eat a similar pile of shit. You know what the end result is? The GDP has increased $20M, and we both have huge shit-eating grins".
If people were buying piles of shit for $10M, then that is what the GDP would be. That's not faking GDP.
LMAO I'm sure that sounded great in your head, but if that service was actually worth 10mm, both parties would have to pay taxes on that income when they report it to the gov't for inclusion in GDP. Yes this applies even if no money changed hands: https://www.irs.gov/taxtopics/tc420
And yes there are workarounds, but clearly it's not that easy to manipulate GDP. If anything, you want to underreport these numbers so you don't owe as much.
> GDP is a concrete measure that is difficult to fake.
I’m not sure how true this is. There are international standards, updated over time, with variable adoption by per-country agencies tasked with measuring GDP.
These agencies typically rely on surveys of industry specific activity to measure different metrics and at times imputation and inference of unmeasured or missing values to form a picture of overall economic activity, from which a single GDP figure is derived.
All of which is to say “measuring” GDP is nothing like measuring a concrete physical quantity such as temperature, and there is ample opportunity to fiddle with the standards or fudge the statistics, either innocently or nefariously.
See for example how incorrect construction data cleansing lead to Japan overstating its GDP for several years.
> GDP is a concrete measure that is difficult to fake.
It's trivial to fake. Just pull some asset values out of your ass, which Wall Street does a million times a day. GDP became a lot less useful when the economy shifted from mostly tangible goods to mostly intangibles (e.g. software) and services, then utterly useless with the over-financialization of our economy. There are many measures that are more informative than GDP (or GDP per capita), that enable more rational decision making. GDP is just a vanity number.
Go back 150 years, and what was tracked was actual production. Iron mined, boats produced etc.
GDP is a bad measure for all the reasons above, and because prices do not work the way GDP want's them too. As another poster alluded to, increase total production and cause prices to fall across the board, and the logic of the system is that GDP drops. The only reason we see GDP increasing is that there is an underlying increase in the measurement (money), and that feeds into the measurement data.
Seriously. If there was an obvious alternate metric, we'd already be using it.
Measuring well-being and happiness will never be straightforward and uncontroversial, despite what the authors of the article say.
You don't need to look much past the first few paragraphs of the article to see an obvious bias about income inequality. That reveals what attempts to find new metrics are really about: the authors want to use a set of metrics which have built-in left-wing assumptions about how society ought to look.
To think that such controversial metrics could serve as a replacement for GDP only reveals the authors' own naivete.
There is actually a lot of knowledge that's been built that shows many effects of inequality on societies. It might not seem obvious but inequality is actually a big driving factor in people's feelings of dissatisfaction in their everyday lives.
But to argue the point a bit more, and this is something that Thomas Piketty (an economist that studies inequality) always brings in his books: one measure is not enough. GDP is one measure, we need to look at many more measures. GDP does say something, it's not meaningless, but we need other measurements to get the full understanding of the picture.
And we actually have lots of them, GDP sadly fails to capture a lot of externalities, so it doesn't really capture very well for example environmental damage; think of china, their GDP is growing a lot but we can all see it's not growing in a sustainable manner. Or think of the USA, highest GDP in the planet but this isn't being reflected in life expectancy for example which actually has been declining for a while now.
And as I said in the beginning, inequality very much affects people's well being and the well being of an economy as a whole as well. So it is definitely a measurement that we ought to take seriously. It seems silly to me to say "these are left wing metric". These are metrics that have a reason of being, inequality has real effects on our economies and there is a lot of work, and good work at that, that you can read on why precisely this is the case.
> a set of metrics which have built-in left-wing assumptions
Introducing political statements on HN and feeding them is frowned upon, but I will bite: the right wing also needs an answer to the problems caused by inequality. Solving issues caused by inequality can easily be a right wing objective: for example when fixing an issue also helps the middle class or the rich.
A metric for inequality can be politically completely neutral, yet it will trigger partisans on the left or right. I do agree that metrics and solutions often have covert political biases.
I think that regardless of your political inclination, the core message of the article remains the same.
The real issue is simply that, a lot of the things we want to convert to simple metrics can't be. Suppose I hand you a list of the exact rate each crime in a country was committed, and I ask you to convert that list to a single number, how would you do so? You could assign a weight to each crime, but how would you know which weights to use? What's the "true cost" of each crime?
Of course, in reality we won't know the real rate of any crime. We will have estimates, which are likely quite far from the truth.
Same here. These well known drawbacks of the GDP measure are covered in a standard Dutch VWO high school economics textbook (comparable to UK GCSE A-level).
Hypothetical; somehow the total dollar impact of the divergence from an ideal timeline, including the cost of detection, correction, and the related punishments / restitution etc is totaled. For figures that are emotionally priceless the actuarial figures used in major disaster calculation will be used.
However the crime example also isn't very useful. Crimes aren't discouraged based on money cost, but a cost that is emotional and related to maintaining order and stability for society.
Reading an earlier thread on Perl I was thinking about how concepts,
language and behaviour relate (as Wittgenstein and Ayer might have
it).
Someone mentioned how, as a Python user, they barely had to think
about pointers/references. Things get magically referenced when
needed. Seems like progress.
When concepts get coded into a language, in this case "economics"
(which is a tool for trying to see the world), they put down roots.
Other concepts "hang off" them. So, we could certainly try to supplant
GDP as a metric. But then what of all the other economic structures
that people have built on GDP? Who will let go of those?
You have to tear down entire branches of thought and replace them with
new utility concepts that make using old ones as anachronistic as
using pointers in Python.
> So, we could certainly try to supplant GDP as a metric.
This is very apparent, because it was only about 30 years ago that GDP itself replaced GNP as the preferred metric for the same purposes in the US. The article mentions the use of GDP internationally for longer, but the US preferred GNP until 1991.
Its also worth noting that the creator of the GDP, a decade before it became dominant (internationally), also warned against overfocusing on it as a measure of welfare, in terms that really apply to any simple unidimensional measure:
“The valuable capacity of the human mind to simplify a complex situation in a compact characterization becomes dangerous when not controlled in terms of definitely stated criteria. With quantitative measurements especially, the definiteness of the result suggests, often misleadingly, a precision and simplicity in the outlines of the object measured. Measurements of national income are subject to this type of illusion and resulting abuse, especially since they deal with matters that are the center of conflict of opposing social groups where the effectiveness of an argument is often contingent upon oversimplification” [0]
The state of the economy is complex and multidimensional, and we need a set of measures which reflect that.
GNP and GDP are very close measures. If people spend a few minutes reading instead of trying their hardest to comment first with what little knowledge of economics they have rattling around their skull, they’d know that GNP does not make any sense in the modern economy.
A a set of measurements is required in many places and sadly it's missed in those places too. Humans love simple explanations, simple measurements, simple models, simple stories, anything which fits in our tiny brains without too much effort. Whether or not those measurements/explanations/models/stories represent reality sufficiently to be useful appears to be beside the point.
"Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.
It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.
It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.
It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
And it can tell us everything about America except why we are proud that we are Americans."
Another historical "fun fact", is that MLK wasn't assassinated while pushing for civil rights. He was killed once he shifted his focus to financial injustice and wealth inequality.
Two might not be a pattern, but it's no accident these historical figures were both challenging the deep pockets status quo and they both died prematurely.
Are you saying the assassins were tools of the true conspirators who ordered their assassinations? John Hinckley was unsuccessful, was he another (failed) tool of a nefarious group that sets out to off public figures "they don't like"?
While RFK sometimes got help from Edwin Guthman and Peter Edelman, he also spoke extemporaneously sometimes, most famously when he had to announce the death of Martin Luther King to a crowd that hadn't yet heard the news:
This is a BS political speech and it is very politically motivated. When you can't fix the economy (get GDP up), just claim the GDP doesn't matter. My country's president just claimed we should focus on National Happiness Product. Of course, when all your economical policies fail, economy is just numbers.
And no, having an accident doesn't increase GDP. If the passengers dies, that will remove their GDP from society. Riots are bad for business. The pandemic brought the GDP down even though Pfizer & Friends made record money.
GDP is the best measure of the size of an economy. Nominal GDP is the best measure of the power of an economy in its standing in the world, comparing to its at parity GDP.
There are cases where GDP can be gamed. For example, constructing a building generated GDP, so does tearing it down. In fact, building it and tearing down even if the building is never used are both GDP positive operations. If it can be measured, Goodhart’s law reigns supreme.
The GDP was expanding at a fantastic rate, at the time. The 1960s were the last decade of strong economic growth, the USA has not seen anything like it in the last 50 years. Only the end of the 1990s seemed to briefly revive the golden years of the post-war boom.
"The philosopher John Stuart Mill noted more than 200 years ago that, once decent living standards were assured, human efforts should be directed to the pursuit of social and moral progress and the increase of leisure, not the competitive struggle for material wealth"
Yes, we took the wrong turn. Most people are subjected to a life long rat race of economic relevance/volatility where most of their waking hours are spent just trying to make a living, by any means necessary.
What makes the state of humanity extra sad is that all this raping of the planetary resources that we do still does not elevate us out of this misery.
It's unclear who this destructive machine is serving. Consider the point of view of an ordinary citizen. Who genuinely has your best interest at heart?
Your ancestors 200 years ago were malnourished, working the fields all day to eke out a miserable existence, never enjoying a single luxury in life. They didn't know how to read or write, and in any case wouldn't have had time for such luxurious activities.
Human progress has brought us to the point where we have the free time to complain about how disadvantaged we are and how unfair life is, without giving a thought to the fact that our daily lives are far more luxurious than those of kings who lived 200 years ago.
Literacy rates in Western Europe and North America were quite high. There was an bustling trade in almanacs, pamphlets, periodicals and Bibles. Go read about Charles Dickens' career and how he succeeded by appealing to the tastes of the common man.
The system crushed us so bad that people like you think we're living in the utopiest of utopias, even the idea of a better future disappeared, even suggesting it could have been better seems to trigger an allergic reaction, the cogs are willing to die for the machine that grinds them, and they seem happy about it. You focus on material goods while completely ignoring what came with it and what it took away from us, as if accumulating goods was a goal in itself. The bed of a min wage worker might be more luxurious than a king's bed from 200 years ago I very much doubt his life is anything luxurious, especially in comparison of a king's life
> Compared to what?
Compared to what it could have been
I have a worse life than my grandparents by almost any conceivable metrics besides the fact that I own and consume more useless shit. They had no degrees, five kids and could afford to live in a city center. I have 0 kids, a master's degree and will never be able to afford 5 kids, let alone in a city center
> Human progress has brought us to the point where we have the free time to complain about how disadvantaged we are and how unfair life is
I work more and will work longer than my grandparents, I don't expect I'll be able to retire before 70, if not more. In France 25% of the poorest already die before reaching retirement age.
> that our daily lives are far more luxurious than those of kings who lived 200 years ago.
I'm still sitting a desk desk 8 hours a day, probably for the next 40 years, while technocrats of the 60s promised automation would bring the 3 days/15 hours workweek
> The more he contemplates, the less he lives; the more he identifies with the dominant images of need, the less he understands his own life and his own desires.
> The pseudoneeds imposed by modern consumerism cannot be opposed by any genuine needs or desires that are not themselves also shaped by society and its history. But commodity abundance represents a total break in the organic development of social needs. Its mechanical accumulation unleashes an unlimited artificiality which overpowers any living desire. The cumulative power of this autonomous artificiality ends up by falsifying all social life.
Guy Debord, 1962
> The necessity of production is so easily proved that any hack philosopher of industrialism can fill ten books with it. Unfortunately for these neo-economist thinkers, these proofs belong to the nineteenth century, a time when the misery of the working classes made the right to work the counterpart of the right to be a slave, claimed at the dawn of time by prisoners about to be massacred. Above all it was a question of surviving, of not disappearing physically. The imperatives of production are the imperatives of survival; from now on, people want to live, not just to survive.
> The distance has not changed between those who possess a lot and those who possess a small but ever-increasing amount; but the intermediate stages have multiplied, and have, so to speak, brought the two extremes, rulers and ruled, closer to the same centre of mediocrity. To be rich nowadays merely means to possess a large number of poor objects.
You're assuming zero population growth and that people "over there" who look and/or talk different that it separately doesn't matter if they starve.
When we make things more efficent it is reasonable to remember this is the /world/ economy getting more efficient and the most important thing we are making efficent is growing enough food for 7b people through specialisation and trade and espeically technical progress. The second most important thing is making it so that parents don't routinely and commonly watch their children die in pain.
In Mill's time at the height of the biggest empire ever known, right at its centre of wealth children starved. Their parents watched them die from what we now refer to as "preventable disease" and are outraged when any child in the world dies of it.
I'm taking that faustian bargain we took as a species every f*king time. No we did not "take the wrong turn." There remains plenty to discuss on how to do it better going forward.
The idea that the the current economic order is the most efficient is... idealistic
> "over there" who look and/or talk different that it separately doesn't matter if they starve.
The global economy is about expanding the wealth and consumption of the.01% while maintaining a standard of living well enough that the next 20% won't murder them and guard then from the bottom 80%
> is growing enough food for 7b people
We're well well beyond this capability. Westerners need to eat less meat, waste less electricity (more fuel for fertilizer etc).
Most westerner economies are rentier economies. They need more wealth taxes and more antitrust.
Rishi Sunak, the billionaire banker, conservative leader of the UK himself said that cutting corporate tax doesn't result in more productive investment
In a modern democracy, only one of those three could conceivably have your interests at heart. Lumping them all together damages participation in democracy, which exacerbates the problem.
Democracy absolutely does not care about you and thinking it does is damaging to democracy. Democracy is just executing the will of the majority. If your interests don’t align with thah majority, the country is not acting on your behalf.
Knowing that an participating in democracy without tying up your identity in the outcomes is critical.
Democracy is incompatible with freedom. As soon as enough people decide I should die or lose my possessions or do some other thing I don't want to do, I am forced against my will with violence.
So we are stuck relying on the intelligence and wisdom and foresight of the masses. No wonder we're screwed.
>human efforts should be directed to the pursuit of social and moral progress and the increase of leisure, not the competitive struggle for material wealth"
What about not directing anything and maintaining a free world where any individual can pursue what goal he or she sees worthy?
I grew sick of governments or groups of self appointed elites trying to tell people how they should live their lives.
> human efforts should be directed to the pursuit of social and moral progress and the increase of leisure
For better or worse we gave up on slavery a long time ago. We decided that humans shouldn't be directed but rather be left to choose their own direction. This means that they are likely to choose, literally and metaphorically, junk food over vegetables. While vegetables may be better for you, it turns out humans like to taste the competitive struggle for material wealth. If it wasn't obvious 200 years ago, we have learned that helping your neighbour live a good life doesn't spark the same desire as striving to have something to show that you are better than your neighbour.
> It's unclear who this destructive machine is serving.
Those who participate in it. This "machine" you speak of is nothing more than the aggregate of choices made by a population of people. They could change, but what's the incentive? Leisure isn't the top priority of the human. Mating is. And displays of "being better" help attract higher quality mates. We have yet to figure out how to provide decent mating options for all so competition is still required.
Id suggest this is what is fueling the political craziness across the globe, people lost faith in the system and politicians, instead of fixing the issue, use peoples anger to advance some agenda.
As long as there is scarcity there will be competition and a "rat race"
I would say we have two real scarcities left remaining: energy and the conjoined pair food/water.
It can be argued that that the latter is entirely dependent on the former and the failure of modernity was our collective inability to adopt/secure nuclear power in the period between 1940-1970, the global adoption and security of which would have pushed us very close to a post-scarcity economy and the major cultural (re)evolution that would entail.
Instead it was weaponized resulting in its demonization by reactionaries and the poisoning of it as "toxic" in the public discourse and we are now stuck in Adam Smith style economies of warfare that will eternally just create new scarcities in new cycles. I would imagine major warfare will soon begin towards the middle/end of this century over habitable space and water scarcities all problems of our own creation.
>As long as there is scarcity there will be competition and a "rat race"
That makes no sense. Human wants are infinite only at zero marginal cost. The moment there is a positive marginal cost wants become finite. Even a gift that costs you nothing has a marginal cost to receive and store it in your house. So even if the entirety of humanity gave Jeff Bezos a gift he would refuse those gifts at some point.
What western societies suffer from is not scarcity but abundance relative to our quite limited wants.
We give up an unreasonable amount of resources to buy something that is already there, land in a popular location. One thing that is special about land is that humans didn't create the earth. Suddenly there is an infinite demand for land because you own anything that happens on it, even the labor of other people working the land. The marginal cost of land is negative because of income taxation. But here is the thing. One man's land abundance is another man's land scarcity. So if you really wanted to solve this problem you would have to divide the earth equally among all humans.
I don't know, there's plenty of people competing over social progress, competing over moral progress, and completing over leisure. I suspect that Mr Mill would take a dim view of this.
Ouch. This hits close to home as I feel exactly in that "rat race" you mentioned. And I was thinking about this very topic few weeks back after rewatching "into the wild".
Before stopping thinking about this I "converged" on an overall happiness score combined with a sustainability index. In this context sustainability is in a wider sense like: are the policies of a government sustainable long term? This is to avoid a government game the system by borrowing a bunch to improve citizens happiness short term to stay in power longer.
On the other hand, our progression has allowed us to overcome challenges that could have been extinction-level events otherwise. Who’s to say what happens if we stagnate and don’t get a COVID vaccine out in time to largely stunt the disease? What sort of knock-on effects might that have had on other areas of progress?
I hate this law. There is no example of a good measure that does not become a target, nor should there be. The only question is who does the evaluating.
The typical example is: hospital emergency room wait times were made a "target" and therefore hospitals stopped admitting ambulances (literally having them circling around the block) before they had the staff freed up. But there's nothing wrong with emergency room wait times being kept low. The obvious locus of evaluation, however, was moved from the patient (who is evaluating his whole end-to-end emergency care on many metrics, including but not limited to emergency room wait time) to some bureaucrat who assesses the hospital only on the wait time.
I'd argue that "free market" pricing in general is. The attitude that "something is valuable if people are willing to pay for it" is being increasingly overfitted.
Overfitted to what? If the whole point of economics in a moral sense is to get people more value, than what does the question of if person A will buy item 1 at a higher price than person B for item 2 for better or worse reasons get the average person/company except for a distraction from their goal? Make item 1, sell it to person A, and go enjoy your more prosperity than you would have gotten for selling item 2 to person B. This proposal needs to be much more concrete to mean anything.
I don't know about "ultimate", but it sure is a good example of one.
In fairness though, if a politician stands at a stump and says, "see, I'm doing great with GDP", but it's because they've been serving the metric rather than the underlying principles, they're likely not going to be well received.
A common example is "lines of code". If you pay by lines of code, then coders will bloat up code to pad their metrics, making it verbose and redundant.
More common is some mostly pointless (or annoying) new feature that an overzealous project manager wants to get users to 'use' (thus boosting some metric they can point at to secure a promotion), so they have the engineers implement a gigantic popup pointing at it. Or worse, they put the entrypoint to the feature in some high touch area so all of the power users accidentally click on it, thus logging an interaction and making the line go up. https://en.wikipedia.org/wiki/Goodhart%27s_law
Yup. There is simply no way we can replace GDP with another metric. There's always a thousand smartasses who say the unemployment rate is fake. It's not fake, it's an indicator and can never tell a complete story. Employment, economic activity, inflation, trade are all drowning in data points that inform some specific minutiae.
The solution is to not base policy on indicators but politics needs to keep things simple.
GDP, like many economic metrics, is of course not an absolute indicator of anything significant. You can set up two shell companies and have them buy and sell the same paper clip between them thousands of times a second, for a million dollars each. It will boost GDP by quite a lot.
Of course historically, such deception has not always dominated, and the apparent GDP has been a good proxy for total genuine economic activity. Economic activity is in turn a proxy for confidence: If everyone is spending more money, it means they're confident they see value being produced that they want to capture. Consumers presumably feel they'll be comfortable for years to come. Businesses think it's time to hire staff, increase production and focus on growth. These things by themselves can be seen as positive effects, but also it means GDP is effectively a crowdsourced predictor of future economic outlook. So GDP by itself isn't that interesting, but it correlates with many economic phenomena that are of interest, which is why it's been a popular measure.
I'm sure the article's authors are well aware of this. If you look at the title closely, there's a bit of sleight of hand: It is not common to claim (save perhaps for uneducated laypeople) that GDP is a measure of national success. It is commonly understood as a measure of economic health. Most people will readily grant that economic health does not necessarily mean national success, since they can decouple in crucial ways. For example, if your previously poor country suddenly becomes colonized by major imperialist powers, the GDP will certainly be bolstered, but the social and geopolitical effects may be detrimental. But when you attack the idea that GDP measures economic success, of course it sounds insightful, since it's the kind of misapprehension that is tempting to ascribe to others and not yourself. "Everyone has made a mistake- but not me!"
> You can set up two shell companies and have them buy and sell the same paper clip between them thousands of times a second, for a million dollars each.
In the case of used goods, the only effect on GDP comes from the transaction fees paid to the broker. Same with buying an already existing house: the GDP contribution is the real estate and legal fees.
And with the stock and bond markets: a trillion dollars' worth of stock changing hands only affects GDP to the extent of the brokerage fees, maybe a billion, maybe less.
And in the case of new goods, only the final product sold to consumers or held in inventory at the end of the accounting period counts towards GDP. Intermediate inputs do not count. So one paper clip sold one million times counts as one paper clip.
Readit News
In truth, pretty much nobody really knows for sure what policies actually will increase GDP, or what causes the short term fluctuations (business cycle / recession) or variation in long term divergense between different countries in the first place. The more honest academic economists will freely admit this. (I was explicitly thaught so in my graduate macro-economics courses). So I think it's a strawman to think that countries/governments are engating in some kind of myopic GDP maximization plan.
I think the appropriate analogy is household or personal income. (GDP is just all incomes in a country summed up and corrected for inflation.) It's probably not the most important thing in the world, and probably not the most important determinant of personal happyness or life satisfaction. But a severe lack of it (especially compared to the people around you) or an unexpected large drop will probably be considered problematic by most people.
Have they tried securing access to large amounts of cheap energy? It is a bit of a win-win because either GDP goes up and case closed or they can sit back and relax in luxury mulling why GDP didn't go up despite massive increases in the general prosperity.
Energy isn't the entire story because there also need to be people around who know how to transform it into whatever you want, but it is a rather important part of the puzzle. After that, freedom and education are probably going to make up the rest. What else is there? I suppose land ownership.
The puzzle isn't that complicated. We all know what comfort looks like. Asking how to make GDP go up is the wrong question, it is just a tool to point out when policies are wasting resources. More waste -> less GDP -> notice that and waste less -> reorient to secure prosperity.
Securing large amounts of cheap energy is non trivial as europe is beginning to find out.
There is no such thing as a trivial win here. And trying to secure it could end up costing significant GDP, as demonstrated by wars fought over securing energy.
As in?
The % of pop. that owns land?
The conversion of common parks to land titles for sale?
The spread of skyscrapers to allow the sale of vetically stacked "land"?
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Increase GDP?
GDP is a concrete measure that is difficult to fake. Once you start arguing about the economic value of volunteering, divorce, income inequality, and crime -- you've opened the door to never being able to trust GDP again.
Should we create new metrics to track progress? Sure. Should we stop tracking GDP? No way.
Being valid in China is a very high bar, there is very little that a totalitarian government can't fake if it tries hard enough.
Government expenditure on services is included in GDP at cost. Transfers to individuals are not.
Transfer the same to an individual in return for their hours and it will be included in GDP. Instant boost of GDP with no material change in output.
It's very easy to fake because GDP isn't all transfers, it's just some of them and like all dividing lines the one chosen is largely arbitrary.
Who is saying we should do that? These items have value, that is not debatable. It might not be economic value, but that's not the point. The point is, these items are not being valued on a national scale, or at least extremely undervalued against GDP. If you have extreme wealth inequality, GDP is a pretty poor measure of basically anything.
I don't think anybody is arguing that we should stop measuring or looking at GDP entirely. The article argues that we need to recognize that we can't just close our eyes to the value of these things.
It's kind of like talking about the value of a human life in dollars. We know this number is more than 0$, and we know this number is less than __POSITIVE_INFINITY__$, and we're probably never really going to agree on a number somewhere in the middle, but it's still an important number to consider.
Or, to push it in the other direction: sell a service back and forth. I sell you a message for 1 billion and then you sell me one for 1 billion. Now we’ve increased gdp by 2 billion (although you need to live in a zero VAT and zero income tax country to do that as a private person and still have it count)
Which means GDP is difficult to fake.
Changing the included values and operands, then calling it a new standard, is common in the US. GDP has been an unreliable metric for decades.
I noticed when the multitude of chip fabs, across california, closed down had coincided with the president announcing the stockmarket gains were being rolled into the accounting. I thought it was obvious that it was not a meaningful metric for measuring production.
Of GDP? Source?
The best counter to that I've ever heard:
"Let's say I pay you $10M to eat a pile of shit, then for kicks you pay me $10M to eat a similar pile of shit. You know what the end result is? The GDP has increased $20M, and we both have huge shit-eating grins".
The GDP is laughably easy to fake.
If people were buying piles of shit for $10M, then that is what the GDP would be. That's not faking GDP.
And yes there are workarounds, but clearly it's not that easy to manipulate GDP. If anything, you want to underreport these numbers so you don't owe as much.
I’m not sure how true this is. There are international standards, updated over time, with variable adoption by per-country agencies tasked with measuring GDP.
These agencies typically rely on surveys of industry specific activity to measure different metrics and at times imputation and inference of unmeasured or missing values to form a picture of overall economic activity, from which a single GDP figure is derived.
All of which is to say “measuring” GDP is nothing like measuring a concrete physical quantity such as temperature, and there is ample opportunity to fiddle with the standards or fudge the statistics, either innocently or nefariously.
See for example how incorrect construction data cleansing lead to Japan overstating its GDP for several years.
It's trivial to fake. Just pull some asset values out of your ass, which Wall Street does a million times a day. GDP became a lot less useful when the economy shifted from mostly tangible goods to mostly intangibles (e.g. software) and services, then utterly useless with the over-financialization of our economy. There are many measures that are more informative than GDP (or GDP per capita), that enable more rational decision making. GDP is just a vanity number.
GDP is a bad measure for all the reasons above, and because prices do not work the way GDP want's them too. As another poster alluded to, increase total production and cause prices to fall across the board, and the logic of the system is that GDP drops. The only reason we see GDP increasing is that there is an underlying increase in the measurement (money), and that feeds into the measurement data.
https://www.heritage.org/international-economies/commentary/...
https://www.bloomberg.com/news/articles/2022-03-16/china-s-s...
Measuring well-being and happiness will never be straightforward and uncontroversial, despite what the authors of the article say.
You don't need to look much past the first few paragraphs of the article to see an obvious bias about income inequality. That reveals what attempts to find new metrics are really about: the authors want to use a set of metrics which have built-in left-wing assumptions about how society ought to look.
To think that such controversial metrics could serve as a replacement for GDP only reveals the authors' own naivete.
But to argue the point a bit more, and this is something that Thomas Piketty (an economist that studies inequality) always brings in his books: one measure is not enough. GDP is one measure, we need to look at many more measures. GDP does say something, it's not meaningless, but we need other measurements to get the full understanding of the picture.
And we actually have lots of them, GDP sadly fails to capture a lot of externalities, so it doesn't really capture very well for example environmental damage; think of china, their GDP is growing a lot but we can all see it's not growing in a sustainable manner. Or think of the USA, highest GDP in the planet but this isn't being reflected in life expectancy for example which actually has been declining for a while now.
And as I said in the beginning, inequality very much affects people's well being and the well being of an economy as a whole as well. So it is definitely a measurement that we ought to take seriously. It seems silly to me to say "these are left wing metric". These are metrics that have a reason of being, inequality has real effects on our economies and there is a lot of work, and good work at that, that you can read on why precisely this is the case.
Introducing political statements on HN and feeding them is frowned upon, but I will bite: the right wing also needs an answer to the problems caused by inequality. Solving issues caused by inequality can easily be a right wing objective: for example when fixing an issue also helps the middle class or the rich.
A metric for inequality can be politically completely neutral, yet it will trigger partisans on the left or right. I do agree that metrics and solutions often have covert political biases.
I think that regardless of your political inclination, the core message of the article remains the same.
The real issue is simply that, a lot of the things we want to convert to simple metrics can't be. Suppose I hand you a list of the exact rate each crime in a country was committed, and I ask you to convert that list to a single number, how would you do so? You could assign a weight to each crime, but how would you know which weights to use? What's the "true cost" of each crime?
Of course, in reality we won't know the real rate of any crime. We will have estimates, which are likely quite far from the truth.
Apparently my high school teacher should have written a nature paper, instead.
However the crime example also isn't very useful. Crimes aren't discouraged based on money cost, but a cost that is emotional and related to maintaining order and stability for society.
Someone mentioned how, as a Python user, they barely had to think about pointers/references. Things get magically referenced when needed. Seems like progress.
When concepts get coded into a language, in this case "economics" (which is a tool for trying to see the world), they put down roots. Other concepts "hang off" them. So, we could certainly try to supplant GDP as a metric. But then what of all the other economic structures that people have built on GDP? Who will let go of those?
You have to tear down entire branches of thought and replace them with new utility concepts that make using old ones as anachronistic as using pointers in Python.
This is very apparent, because it was only about 30 years ago that GDP itself replaced GNP as the preferred metric for the same purposes in the US. The article mentions the use of GDP internationally for longer, but the US preferred GNP until 1991.
Its also worth noting that the creator of the GDP, a decade before it became dominant (internationally), also warned against overfocusing on it as a measure of welfare, in terms that really apply to any simple unidimensional measure:
“The valuable capacity of the human mind to simplify a complex situation in a compact characterization becomes dangerous when not controlled in terms of definitely stated criteria. With quantitative measurements especially, the definiteness of the result suggests, often misleadingly, a precision and simplicity in the outlines of the object measured. Measurements of national income are subject to this type of illusion and resulting abuse, especially since they deal with matters that are the center of conflict of opposing social groups where the effectiveness of an argument is often contingent upon oversimplification” [0]
The state of the economy is complex and multidimensional, and we need a set of measures which reflect that.
[0] https://fraser.stlouisfed.org/title/national-income-1929-193... , pp. 5-6
"Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.
It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.
It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.
It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
And it can tell us everything about America except why we are proud that we are Americans."
https://www.theguardian.com/news/datablog/2012/may/24/robert...
Another historical "fun fact", is that MLK wasn't assassinated while pushing for civil rights. He was killed once he shifted his focus to financial injustice and wealth inequality.
Two might not be a pattern, but it's no accident these historical figures were both challenging the deep pockets status quo and they both died prematurely.
https://kennedykingindy.org/full-rfk-speech
Edit: He also wrote the "We choose to go to the Moon" speech
And no, having an accident doesn't increase GDP. If the passengers dies, that will remove their GDP from society. Riots are bad for business. The pandemic brought the GDP down even though Pfizer & Friends made record money.
GDP is the best measure of the size of an economy. Nominal GDP is the best measure of the power of an economy in its standing in the world, comparing to its at parity GDP.
The GDP was expanding at a fantastic rate, at the time. The 1960s were the last decade of strong economic growth, the USA has not seen anything like it in the last 50 years. Only the end of the 1990s seemed to briefly revive the golden years of the post-war boom.
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Yes, we took the wrong turn. Most people are subjected to a life long rat race of economic relevance/volatility where most of their waking hours are spent just trying to make a living, by any means necessary.
What makes the state of humanity extra sad is that all this raping of the planetary resources that we do still does not elevate us out of this misery.
It's unclear who this destructive machine is serving. Consider the point of view of an ordinary citizen. Who genuinely has your best interest at heart?
A business? No. A bank? No. A country? No.
Your ancestors 200 years ago were malnourished, working the fields all day to eke out a miserable existence, never enjoying a single luxury in life. They didn't know how to read or write, and in any case wouldn't have had time for such luxurious activities.
Human progress has brought us to the point where we have the free time to complain about how disadvantaged we are and how unfair life is, without giving a thought to the fact that our daily lives are far more luxurious than those of kings who lived 200 years ago.
> Compared to what?
Compared to what it could have been
I have a worse life than my grandparents by almost any conceivable metrics besides the fact that I own and consume more useless shit. They had no degrees, five kids and could afford to live in a city center. I have 0 kids, a master's degree and will never be able to afford 5 kids, let alone in a city center
> Human progress has brought us to the point where we have the free time to complain about how disadvantaged we are and how unfair life is
I work more and will work longer than my grandparents, I don't expect I'll be able to retire before 70, if not more. In France 25% of the poorest already die before reaching retirement age.
> that our daily lives are far more luxurious than those of kings who lived 200 years ago.
I'm still sitting a desk desk 8 hours a day, probably for the next 40 years, while technocrats of the 60s promised automation would bring the 3 days/15 hours workweek
> The more he contemplates, the less he lives; the more he identifies with the dominant images of need, the less he understands his own life and his own desires.
> The pseudoneeds imposed by modern consumerism cannot be opposed by any genuine needs or desires that are not themselves also shaped by society and its history. But commodity abundance represents a total break in the organic development of social needs. Its mechanical accumulation unleashes an unlimited artificiality which overpowers any living desire. The cumulative power of this autonomous artificiality ends up by falsifying all social life.
Guy Debord, 1962
> The necessity of production is so easily proved that any hack philosopher of industrialism can fill ten books with it. Unfortunately for these neo-economist thinkers, these proofs belong to the nineteenth century, a time when the misery of the working classes made the right to work the counterpart of the right to be a slave, claimed at the dawn of time by prisoners about to be massacred. Above all it was a question of surviving, of not disappearing physically. The imperatives of production are the imperatives of survival; from now on, people want to live, not just to survive.
> The distance has not changed between those who possess a lot and those who possess a small but ever-increasing amount; but the intermediate stages have multiplied, and have, so to speak, brought the two extremes, rulers and ruled, closer to the same centre of mediocrity. To be rich nowadays merely means to possess a large number of poor objects.
Raoul Vaneigem, 1967
When we make things more efficent it is reasonable to remember this is the /world/ economy getting more efficient and the most important thing we are making efficent is growing enough food for 7b people through specialisation and trade and espeically technical progress. The second most important thing is making it so that parents don't routinely and commonly watch their children die in pain.
In Mill's time at the height of the biggest empire ever known, right at its centre of wealth children starved. Their parents watched them die from what we now refer to as "preventable disease" and are outraged when any child in the world dies of it.
I'm taking that faustian bargain we took as a species every f*king time. No we did not "take the wrong turn." There remains plenty to discuss on how to do it better going forward.
2c worth, YMMV.
The idea that the the current economic order is the most efficient is... idealistic
> "over there" who look and/or talk different that it separately doesn't matter if they starve.
The global economy is about expanding the wealth and consumption of the.01% while maintaining a standard of living well enough that the next 20% won't murder them and guard then from the bottom 80%
> is growing enough food for 7b people
We're well well beyond this capability. Westerners need to eat less meat, waste less electricity (more fuel for fertilizer etc).
Most westerner economies are rentier economies. They need more wealth taxes and more antitrust.
Rishi Sunak, the billionaire banker, conservative leader of the UK himself said that cutting corporate tax doesn't result in more productive investment
In a modern democracy, only one of those three could conceivably have your interests at heart. Lumping them all together damages participation in democracy, which exacerbates the problem.
Knowing that an participating in democracy without tying up your identity in the outcomes is critical.
So we are stuck relying on the intelligence and wisdom and foresight of the masses. No wonder we're screwed.
What about not directing anything and maintaining a free world where any individual can pursue what goal he or she sees worthy?
I grew sick of governments or groups of self appointed elites trying to tell people how they should live their lives.
For better or worse we gave up on slavery a long time ago. We decided that humans shouldn't be directed but rather be left to choose their own direction. This means that they are likely to choose, literally and metaphorically, junk food over vegetables. While vegetables may be better for you, it turns out humans like to taste the competitive struggle for material wealth. If it wasn't obvious 200 years ago, we have learned that helping your neighbour live a good life doesn't spark the same desire as striving to have something to show that you are better than your neighbour.
> It's unclear who this destructive machine is serving.
Those who participate in it. This "machine" you speak of is nothing more than the aggregate of choices made by a population of people. They could change, but what's the incentive? Leisure isn't the top priority of the human. Mating is. And displays of "being better" help attract higher quality mates. We have yet to figure out how to provide decent mating options for all so competition is still required.
As long as there is scarcity there will be competition and a "rat race"
I would say we have two real scarcities left remaining: energy and the conjoined pair food/water.
It can be argued that that the latter is entirely dependent on the former and the failure of modernity was our collective inability to adopt/secure nuclear power in the period between 1940-1970, the global adoption and security of which would have pushed us very close to a post-scarcity economy and the major cultural (re)evolution that would entail.
Instead it was weaponized resulting in its demonization by reactionaries and the poisoning of it as "toxic" in the public discourse and we are now stuck in Adam Smith style economies of warfare that will eternally just create new scarcities in new cycles. I would imagine major warfare will soon begin towards the middle/end of this century over habitable space and water scarcities all problems of our own creation.
Just my $0.02
That makes no sense. Human wants are infinite only at zero marginal cost. The moment there is a positive marginal cost wants become finite. Even a gift that costs you nothing has a marginal cost to receive and store it in your house. So even if the entirety of humanity gave Jeff Bezos a gift he would refuse those gifts at some point.
What western societies suffer from is not scarcity but abundance relative to our quite limited wants.
We give up an unreasonable amount of resources to buy something that is already there, land in a popular location. One thing that is special about land is that humans didn't create the earth. Suddenly there is an infinite demand for land because you own anything that happens on it, even the labor of other people working the land. The marginal cost of land is negative because of income taxation. But here is the thing. One man's land abundance is another man's land scarcity. So if you really wanted to solve this problem you would have to divide the earth equally among all humans.
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Before stopping thinking about this I "converged" on an overall happiness score combined with a sustainability index. In this context sustainability is in a wider sense like: are the policies of a government sustainable long term? This is to avoid a government game the system by borrowing a bunch to improve citizens happiness short term to stay in power longer.
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The typical example is: hospital emergency room wait times were made a "target" and therefore hospitals stopped admitting ambulances (literally having them circling around the block) before they had the staff freed up. But there's nothing wrong with emergency room wait times being kept low. The obvious locus of evaluation, however, was moved from the patient (who is evaluating his whole end-to-end emergency care on many metrics, including but not limited to emergency room wait time) to some bureaucrat who assesses the hospital only on the wait time.
In fairness though, if a politician stands at a stump and says, "see, I'm doing great with GDP", but it's because they've been serving the metric rather than the underlying principles, they're likely not going to be well received.
The solution is to not base policy on indicators but politics needs to keep things simple.
Of course historically, such deception has not always dominated, and the apparent GDP has been a good proxy for total genuine economic activity. Economic activity is in turn a proxy for confidence: If everyone is spending more money, it means they're confident they see value being produced that they want to capture. Consumers presumably feel they'll be comfortable for years to come. Businesses think it's time to hire staff, increase production and focus on growth. These things by themselves can be seen as positive effects, but also it means GDP is effectively a crowdsourced predictor of future economic outlook. So GDP by itself isn't that interesting, but it correlates with many economic phenomena that are of interest, which is why it's been a popular measure.
I'm sure the article's authors are well aware of this. If you look at the title closely, there's a bit of sleight of hand: It is not common to claim (save perhaps for uneducated laypeople) that GDP is a measure of national success. It is commonly understood as a measure of economic health. Most people will readily grant that economic health does not necessarily mean national success, since they can decouple in crucial ways. For example, if your previously poor country suddenly becomes colonized by major imperialist powers, the GDP will certainly be bolstered, but the social and geopolitical effects may be detrimental. But when you attack the idea that GDP measures economic success, of course it sounds insightful, since it's the kind of misapprehension that is tempting to ascribe to others and not yourself. "Everyone has made a mistake- but not me!"
In the case of used goods, the only effect on GDP comes from the transaction fees paid to the broker. Same with buying an already existing house: the GDP contribution is the real estate and legal fees.
And with the stock and bond markets: a trillion dollars' worth of stock changing hands only affects GDP to the extent of the brokerage fees, maybe a billion, maybe less.