Is It Time to Abandon GDP?
In a year of populist discontent across the West and narrowing prospects for major emerging economies, the future may end up being shaped in an unlikely setting: the world’s statistical offices. Among ordinary people and specialists alike, there seems to be an increasingly powerful sense of dissatisfaction not only with the pace of economic growth, but with how that growth is defined and measured.There are two reasons for this.First, aggregate economic growth in the developed world has brought little, if any, benefit to the vast majority of citizens in recent decades – a trend that has been particularly pronounced against the backdrop of the 2008 global financial crisis. As Nobel laureate Joseph Stiglitz reminds us, “in the ‘recovery” of 2009-2010, the top 1% of US income earners captured 93% of the income growth.”But second, and arguably more important, defining welfare solely in terms of what can be measured by markets misses much of what contributes to – or detracts from – human wellbeing. In 1968, Robert Kennedy, campaigning for the presidency of the United States, lamented that this approach “measures everything except that which makes life worthwhile.” It says nothing, for example, about environmental quality, the cohesion of communities, or the stability of individual and group identities – all of which clearly influence wellbeing. Such shortcomings not only stoke suspicion of “experts” who tell us that we should be happier than we are; they also prevent the experts themselves from accounting for welfare effects implied by economic dynamism and innovation. As Barry Eichengreen of the University of California at Berkeley points out, the United States’ recent slowdown in productivity growth has been attributed to “the stagnation of technology.” But this seems “implausible,” he says, given the “radical technological advances in robotics, artificial intelligence, biotechnology, and materials design going on all around us.”