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Except that well-being is relative.

Can we then down-grade the "goddamm gdp"? After all, if everyone knows it's just one indicator out of several, why should we be so concerned that "the economy" is "growing"?

Because it's still a pretty useful indicator: it's broad-based, and it's published on a timely basis. And it's still *generally* the case that that short-run movements in GDP reflect fluctuations in welfare - those other factors generally move much more slowly.

It's not perfect, but it's still pretty useful.

I don't know. It seems to me that the all-pervasive tracking of GDP favours policies which increase GDP (say by pushing non-market activities into the market, or by privatizing government functions) even where these policies aren't optimal for society.

While it may be hard to point to any specific case and say this decision was made wrong due to focus on GDP, over time I think this has a negative impact. For example, how many people have advocated that Canada adopt American policies because they have a higher GDP per capita than we do, while failing to allow for the differences in GDP caused by a more market-based society and a population that works longer hours and takes fewer holidays. If you really think that no policy decisions would have been made differently over the last couple of decades if Canada was consistently believed (measured) to be outperforming the U.S. economically (e.g. if we had reversed the sign of the difference in GDP), then I think you are you are mistaken - hard to prove of course!

I also think back to how many Americans have argued against moving to a more socialist model based on the 'fact' that the GDP/capita (and hence the standard of living in many minds) of Missouri was higher than that of Sweden. Or consider proposals for adding more statutory holidays. I think in the back of some people's minds would be concerns about falling behind in GDP. Generally, I think that what gets measured and what gets treated as our prime objective has an impact.

Economists may look to other measures for evaluating economic welfare but I'm not sure many other people do.

Also, just because there are theoretical issues that prevent coming up with a perfect alternative measure, that doesn't mean that a more useful alternative measure couldn't be constructed. How does one trade off artistic impression against technical prowess in figure skating? No idea, but weighting them equally is likely a better solution than ignoring either one entirely.

Good blog, by the way.


But I'm going to stick to my main point: for policy purposes, the measurement issues involved with GDP just don't matter that much, at least, not to economists. It's certainly the case that you'll see GDP numbers being presented in many weird and wacky ways in order to back up some point or other, but the real problem there isn't GDP: it's bad economics reporting. Of the two problems, I'd say GDP measurement issues rank a distant second behind that of the quality - or lack thereof - of popular economics commentary.

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