

UN report comes up with a better way to size up nations' wealth  - JumpCrisscross
http://www.economist.com/node/21557732/

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rayiner
I'm skeptical about this catching on, but I hope something replaces GDP. It's
used everywhere, and treated as gospel by the media and politicians, but it's
absolutely terrible.

Consider the broken window fallacy. It's Econ 101 that you don't gain anything
by breaking a window just to create work for the glazer, window installer,
etc. Yet, if I went around breaking all the windows in my neighborhood, GDP
would increase! This is actually a pervasive problem with the measure.
Consider polluting activities. A coal plant that creates tremendous air
pollution contributes doubly to GDP. First, the activity itself contributes to
GDP. Second, the health damage created by the pollution creates work for
doctors, etc, which also contributes to GDP! If you replaced the coal plant
with a wind power plant that cost the same, but didn't create any health
damage, GDP would actually go down, even though it's quite obvious that the
economy is better served by the latter.

The degree of reverence with which the media and political system treats GDP
is completely ridiculous given how stupid the measure really is.

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DaniFong
This is a very important step in the right direction. Russia, for example,
shouldn't be exporting its wealth and replacing it with bad investments. But
it is. Discovering these problems will lead to actual policy improvements.

One wishes that the measure of human capital were not so crude, however.

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D_Alex
I propose that the title be amended to "...comes up with _yet another_ way to
size up nations' wealth" and am willing to bet that this report will be all
but forgotten in ten years time.

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bootload
_"... A country can lose $100 billion-worth of pastureland, gain $100 billion-
worth of skills and be no worse off than before. The framework turns economic
policymaking into an “asset-management problem”, says Sir Partha. ..."_

Only in economics can you get away with statements like this.

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msellout
What's wrong with that statement?

To compare policies that affect natural assets and human assets, we need to be
able to measure those assets with the same index. If not dollars, then what?
"Utils"?

Once you pick the units, then we can argue about the methodology for
measuring.

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bootload
_"... What's wrong with that statement? ..."_

It depends what you mean by loss. I consider loss as inability to use an
asset, in this case the use of pasture. The pasture might have a value of $1B
but is that it's true worth? Could you re-build _that_ particular non-
renewable pasture again to it's previous worth at this cost?

Lets use a concrete example. It's quite possible pasture in Fukushima, Japan
has sustained a $1B loss. How would a $1B gain in skills ever replace lost
pasture in this case? This is a real loss. No asset management shuffling can
replace that loss of pasture.

The dollar value given to some assets, in this case natural assets do not
reflect the true value, just what the market finds valuable at that time.

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anewguy
How do you know the "true value" of natural assets in your non-economic
framework? Is it automatically infinite? That would seem impractical - we
would never want to exploit any natural asset.

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obtu
Here's the UN report: <http://www.ihdp.unu.edu/file/download/9927.pdf> (11MB,
370pp, low-res). Other versions are at <http://www.ihdp.unu.edu/article/iwr/>

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lars512
I was amazed that Australia had only increased its inclusive wealth by 0.1% in
the 1990-2008 period. Whatever we're doing, it has problems.

~~~
rayiner
That's per year.

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duncan_bayne
I swear, I read that title as "sieze nations' wealth" :-)

