

GDP Fetishism: why GDP is not a good measure of wellbeing - yummyfajitas
http://www.econlib.org/library/Columns/y2010/HendersonGDP.html#

======
timr
Just in case it isn't clear to everyone (and I don't think it is), this is an
_opinion piece_ from a libertarian think-tank, funded by something called "the
Liberty Fund". Please don't confuse it with anything related to peer-reviewed
economic research.

This is why I hate economics: many of its practitioners have absolutely no
ethical qualms about blurring the line between publication of their _political
opinions_ and their _research_. Unless you pay exceedingly close attention to
the source and context, you can easily be confused into believing that an
editorial is somehow an objective analysis of economic theory. And while I'm
sure the author raises a legitimate point about the shortcomings of GDP as a
metric, this essay is filled with weak assertions and sloppy logic that
probably wouldn't pass muster in a real paper.

~~~
bokonist
Have you read many peer reviewed economics papers? Or even college economics
textbooks? They make same arguments about well being, dead weight losses, etc.
And they are full of weak assertions and sloppy logic. Peer review can be a
process for eliminating error, but it can also be a process for replicating
error. Where does your faith in academia economists come from? Have you read a
bunch of peer reviewed papers, and decided that they have better logic and
reason than the writings of a top econ-blogger ( like Winterspeak (
<http://www.winterspeak.com/> )?

Also note that while econlib is funded by the Liberty Fund, most academic
economists are substantially funded by the government. There is potential for
bias everywhere, let's worry about what people say.

Of course, I also think Henderson is wrong in one of his points. GDP is total
national income times a price deflator. If government spending does not result
in more productive output, then that will show up in the price deflator, and
"real gdp" shouldn't rise. At least in theory. The real problem with the GDP
statistics is that the calculation of the price deflator is riddled with
methodological problems.

~~~
timr
_"Have you read many peer reviewed economics papers? Or even college economics
textbooks? They make same arguments....also note that while econlib is funded
by the Liberty Fund, most academic economists are substantially funded by the
government. There is potential for bias everywhere."_

Economics papers are reviewed by other economists before publication, and
government research funding doesn't dictate political ideology. Also, real
economics papers aren't _opinion pieces_ , disguised as "articles" in a
"library" of economics.

~~~
bokonist
As I said before, peer review means nothing to me, because peer review
replicates error just as much as it replicates truth.

In general, a piece of writing can contain _facts_ (ex. the stock market
crashed in 2009), _interpretations of facts_ (ex. President x's policies
reduced unemployment), and _oughts_ (ex. leisure is inherently good). The line
between the three can often be blurry. Henderson's piece contains facts,
interpretations, and oughts. Most academic papers contain facts,
interpretations, and oughts. Denigrating something as merely an "opinion"
piece is simply a cheap and uninformative way of saying that you disagree with
someone's interpretation of the facts.

 _and government research funding doesn't dictate political ideology_

Ha! Future economists are selected by present economists based on their
interpretation of the facts. Present economists were selected by past
economists. The grant system was originally setup by the FDR administration
and Vannevar Bush, who all believed in a powerful state managed by
technocratic experts. So just as the Liberty Fund tries replicates libertarian
interpretations of the facts, academic system tends to replicate the statist
interpretations of the facts that the founders of the system believed in.

And you still didn't answer my original question. How many peer reviewed
economics papers have you read through and carefully thought about? Do you
have a favorite paper or two?

------
acg
Reminds me of a speech by Bobby Kennedy:

 _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 tells us
everything about America except why we are proud that we are Americans._

------
mark_l_watson
Everyone knows that GDP is an awful measure of economic health and resiliency.
No real news here.

Huricane Katrina? GDP goes up. War? GDP goes up. Banks need bailed out a tax
payer expense. GDP goes up.

This might be a close to infinite list, so I'll stop.

What is the GDP good for? Fooling an ignorant population. So, it does have
some value to the elites.

~~~
jacoblyles
If you ever have the choice of living in a country with $1,000 per capita GDP
and $10,000 per capita GDP, I suggest you choose the latter (unless, of
course, you are there for humanitarian work). That's the difference between
Haiti-size earthquakes and Chile-size earthquakes.

~~~
pw0ncakes
Life is easier in rich countries than in poor ones. Rich countries also have
higher GDP. However, the relationship is causative between the _wealth and
production_ and higher quality-of-life, not GDP. The arrows go like this:
Wealth -> GDP. Wealth -> Well-being. These are tight enough to make it hard
for an order-of-magnitude difference (as opposed to, say, 20%) not to denote a
better quality of life.

However, the US has a very high GDP and, although it's not Third World yet,
has a distinctly lower quality of life than most European countries (expensive
healthcare, high educational costs, 1-2 weeks' vacation being considered
normal) despite those countries' lower GDPs.

~~~
yummyfajitas
How do you conclude that the US has lower quality of life than Euro countries?

As far as I know, both healthcare and educational costs are included in PPP-
adjusted GDP per capita. The US comes out on top of nearly all European
nations (only Luxemborg, Norway, Jersey and Lichtenstein have higher PPP-
adjusted GDP per capita than the US).

[http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_...](http://en.wikipedia.org/wiki/List_of_countries_by_GDP_\(PPP\)_per_capita)

As for vacation time, you seem to assume Americans would rather have longer
vacations and less money, but are somehow prevented from negotiating this with
their employers. Do you have evidence of this? Note that if people prefer
money to vacation, it would _reduce_ their quality of life to give them more
vacation but less money.

~~~
ZeroGravitas
<http://en.wikipedia.org/wiki/Legatum_Prosperity_Index>

<http://en.wikipedia.org/wiki/Satisfaction_with_Life_Index>

[http://en.wikipedia.org/wiki/List_of_countries_by_Human_Deve...](http://en.wikipedia.org/wiki/List_of_countries_by_Human_Development_Index)

<http://en.wikipedia.org/wiki/Quality-of-Life_Index>

America does well in these, but is still generally about 10th-20th. It would
probably be interesting to break the US down by state and see how they compare
to EU nations.

~~~
yummyfajitas
The problem with some of those measures (HDI, Legatum) is that they measure
availability of what the _index compilers_ believe people should want rather
than what people actually want.

If I want porn and video games, it reduces my well being to give me education
at the cost of Hustler/Halo, but it raises my HDI.

~~~
pw0ncakes
HDI measures literacy rate. If people can read, they can be more informed
consumers of porn and video games.

Some people will read smut, given the ability to read. That's fine. Some will
read logic textbooks and become mathematicians. Also fine. However, it's
clearly better for both people to be literate.

~~~
yummyfajitas
Indeed, improving a single criteria _holding all others constant_ is always an
improvement to well being. This i true, but irrelevant.

If people choose a good not measured by your index _at the expense_ of a good
in the index, it lowers their index value but raises well being.

Another example: a food lover might choose to eat delicious pudding rather
than playing soccer. If the index includes health but excludes hedonic
pleasure from food (which I believe the HDI does), the food lover's choice
might reduce HDI in spite of improving his well being.

It's much the same problem as with a man marrying his maid; utility and well
being increases but the index (GDP in that case) decreases.

------
bengebre
Hmm. I think a lot of people are aware that GDP has its shortcomings. I think
many would embrace a metric that fully captured well-being in an economic
manner, but I didn't see the author suggesting any new metric that we should
be following instead. I think we use GDP because it's the easiest thing we can
use that isn't subject to [much] interpretation. And yes, that sometimes leads
to problems.

