A Better Way to Measure GDP

A Better Way to Measure GDP

As governments craft policies to “build back better” following an economic crisis, they need indicators that reflect a meaningful conception of “better.” This doesn’t mean governments need to abandon the standard GDP. Rather they should transform it into a series of indicators — much like existing US statistics for unemployment are reported as “U1” through “U6,” with each number reflecting different aspects of unemployment. Other statistics, including consumer price indices and the money supply, are similarly reported as a series instead of a single number. While GDP, or G1, would be standard national income, G2 could give a fuller picture of income, revealing how equitably it is distributed, while reflecting the contributions of unpaid labor, like care for children and elders. G3 might look to the future, ensuring that today’s output does not hamper tomorrow’s by exacerbating environmental challenges or depleting resources. G4 could seek to account for our overall day-to-day wellbeing, including, for example, measures of health and social connection.

The news of the record-shattering 33.1% percent annualized GDP growth in the U.S. in the third quarter of 2020 seemed, to most people, like a farce. It’s not that the data — reflecting the rebound from an abysmal spring and summer — was technically wrong. It’s that it bore no resemblance whatsoever to most people’s lived experience.

At a time of a massive public health crisis, long lines at food banks, record-breaking hurricanes, glaring racial disparities, and mounting feelings of stress and overwhelm, no one wants to hear about the historic triumph of an abstract number that’s supposed to tell us how well our society is doing. This raises the question: Why do we measure our economy according to a metric that says so little about our well-being?

This isn’t just an academic musing. It’s a practical question for governments today. The measurement that most societies use as the benchmark for national progress doesn’t meaningfully account for successful management of priorities like public health, economic equity, climate action, or racial justice. This poses a problem because, in government, as in business, “we manage what we measure.”

For example, GDP doesn’t reflect whether an economic recovery is equitable. The growing divide of the pandemic — wherein the wealthiest individuals have seen unprecedented income gains and tens of millions of families have lost income — has had no discernable bearing on GDP numbers. Likewise, GDP hasn’t registered the widening gap between Black and white unemployment in recent months, or the ongoing devastation

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