a_unique_person
6th September 2005, 08:00 PM
http://www.theage.com.au/news/ross-gittins/were-doing-well-but-how-do-we-feel/2005/09/06/1125772519083.html
GDP is the value of all the goods and services produced during the period, which is also (roughly speaking) the amount of income all of us earned.
Although you can never predict these things with any certainty, the tipping is that GDP will have grown by about 1.2 per cent in real terms. If so, there'll be great rejoicing. It will be a sign the economy's rate of growth is picking up from its recent slow patch.
There's just one problem. As every greenie will assure you, GDP is a lousy measure of progress. One glaring weakness is that it ignores all the work and production that doesn't involve the exchange of money. So all the goods and services we produce in our homes don't get counted. Nor does all the voluntary work people do.
Another weakness of GDP is that it includes "defensive expenditures". When the build-up of noise in your street prompts you to get your windows double-glazed, that counts as a plus with no minus - even though you're no better off than you were before the traffic got bad. When someone has a road accident, the cost of repairing cars and bodies counts as a plus, while the damage, the pain, the disruption and any loss of life are all ignored.
A third weakness is that GDP ignores all the costs to the environment generated by economic activity: the depletion of natural resources, the destruction of species, the rubbish, the pollution and the greenhouse gas emissions.
If these limitations of GDP surprise you, they don't surprise economists. They point out that GDP measures our income, and while traffic noise and road accidents do nothing to make us better off, it's undeniable that people earn income from installing double-glazing, repairing cars and repairing bodies.
...
Our politicians - Labor just as much as the Liberals - are obsessed by the thing GDP measures, "economic growth". Governments' utterances are dominated by the growth they boast of having achieved. Oppositions' utterances are dominated by the growth governments have failed to achieve. Both sides' plans and promises are about what they'd do to hasten growth. And the way economists promote economic growth - the way they're always urging us to change society so as to foster economic growth - makes it clear they, too, treat GDP as a measure of wellbeing.
How could we have fallen into this error? It's simple. We don't have a well-developed, regular measure of wellbeing, but we do have a well-developed measure of economic growth.
...
In the United States, however, two leading members of the American Psychological Society - Professor Ed Diener of the University of Illinois and Professor Martin Seligman of the University of Pennsylvania - have launched a campaign to correct this imbalance.
They say there was a time when many basic needs were unmet and economic indicators were a good first approximation of how well a nation was doing. As nations become wealthier and basic needs are largely satisfied, however, economic indicators increasingly miss their target.
Taken alone, national economic indicators are now badly out of phase with national wellbeing. In many developed countries, real GDP per person has doubled or trebled over the past 50 years, while measures of satisfaction with life have been flat.
How could this be? Well, consider the "ill-being" that's grown alongside the growth in GDP: divorce, drug-taking, crime, suicide, depression and stress.
Diener and Seligman say the GDP figures should be supplemented by a regularly published "national wellbeing index" derived from a system of "national accounts of wellbeing". The key measure would be a regular national survey of people's life satisfaction ("taking things overall, how satisfied are you with your life?"), but specific aspects of life would also be surveyed: job satisfaction, physical health, mental disorders and social relationships.
....
And if it focused the attention of politicians, economists and the public directly on the true bottom line - wellbeing - rather than on the production and consumption that's such an unsatisfactory surrogate for it, our lives might be made a lot better.
I think this issue is important, because the one of the whole driving forces of what is 'right or wrong' in our society these days is if it is good or bad for the economy. I think that is a very narrow way of looking at what is good or bad for us.
GDP is the value of all the goods and services produced during the period, which is also (roughly speaking) the amount of income all of us earned.
Although you can never predict these things with any certainty, the tipping is that GDP will have grown by about 1.2 per cent in real terms. If so, there'll be great rejoicing. It will be a sign the economy's rate of growth is picking up from its recent slow patch.
There's just one problem. As every greenie will assure you, GDP is a lousy measure of progress. One glaring weakness is that it ignores all the work and production that doesn't involve the exchange of money. So all the goods and services we produce in our homes don't get counted. Nor does all the voluntary work people do.
Another weakness of GDP is that it includes "defensive expenditures". When the build-up of noise in your street prompts you to get your windows double-glazed, that counts as a plus with no minus - even though you're no better off than you were before the traffic got bad. When someone has a road accident, the cost of repairing cars and bodies counts as a plus, while the damage, the pain, the disruption and any loss of life are all ignored.
A third weakness is that GDP ignores all the costs to the environment generated by economic activity: the depletion of natural resources, the destruction of species, the rubbish, the pollution and the greenhouse gas emissions.
If these limitations of GDP surprise you, they don't surprise economists. They point out that GDP measures our income, and while traffic noise and road accidents do nothing to make us better off, it's undeniable that people earn income from installing double-glazing, repairing cars and repairing bodies.
...
Our politicians - Labor just as much as the Liberals - are obsessed by the thing GDP measures, "economic growth". Governments' utterances are dominated by the growth they boast of having achieved. Oppositions' utterances are dominated by the growth governments have failed to achieve. Both sides' plans and promises are about what they'd do to hasten growth. And the way economists promote economic growth - the way they're always urging us to change society so as to foster economic growth - makes it clear they, too, treat GDP as a measure of wellbeing.
How could we have fallen into this error? It's simple. We don't have a well-developed, regular measure of wellbeing, but we do have a well-developed measure of economic growth.
...
In the United States, however, two leading members of the American Psychological Society - Professor Ed Diener of the University of Illinois and Professor Martin Seligman of the University of Pennsylvania - have launched a campaign to correct this imbalance.
They say there was a time when many basic needs were unmet and economic indicators were a good first approximation of how well a nation was doing. As nations become wealthier and basic needs are largely satisfied, however, economic indicators increasingly miss their target.
Taken alone, national economic indicators are now badly out of phase with national wellbeing. In many developed countries, real GDP per person has doubled or trebled over the past 50 years, while measures of satisfaction with life have been flat.
How could this be? Well, consider the "ill-being" that's grown alongside the growth in GDP: divorce, drug-taking, crime, suicide, depression and stress.
Diener and Seligman say the GDP figures should be supplemented by a regularly published "national wellbeing index" derived from a system of "national accounts of wellbeing". The key measure would be a regular national survey of people's life satisfaction ("taking things overall, how satisfied are you with your life?"), but specific aspects of life would also be surveyed: job satisfaction, physical health, mental disorders and social relationships.
....
And if it focused the attention of politicians, economists and the public directly on the true bottom line - wellbeing - rather than on the production and consumption that's such an unsatisfactory surrogate for it, our lives might be made a lot better.
I think this issue is important, because the one of the whole driving forces of what is 'right or wrong' in our society these days is if it is good or bad for the economy. I think that is a very narrow way of looking at what is good or bad for us.