GDP: A poor metric of wellbeing

[ReeferMadness]

The GDP is poor metric of wellbeing:

But the problem is that if there’s an oil spill off the coast of Mexico or the U.S., this also contributes to GDP. If we have more crime in society and pay to deal with it, this contributes to GDP. If we have more war, it contributes to GDP. Our main indicator of economic progress doesn’t distinguish between beneficial economic activity and dysfunctional economic activity.

This is another way of saying the GDP is the sum of what everyone paid for everything they bought. It says nothing about what they got for their money.

http://www.theglobeandmail.com/report-on-business/economy/is-gdp-the-right-way-to-measure-progress-one-economist-says-no/article10242590/

It's tough to improve if you don't measure. But if you measure the wrong things, your improvement will be illusory.

[Bryan]

Nobody said GDP was a measure of wellbeing, it's a measure of the economy.

Hard to believe that the guy being interviewed even passed middle school math, that he's supposedly an economist is astounding. His plan has nothing to do with economics, it's about pushing left-wing social engineering--cost be damned.

[ReeferMadness]

Nobody said GDP was a measure of wellbeing, it's a measure of the economy.

And since it's not a measure of well-being, policies calculated to increase it are misguided and foolish. Instead, it makes much more sense to pursue polices that improve wellbeing.

[TimG]

And since it's not a measure of well-being, policies calculated to increase it are misguided and foolish. Instead, it makes much more sense to pursue polices that improve wellbeing.

What GDP *is* a measure of is how much a society can afford non-essentials. If the GDP grows then various well being improving social policies can be paid for. If the GDP shrinks then there is less money to pay for these policies.

IOW - GDP my not be a direct measure of well being but GDP growth is a necessary prerequisite.

[ReeferMadness]

What GDP *is* a measure of is how much a society can afford non-essentials. If the GDP grows then various well being improving social policies can be paid for. If the GDP shrinks then there is less money to pay for these policies.

IOW - GDP my not be a direct measure of well being but GDP growth is a necessary prerequisite.

That's a myth. If I choose to fix my own car, cut my own lawn, paint my own house, GDP suffers. If I choose to buy pink flamingos, wreck my health with expensive booze, crash my car and buy another, GDP goes up.

[TimG]

That's a myth. If I choose to fix my own car, cut my own lawn, paint my own house, GDP suffers.

If you mow your own lawn or fix your own car you are not able to use your labour in ways that would produce more benefit if you specialized in one particular job. This means that society produces less than it would have otherwise which means there will be less money to pay for services like education.

But if you destroy your productivity with booze then society loses even more even because of the loss of your labour. This is a variation on the broken windows fallacy: http://en.wikipedia.org/wiki/Parable_of_the_broken_window

i.e. acts that create destruction hurt the economy in the long run because resources use to repair the destruction cannot be used for more productive tasks. The only myth here is your belief that acts of destruction increase the GDP in the long run.

Edited March 26, 2013 by TimG

[Moonlight Graham]

And since it's not a measure of well-being, policies calculated to increase it are misguided and foolish. Instead, it makes much more sense to pursue polices that improve wellbeing.

No, economic growth is important to overall wellbeing, though it certainly isn't the only factor (which, yes, sometimes it is given too much or even total weight). But you are right, many policies should also look at overall wellbeing, which many do anyways. ie: When a country brings in a social program, they aren't just thinking about GDP, in fact many times they are thinking of mostly factors beyond GDP. On the grand scheme, I think factors other than economic should be looked at much more by both governments and individuals in their personal lives when trying to attain more happiness and wellbeing.

See your quote from the OP:

ur main indicator of economic progress doesn’t distinguish between beneficial economic activity and dysfunctional economic activity.

This person is speaking about economic progress, which GDP is a good measure (though not a totality of economic progress, since it depends on your definition of economic progress...ie: income equality may factor into economic progress as well for many people)

Edited March 26, 2013 by Moonlight Graham

[eyeball]

Whatever metric we use to describe our human economy it'll always be misleading and flat our wrong so long as we externalize and divorce it from the planet's natural environment.

[Canuckistani]

Whatever metric we use to describe our human economy it'll always be misleading and flat our wrong so long as we externalize and divorce it from the planet's natural environment.

Really good point.

[TimG]

Whatever metric we use to describe our human economy it'll always be misleading and flat our wrong so long as we externalize and divorce it from the planet's natural environment.

A rather irrelevant point because no one does that. I can't think of anyone who thinks that economic activity should be done in ways that are unsustainable. The debate is always about who decides what is sustainable and what is not. Environmentalists like to assume that their definitions are the only one that count but this is simply arrogance on the part of environmentalists . Edited March 26, 2013 by TimG

[Moonlight Graham]

A rather irrelevant point because no one does that. I can't think of anyone who thinks that economic activity should be done in ways that are unsustainable. The debate is always about who decides what is sustainable and what is not. Environmentalists like to assume that their definitions are the only one that count but this is simply arrogance on the part of environmentalists .

I don't understand this. For instance, fossil fuels and certain other resources used in economic activity are unsustainable since we use them at a higher rate than they are replaced (whether by us or via natural processes). Our use of fossil fuels also creates pollutants (let's ignore the carbon dioxide/greenhouse gas debate entirely and just say fuel pollutant byproducts like soot and carbon monoxide etc.), and if we continue to use these fuels at the rate we do we will continue to destroy the environment more and more until much of the human-habitable earth and other ecosystems are massively damaged or possibly even uninhabitable by humans and many other organisms. Therefore, fossil fuel use is an example of economic activity that's unsustainable in its current usage and historical usage.

[TimG]

For instance, fossil fuels and certain other resources used in economic activity are unsustainable since we use them at a higher rate than they are replaced

When a fuel source starts to run out the price goes up and alternatives are used. That is a sustainable practice.

if we continue to use these fuels at the rate we do we will continue to destroy the environment more and more until much of the human-habitable earth and other ecosystems are massively damaged or possibly even uninhabitable by humans and many other organisms.

I am not aware of any evidence that supports your assertion that the earth is likely to be rendered uninhabitable because of fossil fuel use (I am aware of many claims but they lack evidence - they are mostly statements of faith like a belief in Jesus). Edited March 26, 2013 by TimG

[Moonlight Graham]

When a fuel source starts to run out the price goes up and alternatives are used. That is a sustainable practice.

sustainable

adj

1. (Economics) capable of being sustained

2. (Life Sciences & Allied Applications /

Environmental Science) (of economic development, energy sources, etc.) capable

of being maintained at a steady level without exhausting natural resources or

causing severe ecological damage sustainable development

3. (Economics) (of economic growth) non-inflationary

- Capable of being continued with minimal long-term effect on the environment: (sustainable agriculture).

- a: of, relating to, or being a method of harvesting or using a resource so that the resource is not depleted or permanently damaged

I am not aware of any evidence that supports your assertion that the earth is likely to be rendered uninhabitable because of fossil fuel use (I am aware of many claims but they lack evidence - they are mostly statements of faith like a belief in Jesus).

I'll admit I don't have a science journal off hand to back up my claim, and again I'm not talking about global warming, but my best guess is that if humans keep using fossil fuels indefinitely (let's say several centuries) at anything near current levels, the dirt/soot and other toxins (not even talking about greenhouse gases) would accumulate to a level that would make it very difficult for humans and other animals to breath properly (with some external apparatus/gas mask that is). Air quality already gets pretty gross during hot summer days in and around cities.

[TimG]

being a method of harvesting or using a resource so that the resource is not depleted or permanently damaged

Well it depends on what you define the resource to be. Fossil fuels resources are always being depleted, however, we have a consistent track record of finding new sources and/or shifting to alternate sources. From the latter perspective the resource is not being depleted. You wish to argue that the track record of the past will not continue but the question why you believe this.

the dirt/soot and other toxins (not even talking about greenhouse gases) would accumulate to a level that would make it very difficult for humans and other animals to breath properly (with some external apparatus/gas mask that is).

Cities make up a small fraction of the planetary surface. They are also getting cleaner as technology improves. The use of fossil fuels itself is not going to lead to any mass destruction of the environment, although, in places like China they need to do a lot more than they are to limit this kind of particulate pollution. Edited March 27, 2013 by TimG

[ReeferMadness]

If you mow your own lawn or fix your own car you are not able to use your labour in ways that would produce more benefit if you specialized in one particular job. This means that society produces less than it would have otherwise which means there will be less money to pay for services like education.

True but irrelevant. You assume that if I wasn't mowing the lawn, I'd be working for pay.

But if you destroy your productivity with booze then society loses even more even because of the loss of your labour. This is a variation on the broken windows fallacy: http://en.wikipedia.org/wiki/Parable_of_the_broken_window

This just reinforces my point. The broken window is a net loss but it still increases the GDP.

i.e. acts that create destruction hurt the economy in the long run because resources use to repair the destruction cannot be used for more productive tasks. The only myth here is your belief that acts of destruction increase the GDP in the long run.

In the long run, we're all dead. Businesses look to the next quarter.

And what do you mean by destruction? In my view, it's destruction to cut down a forest to make crappy furniture that will only last a few years. But we do it anyway and it definitely drives the GDP up.

[ReeferMadness]

No, economic growth is important to overall wellbeing, though it certainly isn't the only factor (which, yes, sometimes it is given too much or even total weight). But you are right, many policies should also look at overall wellbeing, which many do anyways. ie: When a country brings in a social program, they aren't just thinking about GDP, in fact many times they are thinking of mostly factors beyond GDP. On the grand scheme, I think factors other than economic should be looked at much more by both governments and individuals in their personal lives when trying to attain more happiness and wellbeing.

Economic growth just means that you've spent more real money on goods and services. It doesn't mean you got more value or more enjoyment. It doesn't even mean that you will necessarily be able to keep on spending more (ie you might have borrowed the money).

[ReeferMadness]

When a fuel source starts to run out the price goes up and alternatives are used. That is a sustainable practice.

That is actually nonsense. The price signals are given way too late. We've used about half the oil we've ever found and it's only recently that prices have started to rise.

I am not aware of any evidence that supports your assertion that the earth is likely to be rendered uninhabitable because of fossil fuel use (I am aware of many claims but they lack evidence - they are mostly statements of faith like a belief in Jesus).

Agreed the earth will be habitable - but will it support 7 - 10 billion people? And if not, are volunteering to be one of the left-overs?

[Bonam]

That is actually nonsense. The price signals are given way too late. We've used about half the oil we've ever found and it's only recently that prices have started to rise.

Way too late by what metric? We have a wide variety of alternate energy technologies available to be used as oil becomes scarcer, including nuclear, renewables, coal, etc.

Agreed the earth will be habitable - but will it support 7 - 10 billion

people?

It's supporting 7 billion people right now. And our technology only continues to keep getting better, allowing us to utilize resources more efficiently, and to develop entirely new classes of resources that were not previously used at all.

[Moonlight Graham]

It's supporting 7 billion people right now. And our technology only continues to keep getting better, allowing us to utilize resources more efficiently, and to develop entirely new classes of resources that were not previously used at all.

Keep in mind, the world is supporting 7 billion people right now (and now without many problems), but the majority of this 7 billion lives in quite poor conditions in areas that are not fully (if at all) industrialized, with a big portion of these still living subsistent agricultural lives. If say at least 80% of countries in the world were as economically developed/industrialized as Canada/Western Europe etc., it's very uncertain (in fact, I highly doubt) whether the earth's natural resources and the overall environment would be able to support such a developed population, or if it would even be possible to begin with (especially given today's technology). Consumption, pollution, human waste, fossil fuel use etc. would rise significantly, & my guess is most of these areas would more than double.

In my view, for the vast majority of the global population to live in conditions of high economic and overall human development in our current age, the global population should ideally be cut in half at least.

[Bonam]

Keep in mind, the world is supporting 7 billion people right now (and now without many problems), but the majority of this 7 billion lives in quite poor conditions in areas that are not fully (if at all) industrialized, with a big portion of these still living subsistent agricultural lives. If say at least 80% of countries in the world were as economically developed/industrialized as Canada/Western Europe etc., it's very uncertain (in fact, I highly doubt) whether the earth's natural resources and the overall environment would be able to support such a developed population, or if it would even be possible to begin with (especially given today's technology). Consumption, pollution, human waste, fossil fuel use etc. would rise significantly, & my guess is most of these areas would more than double.

But why should we assume "today's technology" (as you put it) when the conditions you assume are not true today, but will only (possibly) be true in the future, when technology will have likely improved further. Based on recent trends, it will be at least several decades before 80% of the world's population is anywhere close to the economic standards of Canada. What technologies will we have developed by then? How much will they have modified our ability to develop and extract resources, to use new resources, to reduce pollution and do things more cleanly, etc? It is quite possible that technology will have advanced enough such that by the time that 80% of the world's population is at our living standards, that such standards will be sustainable. And there are a lot of smart people working to ensure just that.

In my view, for the vast majority of the global population to live

in conditions of high economic and overall human development in our

current age, the global population should ideally be cut in half at

least.

You are making a quantitative statement, without any numbers to back it up. Sorry, but that has no credibility. You may well be correct that at the present level of technological development, if we wanted everyone to live at the standard that people in North America do, that there would not be sufficient resources available. But saying that the population needs to be cut in half (not by 10%, not by 90% or 99%, but specifically by 50%) is a very precise quantitative claim that must be backed by evidence.

[Moonlight Graham]

You are making a quantitative statement, without any numbers to back it up. Sorry, but that has no credibility. You may well be correct that at the present level of technological development, if we wanted everyone to live at the standard that people in North America do, that there would not be sufficient resources available. But saying that the population needs to be cut in half (not by 10%, not by 90% or 99%, but specifically by 50%) is a very precise quantitative claim that must be backed by evidence.

You are right, I should qualified my statement here with a "my guess is" or something. Yes I pulled the # straight from my ass.

[Pliny]

You are right, I should qualified my statement here with a "my guess is" or something. Yes I pulled the # straight from my ass.

Mmmmm....I like you!

[Moonlight Graham]

Mmmmm....I like you!

Haha why?

[eyeball]

It is quite possible that technology will have advanced enough such that by the time that 80% of the world's population is at our living standards, that such standards will be sustainable. And there are a lot of smart people working to ensure just that.

It's possible, but so long as the income gap continues to balloon, democracy continues to become irrelevant and the environment continues to become degraded I'll call BS on the claim that a lot of smart people are doing very much at all in the department of sustainability.

[August1991]

Whatever one thinks of GDP or GNP, I miss politicians who speak clearly (or who hire speechwriters to write words) in this manner:

Even if we act to erase material poverty, there is another greater task, it is to confront the poverty of satisfaction - purpose and dignity - that afflicts us all.

Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.

It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.

It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.

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 can tell us everything about America except why we are proud that we are Americans.

If this is true here at home, so it is true elsewhere in world.

IMHO. these words are obvious truth.

I wish more Western politicians would have the simple courage (or artistry/style) to say the same.

Edited March 31, 2013 by August1991