GDP alternatives

[jacee]

GDP ... Gross Domestic Product ... a single measure of a country's economic output ... never intended as a stand alone measure:

https://newrepublic.com/article/116461/gpi-better-gdp-measuring-united-states-progress

When the architect of GDP, Simon Kuznets (who later won the Nobel Prize for this work), presented his first report to Congress, he warned against expecting GDP to answer the most important questions for a country: The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP. Later, he wrote in The New Republic, goals for more growth should specify of what and for what.

To quote Yogi Berra, If you don't know where you're going, you might not get there.

Kuznetss concerns were not heeded, and GDP growth increasingly became the primary standard for measuring a societys economic progress and standard of living.

In the wake of the Great Recession, Americans have become cognizant of the fact that GDP bears little connection to their well-being, and many states are working together to implement alternative measures that more accurately reflect the progress of human well-being. One such measure is the Genuine Progress Indicator (GPI), which assesses 26 variables related to economic, social, and environmental progress.

GDP doesn't answer questions about the effects of economic activity on its citizens or the environment:

What are the costs of the environmental degradation resulting from extraction and production of products?

To what extent do the benefits of economic activity improve wellbeing of all citizens?

In many of our discussions here, our opinions keep butting heads against differences in perceptions of economic, social and environmental and long term sustainability vs short term gain in each of those outcomes.

But what if we agreed on basic principles of wellbeing in all of those areas?

What if we agreed on measures of progress in all of those areas?

What if we agreed on short term and long term goals in all of those areas?

Worldwide, the G20 meetings represent the economic arguments, while the people protesting in the streets represent the social, environmental and long term viability issues.

Conflict occurs.

But what if these issues were ALL represented around the same table, monitoring and discussing a more viable approach to human activity and progress on this planet that sustains human life?

Many countries and states are looking at doing just that.

Perhaps, there is no better description of the intent of GPI. Its purpose is to further the conditions that are conducive to life.

.

[bush_cheney2004]

Not clear what any of this has to do with Federal Politics in Canada.

Do you want the referenced USA/American states' concepts to be adopted by Canada ?

GDP has never been the only/most important measure in the United States for answering many different human development and condition questions.

[-1=e^ipi]

How about an additively separable and symmetric (i.e. satisfies anonymity principle) social welfare function where the utility function in the social welfare function is determined empirically from observations of human choices (will need to assume expected utility theory for this though). See more here: http://judithcurry.com/2015/11/29/decision-making-under-uncertainty-maximize-expected-social-welfare/.

With respect to the GPI, you have 26 variables, but how do you determine how much weight each variable should get? It seems arbitrary.

[ReeferMadness]

The quest for GDP has dominated policy of governments around the world. Probably no other single policy determinant has been as destructive in terms of the choices governments have made through modern history. GPI is a huge leap forward and should be actively supported.

Certainly, some components of GPI could be improved but making perfection the enemy of improvement is the wrong thing to do.

[jacee]

How about an additively separable and symmetric (i.e. satisfies anonymity principle) social welfare function where the utility function in the social welfare function is determined empirically from observations of human choices (will need to assume expected utility theory for this though). See more here: http://judithcurry.com/2015/11/29/decision-making-under-uncertainty-maximize-expected-social-welfare/.

With respect to the GPI, you have 26 variables, but how do you determine how much weight each variable should get? It seems arbitrary.

I'll let you go Google that and illuminate us on how it's used.

.

[-1=e^ipi]

Yeah, GPI is dumb. It doesn't even take income inequality into account. And the way it is calculated is very arbitrary and subject to people picking parameters to dogmatically get the conclusions they want. For example, the wiki article has a social cost of CO2 emissions at $93/metric ton, which is just insane and not representative of the mainstream economic view (ironically, they site Richard Tol, but Richard Tol wouldn't agree with a $93/metric ton social cost of CO2 emissions). Also, GPI can't be used to deal with uncertainty, where as social welfare can.

[TimG]

And the way it is calculated is very arbitrary and subject to people picking parameters to dogmatically get the conclusions they want.

GDP is an economic measure and is relevant for monetary policy. That is why it is needed and why it will continue to be used. Any other measure are arbitrary and simply about fabricating political narratives that suit the authors. Edited January 16, 2016 by TimG

[cannuck]

GDP is an economic measure and is relevant for monetary policy. That is why it is needed and why it will continue to be used. Any other measure are arbitrary and simply about fabricating political narratives that suit the authors.

Very true it is an indicator used to set monetary policy, but reality is that it includes so many things that are speculative in nature that it distorts how the GDP relates to wealth being created, rather than just re-distributed (i.e. by speculative gains). Until economists learn to separate out the Casino Capitalism part of economic activity from genuinely productive use of capital, GDP will simply be the blind leading the blind in monetary policy.

[TimG]

Until economists learn to separate out the Casino Capitalism part of economic activity from genuinely productive use of capital, GDP will simply be the blind leading the blind in monetary policy.

The virtue of capitalism and free markets is distributed decision making. However, that is no guarantee of 'good' decisions. The alternative is centralized decision making where the government makes the decisions but experience tells us that will result in even fewer 'good' decisions. Edited January 16, 2016 by TimG

[cannuck]

The virtue of capitalism and free markets is distributed decision making. However, that is no guarantee of 'good' decisions. The alternative is centralized decision making where the government makes the decisions but experience tells us that will result in even fewer 'good' decisions.

IMHO: government's place in the grand scheme of things is to regulate and enforce with wisdom. Until it understands the difference between wealth creation and wealth redistribution, it can not achieve the former goal.

It is also the obvious method of funding and often delivering social services. What it has to learn, though, is how to contract out much of this service delivery to the far more capable world of business.

Government should have no ability to MAKE a decision that affects much of anything except providing for level playing field rules and enforcement, and funding social services.

[hitops]

Yeah, GPI is dumb. It doesn't even take income inequality into account.

And this matters why?

Edited January 17, 2016 by hitops

[hitops]

IMHO: government's place in the grand scheme of things is to regulate and enforce with wisdom. Until it understands the difference between wealth creation and wealth redistribution, it can not achieve the former goal.

Some politicians and bureaucrats might actually not understand that, but most fully understand it but know that it is far more popular to promise everyone freebies/handouts from everyone else, than to tell the truth that those freebies and handouts ultimately cost them more in the long run than if they didn't receive them.

It is also the obvious method of funding and often delivering social services.

It is only obvious for military, law enforcement, the court system and perhaps transportation infrastructure. For all others, it is far from obvious that government is the best option.

Government should have no ability to MAKE a decision that affects much of anything except providing for level playing field rules and enforcement, and funding social services.

Depending on the government, that can mean anything.

Edited January 17, 2016 by hitops

[-1=e^ipi]

And this matters why?

Because of diminishing marginal utility of consumption.

[cannuck]

It is only obvious for military, law enforcement, the court system and perhaps transportation infrastructure. For all others, it is far from obvious that government is the best option.

I have to add universal medical insurance to that list. Sick care and health care should be regarded in policy as what they are in fact - social service. Proof is in the pudding: US version only works for the few privileged to have access to the best of care.

Edited January 17, 2016 by cannuck

[bush_cheney2004]

.... Proof is in the pudding: US version only works for the few privileged to have access to the best of care.

Nope....US version has far more capacity and works just find for a majority of Americans who don't have to wait months or years for simple diagnostic or medical procedures. That's why it is about 17% of United States' GDP.

Edited January 17, 2016 by bush_cheney2004

[waldo]

Nope....US version has far more capacity and works just find for a majority of Americans who don't have to wait months or years for simple diagnostic or medical procedures.

yup, as you have repeatedly stated in this regard: 'U.S. cash is king'! Of course, you refuse to ever speak to the actual U.S. wait time data presented to you... and you have never provided any complete/comprehensive U.S. data/information of your own supplied reference(s)... yet you somehow manage to perpetually make unsubstantiated claims/statements concerning U.S. wait times, while at the same time ignoring the 30+ million U.S. uninsured, the millions of under-insured Americans, etc..

[-1=e^ipi]

I have to add universal medical insurance to that list. Sick care and health care should be regarded in policy as what they are in fact - social service. Proof is in the pudding: US version only works for the few privileged to have access to the best of care.

Both the Canadian and the US systems suck. European systems are better.

[hitops]

I have to add universal medical insurance to that list. Sick care and health care should be regarded in policy as what they are in fact - social service. Proof is in the pudding: US version only works for the few privileged to have access to the best of care.

"Few priviledged" I believe is a gross exageration. The vast majority of Americans had health insurance long before the ACA, and it worked just fine for them.

Also, not having private insurance does not mean you do not get care. Many people without their own insurance are simply young and used their parents. Many others were on medicare or medicaid. Even without any of that, you do not get thrown out on the street, you still get cared for. American hospitals factor non-payment for services into their business model.

And lastly, the assumption that if only you provided insurance, people would use it, is not necessarily true. The Oregon medicaid study proved this clearly. They randomized people with no insurance into a lottery were you got government insurance or you did not, and followed usage patterns and outcomes. The interested finding was not the outcomes (no improvement for those with insurance, btw), but that even among those offered insurance. the majority could not even be bothered to fill out the forms to get it.

Edited January 18, 2016 by hitops

[hitops]

yup, as you have repeatedly stated in this regard: 'U.S. cash is king'! Of course, you refuse to ever speak to the actual U.S. wait time data presented to you... and you have never provided any complete/comprehensive U.S. data/information of your own supplied reference(s)... yet you somehow manage to perpetually make unsubstantiated claims/statements concerning U.S. wait times, while at the same time ignoring the 30+ million U.S. uninsured, the millions of under-insured Americans, etc..

The wait time presented included government insured systems, which will drag the average down. Medicare and Medicaid in the US are the world's largest single payer health care systems.

[hitops]

Because of diminishing marginal utility of consumption.

Explain further?

[cannuck]

"Few priviledged" is simply wrong. The vast majority of Americans had health insurance long before the ACA, and it worked just fine for them.

Also, not having insurance does not mean you do not get care. Many people without their own insurance are simply young and used their parents. Many others were on medicare or medicaid. Even without any of that, you do not get thrown out on the street, you still get cared for. American hospitals factor non-payment for services into their business model.

And lastly, the assumption that if only you provided insurance, people would use it, is wrong. The Oregon medicaid study proved this clearly. They randomized people with no insurance into a lottery were you got government insurance or you did not, and followed usage patterns and outcomes. The interested finding was not the outcomes (no improvement for those with insurance, btw), but that even among those offered insurance. the majority could not even be bothered to fill out the forms to get it.

The rough numbers I use are that something like 60% of Americans are covered by Medicare, Medicaid, fed/state gov't employment or VA benefits so actually have government paid medical insurance of one kind or another. I would guess 20% have good private coverage, 10% are poorly covered and 10% have no coverage at all. Obamacare is an effort to solve that, but a total disaster in execution.

I am an employer in the USA, and am painfully aware of the past and present medical insurance situation. We have also had employees come on board with serious pre-existing conditions, and thus I can tell you, living in a relatively sparse population area (WY) you need big bux on the table to get to competent specialists - or simply drop dead. That has been my personal experience.

I had never heard of the Oregon study, and find that extremely interesting, and quite contrary to what I see here. Of course, we don't have to fill any forms at all unless being admitted, and one must factor in the cultural distrust of government in the USA to even try to begin to explain those results!!! Could you link any summaries for us?

[hitops]

The rough numbers I use are that something like 60% of Americans are covered by Medicare, Medicaid, fed/state gov't employment or VA benefits so actually have government paid medical insurance of one kind or another. I would guess 20% have good private coverage, 10% are poorly covered and 10% have no coverage at all. Obamacare is an effort to solve that, but a total disaster in execution.

I suppose it depends on what you mean by 'good private coverage'. The pre-ACA widely quoted number of people with private insurance is around 64%. Obviously with the ACA, employers are more likely to offload that cost onto ACA and not offer it, so without a doubt those numbers will drop.

I am an employer in the USA, and am painfully aware of the past and present medical insurance situation. We have also had employees come on board with serious pre-existing conditions, and thus I can tell you, living in a relatively sparse population area (WY) you need big bux on the table to get to competent specialists - or simply drop dead. That has been my personal experience.

Sorry to hear it. My guess would be that is specific to sparsely populated areas. I doubt that alternative funding models would make proper specialists more accessible if the problem is population density. The ACA is not likely to improve that, since the real-world effect is to reduce competition and encourages monopoly building.

I had never heard of the Oregon study, and find that extremely interesting, and quite contrary to what I see here. Of course, we don't have to fill any forms at all unless being admitted, and one must factor in the cultural distrust of government in the USA to even try to begin to explain those results!!! Could you link any summaries for us?

This is podcast I enjoy where they did an episode on it. Also lots of links on the page that will give you the info I think you seek, including link to the study and commentaries on it.

http://www.econtalk.org/archives/2013/05/jim_manzi_on_th.html

Edited January 18, 2016 by hitops

[hitops]

Both the Canadian and the US systems suck. European systems are better.

I would suggest some are better and some are significantly worse. The NHS being an example of the latter. Basically take the problems and drawbacks of our system, and amplify them. A colleague of mine (a chemotherapy doc) who used to work in the UK once told me "giving chemotherapy in the UK is easy....nothing is covered, so your options are simple to think about".

We get plenty of UK and Australians applying to come work here. No Americans though.

[-1=e^ipi]

Explain further?

When one is poor, generally the increase in utility that one gains from an additional dollar is greater than if one is rich. An additional dollar for a poor person can go towards food, clothing, shelter, etc. where as an additional dollar for a rich person is more limited in what it can go towards (as the rich person already has essentials paid for) so might go to a vacation in Rome or a big screen TV.

[hitops]

When one is poor, generally the increase in utility that one gains from an additional dollar is greater than if one is rich. An additional dollar for a poor person can go towards food, clothing, shelter, etc. where as an additional dollar for a rich person is more limited in what it can go towards (as the rich person already has essentials paid for) so might go to a vacation in Rome or a big screen TV.

I understand the (fairly misleading) theory that the poor will spend more of their income. I don't see how that has anything to do with my question though.

Edited January 18, 2016 by hitops