GDP

April 15, 2014
It's inadequate and misleading, but it's the best we've got. No, not Congress--we're talking about gross domestic product, the measure that economists use to tell us how we're doing. Put it this way: Music companies bemoan ever falling levels of sales, fewer and fewer units moved of what used to be surefire best-sellers. Does this mean that no one is listening to music? Of course not, observes British economic consultant Coyle: We are awash in music, but no one is paying for it in what has been called the "everything's free economy." GDP, as the author notes, is a "made-up entity" that has been with us only since the World War II era, "an abstract statistic derived in extremely complicated ways, yet one that has tremendous importance." Designed to give some sort of statistical parity to different kinds of economies (agricultural and industrial, say), so that apples could be compared to oranges and still be a fruitful index of well-being, GDP has built-in biases. In at least one important dimension, it puts perhaps undue emphasis on the idea of growth--the sort of mass production that, as Coyle notes, allowed cheap penicillin into the market, among other items in a technological "flood of innovations" that ordinary people could afford. But in a time of increasing abstraction and specialization, when so much economic activity centers on consuming and the servicing of consumers rather than actually making anything, can GDP serve as a reliable measuring stick? It's a flawed instrument, Coyle allows, before urging that, even in the wake of the Great Recession, and for all its inability to gauge "happiness" and other less quantifiable aspects of our lives, "we should not be in a rush to ditch GDP." Coyle does good work explicating a topic that few understand, even if it affects each of us daily. A pleasure for facts-and-numbers geeks, though accessibly written and full of meaningful real-world examples.

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