A Nobel-winning economist says it’s time to kill the GDP metrics

[Hydrogen]

Nobel-winning economist Joseph Stiglitz would like gross domestic product (GDP) to go the way of the pyramid inch and the Arabic mile. “The world is facing three existential crises: a climate crisis, an inequality crisis and a crisis in democracy,” he writes. “Yet the accepted ways by which we measure economic performance give absolutely no hint that we might be facing a problem.” He’s right! In the United States, GDP is on the upswing, yet Los Angeles burns regularly, and the U.S. president faces impeachment.

The problem, he says, is that politicians see positive GDP figures and continue with the status quo. GDP gives no hint of environmental degradation or resource depletion, nor inequality, middle-class suffering, or lower standards of living. “If growth is not sustainable because we are destroying the environment and using up scarce natural resources our statistics should warn us,” he says. “It is clear that something is fundamentally wrong with the way we assess economic performance and social performance.” Preach.

His new book, Measuring What Counts: The Global Movement for Well-Being, cowritten with French economists Jean-Paul Fitoussi and Martine Durand, provides a blueprint for how countries can use more appropriate metrics that account for details such as sustainability and—imagine!—how people feel about their lives.

This all began a decade ago, when Nicolas Sarkozy, then the president of France, asked Stiglitz and fellow Nobel winner Amartya Sen, along with Fitoussi, to set up a commission studying GDP. They published their early deliberations in a book called Mismeasuring Our Lives.

From an economist’s perspective, metrics are the key to everything. “If we measure the wrong thing, we will do the wrong thing,” writes Stiglitz.


https://www.fastcompany.com/90435788/a-nobel-winning-economist-says-its-time-to-kill-the-gdp

....


It appears people of the world are too feeble minded and uneducated to understand GDP. And so the powers that be are calling for GDP numbers to become obsolescent, so that we feeble minded do not injure ourselves attempting to make sense of GDP.

 

This is strikingly similar to americans being denied access to ICOs, access to leveraged crypto based trading platforms like bitmex, crypto ETFs and other innovations. Everywhere throughout the world, opportunities and options are being denied to some demographics. Doors are being closed. What's the reason for this, do you support it? How do people interpret the motive behind these policies?

[Ucy]

I hate to support what economists say but I agree with him in this case, as long as a Hitler does not arise tommorow and start property seizure in order to eliminate these problems.

I would prefer to see people living in moderation, cutting down on unnecessary stuff owned by individual and relying more on natural stuff. I think this is one of the secrets to happiness.

 The way we live on this planet is just too dangerous and unsustainable. Reminds me of how cancer grows at the expense of the body it grows on

[alyssa85]

It appears people of the world are too feeble minded and uneducated to understand GDP. And so the powers that be are calling for GDP numbers to become obsolescent, so that we feeble minded do not injure ourselves attempting to make sense of GDP.

 

They're not feeble-minded. Just pointing out that GDP is flawed and can be manipulated. We've only been obsessed with GDP since the 1960's - prior to that people had other methods of judging whether an economy was doing well. For example, if your tax rates stay steady from year to year, but tax receipts fall, then the economy is doing badly no matter what GDP says.

[Wexnident]

Not really the same as an ignorant person but rather, faces the truth of what GDP really is right now and what the world faces right now. He wants to stop the idea of looking at a piece of paper and then judging the entire country by it, but rather wants the idea of looking at the country itself, before judging the entire country. The economy may be growing well, but that's the economy itself only. It doesn't take into account the loss of resources that were done for that growth to be possible and other factors that were actually sacrificed in order to do so.

[mu_enrico]

I agree that GDP should not be treated like a king of the metric, but not necessary to "kill" it. It's still a useful "quantitative" metric. Here is some interesting article about this issue: https://www.weforum.org/agenda/2016/04/five-measures-of-growth-that-are-better-than-gdp/

But still, it has some issue related to the method to obtain data, and involve partially qualitative analysis.

For example:
(1) Good jobs << how much $ per hour considered "good?"
(2) Wellbeing << how to measure wellbeing?
etc.

[beerlover]

These problems are basically self-solving problems. People think that we should stop it before it is too late but it will stop even if it is too late, just not with humanity. For example, the world is going into a climate change right now right? Do you really think world will stop because all humans die?

Even in the worst case scenario where the whole of humans die because of climate change (hopefully we won't) the world will continue to spin like nothing happened, all those buildings, all those things will go exciting in tens of thousands of years later if not millions of years later and it will just be the world that used to exist all together once again without humanity. Wage gap problem?

Eventually the poor will keep on dying for a faster rate where there will be less and less poor, as long as rich holds the means of production they will want to get richer and richer which means eventually (surely not anytime soon, I mean in centuries) this can't continue since poor will starve to death (they do now too but in less numbers) in big numbers which means "eat the rich" even in figuratively speaking terms may become a truth.

[exstasie]

It appears people of the world are too feeble minded and uneducated to understand GDP. And so the powers that be are calling for GDP numbers to become obsolescent, so that we feeble minded do not injure ourselves attempting to make sense of GDP.

That's not my reading of what he said. It's more about the fact that GDP doesn't reflect "the big picture": living standards, inequality, environmental issues. Only looking at GDP makes everything about achieving growth at any cost.

This is strikingly similar to americans being denied access to ICOs, access to leveraged crypto based trading platforms like bitmex, crypto ETFs and other innovations. Everywhere throughout the world, opportunities and options are being denied to some demographics. Doors are being closed. What's the reason for this, do you support it? How do people interpret the motive behind these policies?

How would this be closing doors, ending opportunities?

[Theb]

Why remove a financial measure solely because it cannot associate itself with what he is trying to link it into or because people can't understand for what it is? GDP provides a snapshot of the countries total monetary value of their finished goods and services it literally doesn't say anything about how it can improve the country's environment or poverty rate so why remove GDP when they can do something to wake up people on the other situation that country is facing? If politicians simply only see the GDP as something they need to stand on to see if their country is doing good then you know they are bad politicians and you really don't have to vote for them in the upcoming election because of it.

[squatz1]

This is even a lesson in modern economics. You're taught that GDP truly isn't a good measure of activity because you''re unable to differentiate between the good and the bad.

Think about it like this:

If a Hurricane is to happen right now in America, the goods and services being distributed throughout the area after the Hurricane would cause a GDP Boost
If people require surgeries due to lung cancer from smoking, GDP will increase.
If the land/air/whatever is being polluted and the government / private groups come in and spend a good deal of money on cleanings, GDP will increase as money is spent on a service of cleaning (and the goods required in such)

The problem is that politicians are always focused on the short term because they want to be reelected. They always need to continue the growth, and they can't focus on the next decade, or two decades, or etc. They're focused on the next six months to a year because they want to keep their job.

[The Sceptical Chymist]

GDP is on the upswing, yet Los Angeles burns regularly, and the U.S. president faces impeachment.

I don't really get the point of this part of the quote, since those things are only factors that might potentially affect the economy and it isn't as though this is the first time in the history of economics that there's been severe unrest, disasters, and everything else happening.  There are always things going on that might affect a country's economy, but good luck trying to measure the impact before the effect happens.

So this is one economist blabbering on about some iconoclastic, paradigm-shifting lunacy.  The man probably deserves some respect for his accomplishments, but I trust the academic community will be the best judge of whether to listen to his suggestions, much like what happens in the scientific community.  There are well-known scientists who don't believe the HIV virus exists and have said as much, but that line of thinking hasn't exactly gone mainstream.  True knowledge will (hopefully) always prevail.

[squatz1]

GDP is on the upswing, yet Los Angeles burns regularly, and the U.S. president faces impeachment.

I don't really get the point of this part of the quote, since those things are only factors that might potentially affect the economy and it isn't as though this is the first time in the history of economics that there's been severe unrest, disasters, and everything else happening.  There are always things going on that might affect a country's economy, but good luck trying to measure the impact before the effect happens.

So this is one economist blabbering on about some iconoclastic, paradigm-shifting lunacy.  The man probably deserves some respect for his accomplishments, but I trust the academic community will be the best judge of whether to listen to his suggestions, much like what happens in the scientific community.  There are well-known scientists who don't believe the HIV virus exists and have said as much, but that line of thinking hasn't exactly gone mainstream.  True knowledge will (hopefully) always prevail.

President facing impeachment doesn't really do anything to GDP.

But natural disaster -- like wildfires do cause GDP to increase. As money is going to have to spent by government on overtime for employees to stop the fire (Fire department), securing areas and getting people out of places (mix of police and fire), treating people with burns or smoke inhaling problems (hospital staff)

Then you're going to have to rebuild areas, maybe spend some money on prevention. You're talking about a ton of contractors coming in to build new houses, new businesses, etc.

Natural Disasters cause a GDP boost as more output is required to makeup for what is lost.

[Broly46]

It’s rhe old saying the old trick won’t always work. BTW gdp seem like a rather old benchmark system invented by nobody know what who and why it was needed, economist need to come up with their new economics stimulation packages to boost the people to spend their money, and they might need to come up with more creative marketing tricks.

[Hydrogen]

They're not feeble-minded. Just pointing out that GDP is flawed and can be manipulated. We've only been obsessed with GDP since the 1960's - prior to that people had other methods of judging whether an economy was doing well. For example, if your tax rates stay steady from year to year, but tax receipts fall, then the economy is doing badly no matter what GDP says.

You realize this proposal does nothing to address flaws in GDP.

Its more a form of censorship. Similar to how internet search results and news media scrub statistics for how many trillions the EU is currently in debt. Its easy to find the US deficit in trillions. Try to find the same stat for the EU and there is a mysterious censorship blackout in effect.

These problems are basically self-solving problems. People think that we should stop it before it is too late but it will stop even if it is too late, just not with humanity. For example, the world is going into a climate change right now right? Do you really think world will stop because all humans die?

Climate change is only the latest crisis being leveraged to push political agendas.

-Drug crisis: citizens must sacrifice rights, $$ and freedom to fix this.
-Terrorist crisis: citizens must sacrifice rights, $$ and freedom to fix this.
-Climate crisis: citizens must sacrifice rights, $$ and freedom to fix this.

And who creates this crisis? As all of these are manufactured agendas.

That's not my reading of what he said. It's more about the fact that GDP doesn't reflect "the big picture": living standards, inequality, environmental issues. Only looking at GDP makes everything about achieving growth at any cost.

How would this be closing doors, ending opportunities?

Normally. GDP shrinks as doors are closed and opportunities are diminished.

Getting rid of the GDP metric is simlar to getting rid of deficit numbers or redefining unemployment metrics to illustrate a rosier picture of the economy.

It could be what happens when ruling elites decide to kill job markets and economies and want to conceal this harsh reality from the public.

[alyssa85]

You realize this proposal does nothing to address flaws in GDP.

Its more a form of censorship. Similar to how internet search results and news media scrub statistics for how many trillions the EU is currently in debt. Its easy to find the US deficit in trillions. Try to find the same stat for the EU and there is a mysterious censorship blackout in effect.

There isn't a mysterious censorship blackout at all. In the EU, the deficit is calculated per member state:

https://ec.europa.eu/eurostat/statistics-explained/index.php/Government_finance_statistics

The EU-28’s government deficit-to-GDP ratio decreased from -1.0 % in 2017 to -0.7 % in 2018, while this ratio also decreased in the EA-19 from -0.9 % to -0.5 %. Both in the EU-28 and EA-19, the general government deficit was the lowest in the available time series. Fourteen EU Member States — Luxembourg (+2.7 %), Malta and Germany (both +1.9 %), Bulgaria (+1.8 %), the Netherlands (+1.5 %), Czechia (+1.1 %), Greece (+1.0 %), Sweden, Denmark and Slovenia (all +0.8 %), Lithuania (+0.6 %), Croatia (+0.3 %), Austria (+0.2 %) and Ireland (+0.1 %) — registered government surpluses in 2018.

There were 12 EU Member States, namely Poland, Portugal, Estonia, Latvia, Belgium, Finland, Slovakia, Italy, Hungary, the United Kingdom, France and Spain, that recorded deficits in 2018 that were smaller than 3.0 % of GDP.

Two Member States had deficit equal to or higher than 3.0 % of GDP: Romania (-3.0 %) and Cyprus (-4.4 %) (see Figure 1). The high deficit for Cyprus in 2018 is mainly due to the impact from the restructuring of the Cyprus Cooperative Bank Ltd (CCB) - the sale of the good parts of CCB and the subsequent integration of the remaining public financial defeasance structure into general government accounts.

If you download the document it should show you the actual numbers in billions and trillions.

The EU28 are all the countries in the EU (including the UK in this particular calculation). The EU19 are the 19 countries of the eurozone.

[Hydrogen]

You realize this proposal does nothing to address flaws in GDP.

Its more a form of censorship. Similar to how internet search results and news media scrub statistics for how many trillions the EU is currently in debt. Its easy to find the US deficit in trillions. Try to find the same stat for the EU and there is a mysterious censorship blackout in effect.

There isn't a mysterious censorship blackout at all. In the EU, the deficit is calculated per member state:

https://ec.europa.eu/eurostat/statistics-explained/index.php/Government_finance_statistics

The EU-28’s government deficit-to-GDP ratio decreased from -1.0 % in 2017 to -0.7 % in 2018, while this ratio also decreased in the EA-19 from -0.9 % to -0.5 %. Both in the EU-28 and EA-19, the general government deficit was the lowest in the available time series. Fourteen EU Member States — Luxembourg (+2.7 %), Malta and Germany (both +1.9 %), Bulgaria (+1.8 %), the Netherlands (+1.5 %), Czechia (+1.1 %), Greece (+1.0 %), Sweden, Denmark and Slovenia (all +0.8 %), Lithuania (+0.6 %), Croatia (+0.3 %), Austria (+0.2 %) and Ireland (+0.1 %) — registered government surpluses in 2018.

There were 12 EU Member States, namely Poland, Portugal, Estonia, Latvia, Belgium, Finland, Slovakia, Italy, Hungary, the United Kingdom, France and Spain, that recorded deficits in 2018 that were smaller than 3.0 % of GDP.

Two Member States had deficit equal to or higher than 3.0 % of GDP: Romania (-3.0 %) and Cyprus (-4.4 %) (see Figure 1). The high deficit for Cyprus in 2018 is mainly due to the impact from the restructuring of the Cyprus Cooperative Bank Ltd (CCB) - the sale of the good parts of CCB and the subsequent integration of the remaining public financial defeasance structure into general government accounts.

If you download the document it should show you the actual numbers in billions and trillions.

The EU28 are all the countries in the EU (including the UK in this particular calculation). The EU19 are the 19 countries of the eurozone.

Does this mean you don't actually know what the EU deficit in trillions is. As you've never bothered to add the accumulate deficits of each and every EU member state?

All I know is, the EU used to have equivalent websites to this one which tallies US debt:

https://usdebtclock.org/

EU sites like that one were shut down. Then they took steps to make it more difficult for someone to figure out what actual EU debt is.

I used to be able to type: "european union total deficit" into a search engine and it would give me a valid response. That no longer works as search engines would appear to scrub the results.

Its similar to how many news stories which were previously visible to the public are now concealed behind a paywall. Its a softer form of censorship than burning books but it is still censorship.

[cryptoknightt]

I hate to support what economists say but I agree with him in this case, as long as a Hitler does not arise tommorow and start property seizure in order to eliminate these problems.

I would prefer to see people living in moderation, cutting down on unnecessary stuff owned by individual and relying more on natural stuff. I think this is one of the secrets to happiness.

 The way we live on this planet is just too dangerous and unsustainable. Reminds me of how cancer grows at the expense of the body it grows on

it may be true, but what about human greed?
I think so too, but we can see that a house inhabited by 2-5 people sometimes has more vehicles than their number, or it can be called savings. fast.
of course, this will affect the economy, as more job seekers will be looking for it.
sometimes I think Thanos's idea of ​​destroying half the population on earth is appropriate for reflection

[beerlover]

These problems are basically self-solving problems. People think that we should stop it before it is too late but it will stop even if it is too late, just not with humanity. For example, the world is going into a climate change right now right? Do you really think world will stop because all humans die?

Climate change is only the latest crisis being leveraged to push political agendas.

-Drug crisis: citizens must sacrifice rights, $$ and freedom to fix this.
-Terrorist crisis: citizens must sacrifice rights, $$ and freedom to fix this.
-Climate crisis: citizens must sacrifice rights, $$ and freedom to fix this.

And who creates this crisis? As all of these are manufactured agendas.

That is what I am saying, they can create any sort of problem they want, it won't change the end result, as long as rich wants to stay in power and as long as nations fight each other there will be end to humanity in the end, maybe not now, maybe not another 200 years, we don't have an exact date, however we will have end of humanity as we know it if this continues the way it is right now.

When humanity is getting closer and closer to end, money will not be a problem, money will not be a solution, humanity will be like a cornered dog and we won't care about rules as much as we care about survival and even if we fail, world will continue to spin even after every single human is dead. So long story short rich do not care about legacy as much as they care about dying rich, they don't realize their grandchildren will be the ones who will not be rich after they died, it will be survival of the fittest for sure.

[exstasie]

That's not my reading of what he said. It's more about the fact that GDP doesn't reflect "the big picture": living standards, inequality, environmental issues. Only looking at GDP makes everything about achieving growth at any cost.

How would this be closing doors, ending opportunities?

Normally. GDP shrinks as doors are closed and opportunities are diminished.

Using different metrics to measure economic health (presumably in addition to GDP) doesn't affect GDP itself.

Getting rid of the GDP metric is simlar to getting rid of deficit numbers or redefining unemployment metrics to illustrate a rosier picture of the economy.

Putting more value on metrics like economic inequality, the deteriorating middle class, environmental degradation, etc. would make places like the US look much worse.

So much of our GDP now is purely growth in the financial markets. Hedge funds and investment banks are sucking up all the growth while wages have been completely stagnant for many years, thus the deterioration of the middle class.

I think focusing purely on GDP is extremely damaging for this reason. Regular working people don't benefit from economic policies that value GDP growth at the cost of other important metrics.

[eaLiTy]

So much of our GDP now is purely growth in the financial markets. Hedge funds and investment banks are sucking up all the growth while wages have been completely stagnant for many years, thus the deterioration of the middle class.

It is really a vague calculation and the real reason we are using the analysis is to understand the market growth and the economic situation of the country, basically just calculating the number of transaction done in a country be it anything and definitely it has its flaws but you need to have a metric to determine how a country is doing and is there a suggestion for a better metric, if you are concerned about the deterioration of the middle class the ruling politicians has to make rudimentary changes in how they evaluate things and how to balance the economic structure so that there wont be a huge disparity between the rich and the poor.

[pugman]

It appears people of the world are too feeble minded and uneducated to understand GDP. And so the powers that be are calling for GDP numbers to become obsolescent, so that we feeble minded do not injure ourselves attempting to make sense of GDP.
[...]
This is strikingly similar to americans being denied access to ICOs, access to leveraged crypto based trading platforms like bitmex, crypto ETFs and other innovations. Everywhere throughout the world, opportunities and options are being denied to some demographics. Doors are being closed. What's the reason for this, do you support it? How do people interpret the motive behind these policies?

I mean in all fairness, GDP was never meant to be the sole determinant of everything a country to base things on. Look at the definition of GDP for example, "Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate. GDP can be calculated in three ways, using expenditures, production, or incomes.¹"

It just determines the growth of a country based on the production and income. Think about it, US is THE best performing economic nation cause they have put themselves in situation like that by keep printing notes, the rich people over there keep getting richer, and the poor get more poorer. One wrong neutralizes the other. Anyone who dare go against the US will most probably face an existential crisis, and will face a war they can't afford to win. The time is not to kill the GDP metrics, but rather change the whole Global economy, and stop letting one country decide the fate for the rest of the whole World. I don't care if Crypto is not accepted in the most parts, but if countries can work together and stop the multiple global crisis we're on the verge of facing, I would rather have that.

¹ Source: https://www.investopedia.com/terms/g/gdp.asp