The head of the consultancy Enlightenment Economics Diana Coyle talks to the FT’s Cardiff Garcia about why GDP is becoming less useful as a measurement of economic activity, the trouble with big data and why we should be building like the Victorians. See the video here
Here are a further couple of articles on the FT that discuss the drawbacks and benefits of GDP.
Lay criticisms of GDP are often based on the indisputable observation that there is more to life than economics and material goods. GDP omits work done in the home, mostly by women. It values expenditure on war and nursing care on the same basis. It records the despoliation of the environment only by reference to the amount spent despoiling it, and then includes the amount spent to clean it up. It does not tell us how happy we are or how fulfilling are our lives.
Has GDP outgrown its use? by David Pilling
- GDP is better at measuring quantity than quality.
- One of the biggest failings of GDP is how atrocious it is at capturing services.
- GDP mostly takes into account things that are bought and sold. Swaths of non-marketed activity are entirely invisible.
- GDP is particularly bad at capturing one of the most important features of modern economies: innovation.
- How do we value economic activity if it doesn’t command a price?
- Another failing of GDP is that it takes no account of how many hours people work.
- GDP has become such a powerful proxy for what we do hold dear that we find it hard to see past it. Few economists are blind to its many limitations. Most, nevertheless, give the impression of wishing to maximise it at all costs.