Stiglitz wants GDP retired

“It’s time to retire metrics like GDP.” writes Joseph Stiglitz in The Guardian. “The way we assess economic performance and social progress is fundamentally wrong, and the climate crisis has brought these concerns to the fore.” Indeed. Always nice to hear the reforming voices. Apparently another revised book of alternative measurements has just been published. Even more reasonable than the last one.

But don’t get excited. The reformers are singing in the wilderness. It is hard to believe they will ever get loud enough to compete with TINA’s incessant incantations of the Status Quo. Short of some miraculous learning curves, GDP will continue to be, in perpetuity, forever.

“If the GDP is Up, Why is America Down?” is the title of a seminal article by Clifford Cobb et al in The Atlantic. In the face of gloomy voters in good times, they ask: “Could it be that the nation’s economic experts live in a statistical Potemkin village that hides the economy Americans are actually experiencing?”

Yes it could! And yes it is! And look here, we got some excellent alternatives!

That was in 1995. Today it’s rather touching to read the hopeful enthusiasm which Cobb et al felt about their “genuine progress indicator” GPI. (1)

A bit like Stiglitz et al now. Indeed, since the 2008 crash there has been a fresh bout of reformist efforts. In 2016 The Economist finally felt nudged to brief us on “the trouble with GDP : an increasingly poor measure of prosperity it is not even a reliable gauge of production.” ( Shock horror! It doesn’t even count car production properly ‘cos all the money is made in the finance department? It’s own earnest list of reformist modifications was gratefully received by the likes of Oxfam.

But nothing happened.

In 2018 David Pilling even managed to distil a celebrated bestseller out of GDP’s absurdities.

To no avail. Tin eared TINA is too busy counting old beans. Too many alternatives? banging their heads against institutional inertia? Also, as Helen Jackson and Paul Ormerod point out in a Prospect article the focus on replacing GDP “… can sometimes come across as a displacement activity in lieu of advocating a political programme.”

In his review of Pilling, Adam Tooze reminds us of the political realities behind the economic puppetry.

“As we come to terms with an environmental crisis, there has been a rash of books about the growth fetish and how to overcome it. David Pilling’s book isn’t the first or the deepest, but it certainly has a claim to being the most engaging and fast paced. In a wonderfully cosmopolitan survey he shows us the work that goes into making up the world economy. He introduces us to Chinese accountants struggling to scrub their numbers of lethal pollution, Nigerian economists trying to count the informal economy, shamefaced British statisticians valuing sex work. …

One can agree absolutely with Pilling’s diagnosis that we currently live in a state of dysphoria in which a gulf looms between economic reality and the measures experts use to measure it. What a broader gauge history would have done is to explain why. The problem is not simply that back in the 1940s Kuznets’ more humanist conception of economic data lost out to that of Keynes. It is that the mid-century idea of the national economy is coming apart. Oligarchic inequality, the breakneck incorporation of underdeveloped economies into global markets, and the environmental crisis all render this vision increasingly obsolete. …

Pilling ends his book with a call for us to move beyond GDP. He is right. We need a debate about what to measure. But as he acknowledges, well-meaning efforts to augment or adjust it are easily dismissed by those in power. That should be no surprise. Power and knowledge are joined at the hip.” Read the whole review here

Joined at the hip indeed. Like so many other “value free” , “objective ” measurement methods in economics its creation and inscription is a value laden narrative of the “people in power need to know this now!” type. More to do with military mobilisation potential than well being. Aggregates are problematic enough when it comes to showing what they really show beyond the method of data collection. The tenuous relation between real and represented starts with the questionnaires being filled in and ends with the stats selected to crunch out the headline number. Designed for a purpose. To be a single indicator.

Has a single number ever inscribed itself into the drivers of human agency like GDP? Compare and contrast IQ ?! Meanwhile “Growth” stays on the agenda as I am working on a post on The Limits To Greta

Just follow the money …

scroll down for notes, updates and articles

(1) “If the GDP is Up, Why is America Down?” by Clifford Cobb, Ted Halstead, and Jonathan Rowe, The Atlantic, 1995 – excerpts:

“The problem goes much deeper than the “two-tiered” economy–prosperity at the top, decline in the middle and at the bottom–that received so much attention. It concerns the very definition of prosperity itself. In the apt language of the nineteenth-century writer John Ruskin, an economy produces “illth” as well as wealth; yet the conventional measures of well being lump the two together. Could it be that even the upper tier was–and still is–rising on the deck of a ship that is sinking slowly into a sea of illth, and that the nation’s indicators of economic progress provide barely a clue to that fact?

Ample attention was paid to the symptoms: People were working longer hours for less pay. The middle class was slipping while the rich were forging ahead. Commutes were more harried. Crime, congestion, and media violence were increasing. More families were falling apart. A Business Week/Harris poll in March imparted the not surprising news that more than 70 percent of the public was gloomy about the future. …

By the curious standard of the GDP, the nation’s economic hero is a terminal cancer patient who is going through a costly divorce. …

The perversity of the GDP affects virtually all parts of society. … The strange fact that jumps out from Bennett’s grim inventory of crime, divorce, mass-media addiction, and the rest is that much of it actually adds to the GDP. Growth can be social decline by another name. Divorce, for example …

Economists have couched their resistance to new indicators mainly in philosophical terms. A measure of national progress must be scientific and value-free, they say. Any attempt to assess how the economy actually affects people would involve too many assumptions and imputations, too many value judgments regarding what to include. Better to stay on the supposed terra firma of the GDP, which for all its faults has acquired an aura of hardheaded empirical science.

Aura notwithstanding, the current GDP is far from value-free. To leave social and environmental costs out of the economic reckoning does not avoid value judgments. On the contrary, it makes the enormous value judgment that such things as family breakdown and crime, the destruction of farmland and entire species, underemployment and the loss of free time, count for nothing in the economic balance. The fact is, the GDP already does put an arbitrary value on such factors–a big zero. …

Conventional economic thinking follows a simple premise in this regard: As Paul Samuelson puts it in his textbook, “economics focuses on concepts that can actually be measured.”If something is hard to count, in other words, then it doesn’t count. …

Of course, there will never be a way to assign an exact dollar value to our family and community life, our oceans and open spaces. This doesn’t mean they don’t have value. It means only that we don’t have a way to register their value in a form comparable to market prices. Given that, the challenge is simply to start to develop values that are more reasonable than zero; it is to stop ignoring totally that which is crucial to the nation’s economic and social health. An approximation of social and habitat costs would be less distorting and perverse than the GDP is now; a conservative estimate of, say, the costs of family breakdown and crime would produce a more accurate picture of economic progress than does ignoring such costs entirely.

We have a rough sketch of such a picture. On a limited budget, using data that the federal government and other institutions already collect, we have developed estimates for the kinds of factors that the economic establishment ignores.

The result is a new index that gets much closer- not all the way, but closer–to the economy that people experience. We call it the “genuine progress indicator” (GPI) “

read the whole article here

BIP updates 2-2023 – deutsch

makroskop.eu 15-11-2022 Warum Babys kein Geld brauchen – und wir kein BIP – Von Werner Vontobel

makroskop.eu 11-1-2023 Wir können besser als immer nur BIP – Von Werner Vontobel

GLEICHGEWICHTSMODELL 2.Teil – Späte Einsicht: Ökonomie wäre eigentlich die Wissenschaft davon, wie wir unsere (re-)produktiven Tätigkeiten organisieren.

»Nicht von dem Wohlwollen des Fleischers, Brauers oder Bäckers erwarten wir unsere Mahlzeit, sondern von ihrer Rücksicht auf ihr eigenes Interesse.“ Dieses Zitat von Adam Smith ist die Quintessenz dessen, war ich damals an der Universität Basel gelernt habe und was heute immer noch gelehrt wird. Meine eigene wirtschaftliche Realität war hingegen die, dass ich sämtliche Mahlzeiten dem Wohlwollen meiner Eltern zu verdanken hatte. Und dem Wohlwollen des Staates war es geschuldet, dass mein Studium pro Semester nicht mehr als ein paar Hundert Franken kostete. Dasselbe galt für meine Mitstudenten.

Wie gingen wir mit diesem Widerspruch um? Nun, wir haben ihn ebenso wenig bemerkt, wie Adam Smith, dessen Breakfast, Lunch und Dinner bis zu dessen Tod von seiner Mutter gekocht und serviert wurden. Aber das wollten wir gar nicht so genau wissen. Frei nach Smith: Nicht der Befriedigung der Neugier gilt unser Studium, sondern dem eigenen Interesse an der Erlangung eines Diploms, und später vielleicht einer Professur, mit der wir den etablierten Wissenstand weitergeben konnten. …

makroskop.eu/ 21-12-2021 50 Lehrjahre als Ökonom – Von Werner Vontobel

GLEICHGEWICHTSMODELL 1.Teil – Die Gleichgewichtsmodelle der „modernen“ Ökonomie bieten keine brauchbare Grundlage für wirtschaftspolitische Entscheide. Die Suche nach einem realistischeren Modell. –

Nichts gegen meine damaligen Professoren an der Universität Basel. In der zweiten Hälfte der 1960er-Jahre war die Wirtschaftstheorie, die sie mich lehrten, noch einigermaßen realistisch: Wir leben in einer Marktwirtschaft, in der die „atomistische“ Konkurrenz dafür sorgt, dass alle Marktteilnehmer in etwa gleich mächtig, bzw. machtlos sind. Dies wiederum ist die Voraussetzung dafür, dass der technologische Fortschritt in Wohlstand für alle umgesetzt wird.

Mein wichtigster Lehrer war Professor Gottfried Bombach, einer der bekanntesten Vertreter des damals vorherrschenden Keynesianismus. Diese Lehre besagt, dass die Marktwirtschaft zwar grundsätzlich zum Gleichgewicht und zur Vollbeschäftigung führt, dass der Staat aber konjunkturelle Schwankungen mit steigenden oder sinkenden Staatsausgaben glätten muss.

GDP- growth metrics, indices – updates 2/2023

ft.com 1-10-2022 Liz Truss’s growth delusion

economist.com 5-2022 Why long-term economic growth often disappoints

theconversation.com 13/12/2021 GDP ignores the environment: why it’s time for a more sustainable growth metric by Stephen Onakuse

…”…Gross Ecosystem Product : As such, we need to start looking at alternative metrics such as GEPso that we can account for nature’s contribution to economic activity and human wellbeing. Although research into calculating GEP is only in its infancy, it attempts to place a monetary value on things like clean water, soil quality, food security, healthcare and the culturally-significant landscapes that contribute to our happiness. In other words, GEP assigns a dollar value to the work of bees who act as nature’s pollinators, bogs that sequester carbon, and the stimulating effect nature has on our mental health…”…

paecon.net/pdf 2022 Introducing maldevelopment indices – by Jorge Buzaglo, Leo Buzaglo

KW: GDP, Structural change, national income accounting, economic growth, economic development, confirmation bias.

“In recent years there has been a proliferation of alternatives to move beyond GDP as an indicator of socio-economic wellbeing. This was most probably due to the growing distrust of GDP as an appropriate metric for measuring the degree of advancement of societies. Another probable reason for the growing GDP disbelief is the ecological crisis rapidly approaching catastrophic levels, and the international opinion and mass mobilization it has given rise to. Ecological disruption is not a subject about which GDP has much to say ² although there have been attempts to adjust GDP to allow for the costs of environmental destruction.1 GDP is not only a socially (distributionally) blind indicator but also an ecologically blind indicator. The search for alternatives to GDP has even reached the highest bastion of economic orthodoxy, namely the International Monetary Fund (IMF). ..”…

paecon.net/pdf 12-2021 Measuring economic transformation – what to make of constant price sectoral GDP– evidence from Vietnam by Adam Fforde

…”…The accounting identity that requires their equality only holds for current prices. Therefore, constant price sectoral GDP data does not measure actual factor inputs. Despite this, the analytical frameworks of economists analysing structural transformation often assumes that they have, in constant price sectoral GDP, a measure of actual factor inputs (when they do not). This inhibits analyses from engaging properly with incentives, often disregarding the possibility of disequilibria by adopting a production function approach that, encouraged by the belief that constant price sectoral data measures changes in actual factor inputs, expects technical conditions to determine incentives (factor rewards). The paper shows this risk of confirmation bias by examining work on Vietnam…”…

theguardian.com 28/11/2021 Don’t be fooled by Australia’s GDP growth – buying more things is not a good measure of our welfare – ‘Since when was the monetary value of the stuff we consume equivalent to the fullness of our lives?’ – by Jessica Mizrahi

“Using GDP to assess wellbeing is a flawed view which has led us to narrow, short-term decision-making. Gross domestic product as a measure of welfare is like exam results as a measure of intelligence. Neither is especially good. However both are widely cited and heavily relied upon. Why? They’re not great – but they’re the best we’ve got. GDP is effectively an accounting measure. There are three ways it can be calculated – as how much we produce, how much we spend, or how much we earn. The net result is the same; a dollar value of everything we produce for use. Like other accounting measures, there are well established rules on how it should be calculated and disclosed. Great bedtime reading…

…we can say that Australia’s economy is larger than New Zealand’s, as well as being bigger today than it was a decade ago. It also provides relativity – we know not just that California’s economy is bigger than Australia’s… These features are precisely why, like exam results, we are so fond of GDP as a measure. Fine. Until we start thinking GDP is something it’s not… Too often, politicians and pundits interpret GDP as a measure of welfare. Somehow, we’ve started assuming that GDP per capita is a great way of assessing how well-off we are… Official GDP figures say that we managed the “V” recovery, and are well and truly back on track. Sure, fewer year 9 students are meeting minimum national standards on literacy and numeracy, gambling has skyrocketed, 14% of young people feel lonely most or all of the time, and we have more hazardous waste than ever before…It’s a dangerous view which has led us to narrow, short-term decision-making. If you need evidence, look no further than Cop26. Despite decades of science from international experts, the world is currently not on track to limit global warming to 1.5 degrees. Why? Well, we’re busy trying to fuel the economy by encouraging more production and consumption of things. Printer ink, as an example, is often more expensive than printers themselves. With instant asset write-offs, small businesses are better off buying a new printer every time the ink runs dry, and throwing out the old one. While we’re at it, how about encouraging some more traffic jams? Traffic jams mean using more petrol, which means spending more money – which may be good for GDP in the short-term…

None of this is anything new. Nobel laureates in economics have been advocating for change for decades. However, because GDP gets measured, it continues to be at the forefront of what gets managed…”…

theguardian.com/ 6/2019/ is-time-to-end-our-fixation-with-gdp-and-growth

OECD better life Index (video)

academia.edu The Better life Index Leonardo Rosini

Description: For those involved in development economics, the problem of measuring the well-being, which is also sustainable, of citizens is undoubtedly considered one of the main cornerstones in studying public intervention policies. GDP is an index that alone cannot measure the well-being of citizens: Kuznets himself, one of the major contributors to the creation of GDP as an index of the economic and productive development of a nation, highlighted, during a United States Congress, the great limits that per capita income had in representing the well-being of citizens.
Since then there have been several attempts, between the most successful and the least, to introduce new measures of well-being. One of the best is certainly the so-called Better Life Initiative of OECD. An in-depth picture of this initiative and its main components as an alternative to GDP for the measurement of collective well-being will be displayed. oecdbetterlifeindex.org

guardian.com 5/2021 Focus on individual wellbeing doesn’t help – Angela Smith
As the powerful feather their own nests, for many daily life is a horror story of precarity and anxiety

blogs.lse.ac.uk/lsereviewofbooks/2019/02/28/long-read-review-k-punk-the-collected-and-unpublished-writings-of-mark-fisher-2004-2016-by-Mark Fisher-edited-by-darren-ambrose-with-simon-reynolds/

goodreads.com/book/-capitalist-realism

theoryculturesociety.org/blog/review-wendy-brown-undoing-the-demos

“At its worst, the resilience imperative is an offensive, exclusionary narrative that blames individuals for their predicament. Encouraging us to internalise, rather than question, the dominant logic of neoliberal values and the structural inequalities and social determinants that contribute to poor mental health, it undermines our impulses to solidarity. And at its best? Perhaps when it emerges from resistance and solidarity – not compliance and individuality.

The self-help industry’s moralising frame of reference offers the psychological comfort of consolatory distractions, encouraging conformity rather than criticality. Changing the status quo requires resistance, not resignation and compliance with the sanitised dictates of self-help gurus, and their market-friendly humbuggery that promises individual transformation and human flourishing without altering the structural conditions that contribute to distress.

Anxiety is symptomatic of the radical contingency of our era. Normalised precarity has normalised anxiety. To feel anxious, vulnerable and unhappy in a system that masquerades as freedom and demands that workers be resilient while leaving them unprotected is an understandable outcome”

source griffithreview.com/

economicsfromthetopdown.com 2019 Real GDP: The Flawed Metric at the Heart of Macroeconomics Blair Fix, Jonathan Nitzan and Shimshon Bichler

In this post, we’re going to go down the rabbit hole looking at the severe problems with real GDP. I am honored to have coauthored this research note with Jonathan Nitzan and Shimshon Bichler. Jonathan teaches political economy at York University in Canada. Shimshon teaches political economy at colleges and universities in Israel. All of Bichler & Nitzan’s publications, lectures, reviews, interviews and courses are available for free from The Bichler & Nitzan Archives.

Read or downlod PDF here 2014 “Towards an operational measurement of socio-ecological performance – Research paper reviewing critically different approaches to measuring wellbeing” by Sigrid Stagl, Claudia Kettner, Angela Köppl

Abstract : Questioning GDP as dominant indicator for economic performance has become commonplace. For economists economic policy always aims for a broader array of goals (like income, employment, price stability, trade balance) alongside income, with income being the priority objective. The Stiglitz-SenFitoussi Commission argued for extending and adapting key variables of macroeconomic analysis. International organisations such as the EC, OECD, Eurostat and UN have proposed extended arrays of macroeconomic indicators (see ‘Beyond GDP’, ‘Compendium of wellbeing indicators’, ‘GDP and Beyond’, ‘Green Economy’, ‘Green Growth’, ‘Measuring Progress of Societies’). Despite these high profile efforts, few wellbeing and environmental variables are in use in macroeconomic models. The reasons for the low uptake of socio-ecological indicators in macroeconomic models range from path dependencies in modelling, technical limitations, indicator lists being long and unworkable, choices of indicators appearing ad hoc and poor data availability. In this paper we review key approaches and identify a limited list of candidate variables and – as much as possible – offer data sources.

researchgatenet 2013 Speich-Chassè, Daniel (2013), Die Erfindung des Bruttosozialprodukts: Globale
Ungleichheit in der Wissensgeschichte der Ökonomie. Göttingen: Vandenhoeck &
Ruprecht.

capitalaspower.com 2019 Real GDP: The Flawed Metric at the Heart of Macroeconomics by Blair Fix, Jonathan Nitzan and Shimshon Bichler

“The study of economic growth is central to macroeconomics. More than anything else, macroeconomists are concerned with finding policies that encourage growth. And by ‘growth’, they mean the growth of real GDP. This measure has become so central to macroeconomics that few economists question its validity. Our intention here is to do just that. We argue that real GDP is a deeply flawed metric. It is presented as an objective measure of economic scale. But when we look under the surface, we find crippling subjectivity. Moreover, few economists seem to realize that real GDP is based on a non-existent quantum — utility. In light of these problems, it seems to us that much of macroeconomics needs to be rethought…”… pdf here.

positivemoney.org The Tragedy of Growth To protect wellbeing and avoid ecological disaster we must abandon GDP growth and transform our economic system by David Barmes + Fran Boait Critiques of Gross Domestic Product (GDP) as a measure of economic progress are widespread. However ‘beyond GDP’ narratives often seek to complement the dominant indicator with other measures of progress, aiming for ‘inclusive’ or ‘green’ growth, instead of truly moving ‘beyond GDP’.

scmp.com/ chinas-gdp-paradox-why-young-chinese-despair-about-future 13 Feb, 2021 Cissy Zhou China’s GDP ‘paradox’: why young Chinese despair about future prospects despite rapid economic growth Young Chinese are using social media platforms like Bilibili to voice despair over rising house prices, widening inequality and the price of everyday goods The growing frustration about social mobility highlights a ‘serious divergence’ between China’s fast-growing economy and the life satisfaction of citizens

Quality of Life, Wellbeing and Biodiversity. The role of biodiversity in future development. Final Report submitted to (GIZ) by Katriona McGlade and Katharina Klaas “The main objective of this study is to highlight the importance of divergent views on biodiversity and their significance for human wellbeing. These insights are to contribute to the discussion among decision-makers and practitioners on whether current development cooperation policies and programs sufficiently reflect different perceptions of biodiversity and wellbeing. read or download PDF here

telegraph.co.uk/02/09/2021 Growth figures don’t tell us what we really need to know about economy Historic falls in GDP are a distraction from key issues including the future of the labour market and the long-term impact of Brexit

theguardian.com/business/2019/jun/13/moving-away-from-gdp-as-a-measure-of-success

irishtimes.com Wellbeing not GDP must be our measure of progress
Yardsticks other than economics can improve policymaking and resource use

theguardian Britons want quality of life indicators to take priority over economy

“Measures of the UK’s quality of life should replace the publication of purely economic indicators, campaigners and politicians have urged, as polling has found a substantial majority of the public want ministers to focus on improving health and wellbeing over economic growth.”

hbr gdp-is-not-a-measure-of-human-well-being

theguardian moving-away-from-gdp-as-a-measure-of-success

The_Sustainable_Development_Index : Measuring the ecological efficiency of human development in the anthropocene – by Jason Hickel 2020

ABSTRACT – When the Human Development Index (HDI) was introduced in the 1990s, it was an important step toward a more sensible measure of progress, one defined less by GDP growth and more by social goals. But the limitations of HDI have become clear in the 21st century, given a growing crisis of climate change and ecological breakdown. HDI pays no attention to ecology, and retains an emphasis on high levels of income that – given strong correlations between income and ecological impact – violates sustainability principles. The countries that score highest on the HDI also contribute most, in per capita terms, to climate change and other forms of ecological breakdown. In this sense, HDI promotes a model of development that is empirically incompatible with ecological stability, and impossible to universalize. In this paper I propose an alternative index that corrects for these problems: the Sustainable Development Index (SDI). The SDI retains the base formula of the HDI but places a sufficiency threshold on per capita income, and divides by two key indicators of ecological impact: CO2 emissions and material footprint, both calculated in per capita consumption-based terms and rendered vis-à-vis planetary boundaries. The SDI is an indicator of strong sustainability that measures nations’ ecological efficiency in delivering human development. read or download here

academia.edu 2011 Opportunities for a better use of indicators in policy-making: emerging needs and policy recommendations – by Samuela Bassi