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It’s been around that long, and it proved to be a valuable planning tool when the nation headed into World War II, the New York Times’ Fred Andrews wrote last spring. GDP helped war planners “decide how to apportion [the nation’s] scarce resources between wartime and civilian priorities.” Okay, so it’s been around a long time. What’s the point? Change, economic change.
GDP stands for Gross Domestic Product, accent on “product.” “GDP is a measure best fitted to mass production of handgoods,” Andrews wrote. Consequently, it doesn’t do so well when it comes to measuring services, which, as Andrews pointed out, “have swollen to dominate today’s economy.” And that’s not all—GDP doesn’t “count the underground economy, conducted out of sight of regulators and tax collectors, even though this unofficial sector provides many jobs and is often highly entrepreneurial.”
Andrews was commenting on British economist Diane Coyle’s book, GDP: A Brief but Affectionate History (2014). Coyle took a 360° look at GDP and found other shortcomings. One of those shortcomings Andrews emphasized was that “GDP tells us nothing about whether we are eating our own corn,” meaning, “does today’s growth come at the expense of tomorrow’s? Are we consuming our natural—and human—resources without replacing them?”
According to Andrews, Coyle believes that “while imperfect, the GDP is good enough as a measure of how fast the economy is growing and better than any alternative.” And, as Paul Simon put it in verse, “When times are mysterious serious numbers will speak to us always.”
