Download GDP Issues

NS3040
Fall Term 2015
GDP Issues
GDP Issues I
• Diane Coyle, Beyond GDP, Foreign Affairs, February 16,
2014
• Gross Domestic Product is a tally of all goods and
services produced within a country during a specific time
period.
• Was not invented until the 1930s when Great Depression
and WWII pushed Washington to start counting
government spending as a net positive for economy
• Number of conceptual problems in interpreting figures
• Quality of products change over time
• Need to net out inflationary effects
• How to handle new products as they come into use
• Many products not registered in market place thus not counted
2
GDP Issues II
• Hard to make international comparisons given significant
differences in economic structure around world
• Other problems with GDP
• Difficult to factor in environmental damage
• Depreciation in oil countries
• Sustainability
• Products or services that improve living standards but are free –
Google claims their free services are with $150 billion
• Some have argued since GDP does not measure wellbeing we need a broader measure -- happiness
• By failing to capture fully increasing range of products in
the economy GDP under-reports innovation
• Driverless Car – Goes down as a car, but for many more
valuable. Higher contribution to safety which is not captured
3
GDP Issues III
• The trade part of GDP statistics also misleading
• Just records final export import destination
• US may trade more with Singapore than china in
Singapore adds most of the value but final product
exported from China
• Does not capture shadow economy – may be 40% of
output in some countries
• Many attempts to augment GDP into a broader measure
of welfare
4
Economist Better Life Index
5
Legathum Prosperity Index
6