Saturday, November 5, 2016

Don't Abandon GDP: Make it Better

Economist Edoardo Campanella is one of many, who challenges the (currently existing) structure of GDP. In a Project Syndicate article, he notes:
Among ordinary people and specialists alike, there seems to be a powerful sense of dissatisfaction not only with the pace of economic growth, but with how that growth is defined and measured...There are two reasons for this. First, aggregate growth in the developed world has brought little, if any, benefit to the vast majority of citizens in recent decades.
But second and arguably more important, defining welfare solely in terms of what can be measured by markets misses much of what contributes to - or detracts from - human wellbeing. In 1968, Robert Kennedy, campaigning for the presidency of the United States, lamented that this approach "measures everything except that which makes life worthwhile." It says nothing, for example, about environmental quality, the cohesion of communities, or the stability of individual and group identities - all of which clearly influence wellbeing.
I was glad to find that towards the end of the article, Campanella stressed how he - along with others at Project Syndicate - weren't intent on the abandonment of GDP, but simply of making it a better measure than it is in the present. Of course, there are plenty of different versions floating around, how one might do so. And those who have kept up with this blog, know that I have made the case to maintain GDP as a central measure more than once.

It's surprising that in so many discussions regarding GDP, there's little consideration as to what this important measure best serves: a reasonably accurate portrayal of society's ongoing and mutual monetary obligations. In other words, neither economists or policy makers always take into account, the important role which GDP plays for the monetary representation of populations as a whole. Taken too far, a reconfiguration of GDP could make it even less evident, why these monetary connections matter more than anything else for all concerned. Even though some policy makers might prefer a (further) loss of transparency, clearly, greater "societal wellbeing" would not be the result.

Wellbeing in particular, is best addressed by a more productive approach in terms of supply side factors, which the measure of GDP would consequently take into account. Fortunately, a marketplace for time value, would allow individuals and groups to directly contribute to greater wellbeing, via their own resourcefulness and abilities. A more productive economic approach to the time scarcity of individuals and groups, would provide a core means to address quality of life issues which go well beyond government measures or statistics.

Time scarcity issues are also at the heart of the choices people make, in apportioning work and responsibility between family and community. One reason it helps to maintain family time as non economic - for instance - is that doing so preserves the freedom of choice which is so important, for how families prefer to spend oft scarce time with one another. Sometimes, home is the only environment where spontaneous choices in production and consumption can be made, which in turn allow individuals to "recharge" for their ongoing community and workplace obligations.

That said, there are nowhere near sufficient spontaneous choices for economic time use, in today's community settings. Consequently, neighbors may have little existing rationale, to meet neighbors who may in fact harbor common interests and aspirations. And even though family is often central to one's life, when individuals lack connections in local economies, their connections to family tend to suffer as well.

What of the environmental concerns, so often expressed in terms of GDP? This is another case in point: environmental adaptation for GDP measure would be an awkward tool, even in the best of circumstance. Environmental issues ultimately need to be addressed at a grassroots level. Presently, it is much too difficult for many populations to adopt simpler lifestyle options at the level of community infrastructure design. For instance, governments inadvertently set themselves up for high fossil fuel use in aggregate, by insisting on automobile centered zoning and regulation, everywhere. Then the same governments (and their media), pressure citizens and other governments alike to cut back on their pollution! Indeed, many citizens could already have vastly reduced their carbon footprint, were walkable communities a truly viable option.

In summary, there's no reason to expect the GDP measure to address issues which are in reality quite different, from the monetary purpose which only GDP can fully serve. Let's keep it simple: GDP measures the economic activity which people provide for one another. Wellbeing and environmental concerns can be improved by active citizen inclusion in daily economic life, should the relevant public and private interests make it possible for this to occur. Perhaps the best way to make GDP a "worthy" measure, is to simply create a marketplace for the time value of every citizen, not just those who presently hold the most sought after skills. Otherwise, if few markets remain for the value of the time we have to offer, our welfare will ultimately be forgotten - in spite of those who profess to hold our welfare uppermost in their minds.

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