Item — HN Reader

Everyone knows that GDP is an awful measure of economic health and resiliency. No real news here.

Huricane Katrina? GDP goes up. War? GDP goes up. Banks need bailed out a tax payer expense. GDP goes up.

This might be a close to infinite list, so I'll stop.

What is the GDP good for? Fooling an ignorant population. So, it does have some value to the elites.

1 comments

If you ever have the choice of living in a country with $1,000 per capita GDP and $10,000 per capita GDP, I suggest you choose the latter (unless, of course, you are there for humanitarian work). That's the difference between Haiti-size earthquakes and Chile-size earthquakes.

Life is easier in rich countries than in poor ones. Rich countries also have higher GDP. However, the relationship is causative between the wealth and production and higher quality-of-life, not GDP. The arrows go like this: Wealth -> GDP. Wealth -> Well-being. These are tight enough to make it hard for an order-of-magnitude difference (as opposed to, say, 20%) not to denote a better quality of life.

However, the US has a very high GDP and, although it's not Third World yet, has a distinctly lower quality of life than most European countries (expensive healthcare, high educational costs, 1-2 weeks' vacation being considered normal) despite those countries' lower GDPs.

I have to agree. People in my country fret about our GDP per capita compared to some of our peers. They worry that we are falling behind, somehow losing out.

If this is what losing out is, I'd hate to know how they'd adapt to my old country (I come from Africa originally).

I live in a developed country, with fantastic quality of life, largely unaffected by the recession. People are pretty much mostly happy still.

My salary still goes up every year. I can still afford a comfortable life. I can drive an hour and be at our beaches or one of our great national parks. I can walk around at night without worrying I'm going to get mugged or killed.

Pretty much, I know that if I have kids, they have a good chance of being able to go for opportunities that interest them, and follow them through without externalities like famine, war or unexpected sickness obliterating their chances.

I'll take my current life over working slavish 50-60 hour weeks in the service of some grand GDP goal, thanks.

(I live in New Zealand).

How do you conclude that the US has lower quality of life than Euro countries?

As far as I know, both healthcare and educational costs are included in PPP-adjusted GDP per capita. The US comes out on top of nearly all European nations (only Luxemborg, Norway, Jersey and Lichtenstein have higher PPP-adjusted GDP per capita than the US).

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_...

As for vacation time, you seem to assume Americans would rather have longer vacations and less money, but are somehow prevented from negotiating this with their employers. Do you have evidence of this? Note that if people prefer money to vacation, it would reduce their quality of life to give them more vacation but less money.

http://en.wikipedia.org/wiki/Legatum_Prosperity_Index

http://en.wikipedia.org/wiki/Satisfaction_with_Life_Index

http://en.wikipedia.org/wiki/List_of_countries_by_Human_Deve...

http://en.wikipedia.org/wiki/Quality-of-Life_Index

America does well in these, but is still generally about 10th-20th. It would probably be interesting to break the US down by state and see how they compare to EU nations.

The problem with some of those measures (HDI, Legatum) is that they measure availability of what the index compilers believe people should want rather than what people actually want.

If I want porn and video games, it reduces my well being to give me education at the cost of Hustler/Halo, but it raises my HDI.

HDI measures literacy rate. If people can read, they can be more informed consumers of porn and video games.

Some people will read smut, given the ability to read. That's fine. Some will read logic textbooks and become mathematicians. Also fine. However, it's clearly better for both people to be literate.

Indeed, improving a single criteria holding all others constant is always an improvement to well being. This i true, but irrelevant.

If people choose a good not measured by your index at the expense of a good in the index, it lowers their index value but raises well being.

Another example: a food lover might choose to eat delicious pudding rather than playing soccer. If the index includes health but excludes hedonic pleasure from food (which I believe the HDI does), the food lover's choice might reduce HDI in spite of improving his well being.

It's much the same problem as with a man marrying his maid; utility and well being increases but the index (GDP in that case) decreases.

But ya can't measure wealth directly, so....

GDP is useful for a purpose other than "fooling an ignorant population".