The GDP isn’t called gross for nothing
- By David Brancaccio. April 21, 2010

pabstSuppose you found a lantern, gave it a rub, and wished that everyone in the world would act ethically and lawfully, henceforth and in perpetuity. Imagine a world of law-abiding citizens. I would want to live in that world. Yet what a disaster that would be for the economy. If everyone did the right thing, the standard measure of the economy, Gross Domestic Product, would fizzle into the abyss.

Think about it. If there were no crime, we would not have to pay for police and that would be bad for GDP. We would not have to buy police uniforms, radios, nightsticks or police cars. Forget about prisons, a $68 billion a year industry in the US alone. Crime, sadly, is a boon to GDP, and taking illegal activity away would reduce standard economic output.

A lot of what is good for this key economic indicator is actually rotten for human beings. If you drive home safely today, you have not done much for GDP, beyond causing maybe a tad of depreciation on the car and the need for a little extra fossil fuel at the pump. If you really want to help GDP, why not crash on the way home? A good automobile wreck cheers up GDP in a variety of ways: Maybe producing work for an auto body shop, a new car factory or, if you get hurt in the wreck, some added economic activity in the form of a hospital visit.

Here is the problem: it is the convention in the modern world to think when GDP goes up, we are all better off. Ever hear the radio newsreader do the quarterly GDP figure? Her voice is brightly optimistic if the number has gone up yet full of dire foreboding if the figure has dropped. GDP has become a measure of how well we are doing and it does nothing of the kind.

I recently spent nine full hours locked in a room with some of the top economic statisticians in the world. A brave thing to do, I know, but these were good people. The gathering’s organizers were out to “Dethrone GDP” as the key measure of all that is good. If we want to measure how well we are doing, let’s measure well-being, not any old piece of economic activity good or bad was the operative principle.

The especially interesting question is what new indicators to use if GDP were to get knocked of the throne. It turns out this is a fascinating debate, one being joined by all sorts of fancy people--a winner of the Nobel Prize in economics and the President of a big European country among them. The debate centers on a simple but overriding fact: We are what we measure. If we come up with a new economic report card that really measures how well are doing, we might just achieve the goal of doing better as a society. I am looking forward to keeping a close eye on this process as part of my wider quest to examine economic alternatives. It is a journey we all can join as we work come up with our personal definitions of well-being. For instance, might it be about physical and mental health? Is it freedom to do what we want without hurting anyone else? Is it about the time to do what is important for ourselves, our families, our communities?

There is an office building in Europe set up to change color. The public is invited to send a text message each day indicating if they are feeling this is a good day or a bad day. Depending on the aggregate results of these texts, the building is bathed in a different shade of light. The building’s green, it must be on balance, a good day. A statistician would blanch at this. Yet there value in this building, even beyond performance art. That building is one, admittedly limited, answer to the question "How are we doing?" At some level, it is a better answer to that question than the Gross Domestic Product.