is GDP an accurate measure of how well a country is doing?

[antaeus]

there was an interesting article in last weeks time magazine criticising GDP as a measure of how well a country is doing..

the basic argument is that GDP measures a country's production output, not the final balance of accounts. the prime example of how skewed it can be is perhaps the united states, which consumes more than it produces leaving with a massive deficit, but because it produces so much, leads the way with GDP despite not making enough money to balance it's books (this is true of many western nations).

time suggests that GDP will probably remain a measure of how well a country is performing simply for the fact that it keeps western economic powers on the top of all the economic indicator lists...

there has been moves to look at alternatives... in the mid 2000s the chinese tried to develop a GDP equation which removed the cost of environmental damage from GDP, but had to abandon the equation because it left them looking very poor indeed...

as far ago as the 1960s GDP as a measure of a country's performance was criticised by robert kennedy who suggested it was a flawed measure of how well a country was because it accounted for the manufacture of nuclear bombs and armoured cars for fighting protesters in the streets but not the strength of public debate, or poetry, or the strength of "our marriages".. in other words, as a measure of how "well off" a country is, it fails because it only measures production, not the actual well being of the people.

should we be looking at other ways to measure the wealth of society?

[Erik]

I think GDP is a poor way to compare countries, yes.

But it is a reasonably good way to see if a specific country is improving or not.
In this case you don't look at the absolute figure, but the % of change from one year to the next.

The Human Development Index is probably the best figure we have to compare countries.

[Kjertesvein]

The Human Development Index is probably the best figure we have to compare countries.

They say its an index of how Scandinavian your country is.

[Mangalore]

The GDP is just one measurement. It gives you a figure of the economic output of a nation but without others it won't give you a good picture because it is just a specificly defined measurement.

I don't think bring cultural aspects into it works at all because it goes even farther from any objective view on things. You might view certain social programs in one country as evil oppressive communism but its people may not see it that way so is bad then? Or if people are satisfied with an authocratic system. Is it bad then?

I find the GDP mainly problematic in that it measures all economic activity regardless of the activity taking place within a closed system of the society or actually creating a net profit to the scale.

time suggests that GDP will probably remain a measure of how well a country is performing simply for the fact that it keeps western economic powers on the top of all the economic indicator lists...

That's kind of stupid in regards of the fact that western economic powers remain on the top of the list for other reasons that indicate their capability: technological advances (patents), hightech industries, exports of goods, research, education...

The GDP is just one figure and should be treated as such. E.g. the distribution of wealth earned in the GDP would be an important factor as well because if the wealth is only in few hands this leaves the majority of people worse off than the GDP per capita suggests.

I think one simply shouldn't give it too much weight. Countries with extremely high GDP per capita can still have major problems social, economical or political. However they have something that created this wealth as well.

[JP226]

For the most part it's fine. It could probably accurately Identify 90% of economic output rankings which is not too shabby. If you are comparing say the US and the EU then maybe it's not accurate enough but say take comparing a banana republic like the netherlands to the US... then obviously the US is larger.

Bot

[roy34543]

Are you one of those people that want to measure "Gross national happiness"?
frankly we could all just take drugs and die and maybe we would be happy, but thats not a good measurement of how well a country is doing either.
Noone really says GDP means your the best country, I mean some very small countries haev very good GDP per capita, But that doesnt mean theyre doing particularly well.

[antaeus]

Are you one of those people that want to measure "Gross national happiness"?

i didn't express my opinion, just passed on time magazine's as a discussion point.

i do think however, that basing policy on GDP alone can be dangerous as reducing a nation's goals to simple production isnt going to make a nation powerful, or developed. this isnt so important in the west, but for developing nations or even those at the bottom of the developed list, it could be dangerous. i dont think any gross national happiness rating would be helpful either - you can be quite happy while you're poor.

[Haakon]

Noone really says GDP means your the best country, I mean some very small countries haev very good GDP per capita, But that doesnt mean theyre doing particularly well.

I'd like to see anything that suggest the oposite.

[michael123]

It's probably a pretty accurate measure of how well a country is doing economically, but define "how well a country is doing". In terms of wellbeing, happiness, individual purchasing power etc, I guess PPP GDP per capita would be a more accurate measure. You also have other economic indicators to see how well a country is doing economically, like unemployment/inflation, but these usually have some impact on GDP, which makes it a fairly comprehensive measure.

That said, I agree entirely that countries need to balance the books more. Britain, for example, has completely unsustainable levels of borrowing. Everyone keeps blindly following the economics of mass credit, but I really don't understand when all this gets paid back. I read recently that the UK borrowed about £6bn ($10bn) per month early this year. Just how the hell and when the hell do we pay this money back?

[roy34543]

I'd like to see anything that suggest the oposite.

For example , dubai has a very high GDP per capita, but its filled with lawlessness, semi-slaves , a lack of human rights if your poor , and the entire basic infastructure is driven by an oil and construction boom that is going to die eventually.
and while thailand might not have the highest GDP in the world, it has the lowest rate of unemployment .
and for example, Israel is not particularly high on the GDP scale, but there are a lot of academical achievements coming from there.
Then you have the tax havens, where most people are poor, but the GDP is inflated because of the money theyre making managing illegal accounts.

Basically speaking its only meant to measure the economy, little more and little less.

[Panzerbear]

GDP is at least statistically measurable and intuitive. and it is not a measure of how a country is "doing", it measures country's economy.

[Hunter Makoy]

The GDP is an excellent tool for measuring the things that GDP actually measures. The problem comes from people trying to use GDP to measure things that it really doesn't have anything to do with. As Panzerbear says it doesn't measure how well a country is "doing", just the overall economic state of the country. If people like to OP are trying to use it as some magic number to say which country is better then another, then no wonder it seems to not be accurate.

Guess what, a rain gauge in your backyard doesn't accurately account for national rainfall either.

[FuZe]

GDP is about as accurate in measuring of how well a country is doing as airspeed is in measuring how well one is flying.

Hint - you can stall at any speed.

[chilon]

No it is not, although it does somewhat accurately measure certain forms of industrial productivity.

The problem is all the externalities it does not take into account.

Also it ignores all black market activity which from just guns and drugs is not a small amount of economic activity.

[Sphere]

the basic argument is that GDP measures a country's production output, not the final balance of accounts.

GDP is a good way to normalize the "final balance of accounts". E.g. if Costa Rica had $10 Trillion in government debt, would it be in the same financial situation as the US with $10 Trillion in government debt? Obviously not as for Costa Rica that debt would be many hundreds of times larger than Costa Rica's GDP, while that is about 100% of US GDP. One is manageable the other is not.

GDP is just one useful statistic, it is not the be all and end all of Economic statistics

[justicar5]

it is good at what it measures, but is not the whole story

[barbarossa pasha]

If you want to compare the actual living standards, I think the Human Development Index is widely accepted as the best measure. If you are going to use GDP, it should at the least be GDP per capita (PPP).

If you want to compared real economic power in absolute terms, and possibly potential military power, then GDP remains a good measure, I'd say.

[IrishHitman]

is GDP an accurate measure of how well a country is doing?

No, it's only one facet of a way that you measure how a country is doing.

Personally, I'd look at GDP, unemployment, and relative poverty.