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Wednesday, May 11, 2011
"Natural" or "good" growth from last night's discussion
Stiglitz, our last author for this class, has been a tireless critic of GDP statistics and how the act of creating the gross domestic product number leads us to the wrong definition of growth and well-being. Here is a short piece that he wrote in 2009 (see here) He says, "Before the crisis, when US growth (using standard GDP measures) seemed so much stronger than that of Europe, many Europeans argued that Europe should adopt US-style capitalism. Of course, anyone who wanted to could have seen American households' growing indebtedness, which would have gone a long way toward correcting the false impression of success given by the GDP statistic. Recent methodological advances have enabled us to assess better what contributes to citizens' sense of well-being, and to gather the data needed to make such assessments on a regular basis."
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This article makes an interesting point. We cannot take just one statistical measure as the perfect measure of societal improvement. GDP obviously has its set backs (does not reflect who in the U.S is becoming wealthier and if spending is efficient). I guess that's why there are many different economic measures that are better at reflecting true states of the economy. I think it is important to look at a wide array of economic measures if we want to make a solid assessment about society's well-being.
ReplyDeleteInteresting article. I agree with chris you need multiple measures to get a true gestalt of economic growth.
ReplyDeleteI think this article proves exactly why you can't take one stat to show the well being or lack there of for any society. Although GDP is a very important figure that is widely used there are too many other factors that have important implications as well. Thus, in order to provide meaningful information data must be widespread.
ReplyDeleteStandard of living measurements, such as GDP and GNP have long been scrutinized for their flaws. I agree, they are far from perfect measures. However, they do offer a uncomplicated, universal measurements that are quantifiable.
ReplyDeleteCritics of these measurement tools often point to the extremely low ranking that the US has in distribution of wealth. I’m not sure this is a sound argument, however. Tanzania, Kazakhstan, Mongolia, and Ethiopia all perform better in this measurement, but if I had to bet, I’d say that the standard of living in the US is higher.
Other measures, such as PQLI and HDI indexes, are extremely complex and unquantifiable. Even so, the US performs fairly well in both of those – 4 and 10 respectively.
Is GDP a perfect measure? No, of course not. But, I think it is a simple, fairly accurate measurement.
I posted the other day from recession.org which said that GDP was a globally accepted measure for determining a recession. I am glad that this article points out the flaws in using GDP as such a significant determinant, but I do agree with Dane that also that GDP measures can be useful when combined with other economic indicators.
ReplyDeleteI agree with everyone as well that there should be a more comprehensive stat used for measuring the economy.
ReplyDeleteBut of course this can also go back to the topic that we aren't putting any money into making sure we collect this data.
ReplyDeleteI think one of the best scores for measuring quality of life in a country is the infant mortality rate. It should be around the same and pretty low for all demographics. I think it shows how much we are willing to care about the people and invest in them. I think GDP is more focused on good and services and not necessarily the people aspect. The people aspect I think is the one we should focus on getting data for. Who cares how a country is doing on paper when it really matters about the population of the country.
I liked this article. I liked Stiglitz's analysis of quality vs. quantity.
ReplyDeleteHis argument that GDP Per Capita is not reflective of the average citizen is very well explained, and I will be inclined to agree with him from now on. The "inequality" as he puts it has separated average from outliers.
"For example, while GDP is supposed to measure the value of output of goods and services, in one key sector – government – we typically have no way of doing it, so we often measure the output simply by the inputs. If government spends more – even if inefficiently – output goes up."
ReplyDeleteI'm really confused by this statement. What goods and services are we talking about that the government supplies? Is it, for one instance, government workers? So its GDP output would be just what the government pays its workers? That doesn't make sense to me, if GDP is supposed to be the value of these goods and services, or basically revenues, how can the government call its GDP what they're spending? I agree with Stiglitz that this is strange...
I agree with Chris that there are probably better economic measures to measure quality of life and society's well being. The part that caught my eye was the well being and indicators of our current health care system. There are inherent social justice issues in the debate over health care. I think the new health care reform laws are taking strides to alleviate inequities between health care and health care providers. I also think it will be hard for people to use other measures other than the GDP. GDP is widely used by the media, economists, and politicians alike.
ReplyDelete