A NEW (net economic welfare) measure of economic health
When the economy recovers, will we be able to accurately measure its health? Not by monitoring the GDP, says Eric Zencey, a professor of historical and political studies at Empire State College, writing in the New York Times. He says that if "creative destruction" can take down obsolete industries, it also ought to be able to take down the concept of the GDP, which he calls "a deeply foolish indicator of how the economy is doing. It ought to join buggy whips and VCRs on the dust-heap of history."
Zencey explains that GDP ignores the economic value of things like volunteer work, unpaid domestic labor, and "natural-capital" services. Regarding this last category, he cites an example: "If you let the sun dry your clothes, the service is free and doesn’t show up in our domestic product; if you throw your laundry in the dryer, you burn fossil fuel, increase your carbon footprint, make the economy more unsustainable—and give G.D.P. a bit of a bump." GDP, he goes on, fails to distinguish between costs and benefits. Defensive and remedial spending, he continues, adds to the GDP but fails to improve our standard of living.
"Because we use such a flawed measure of economic well-being," Zencey writes, "it’s foolish to pursue policies whose primary purpose is to raise it. Doing so is an instance of the fallacy of misplaced concreteness—mistaking the map for the terrain, or treating an instrument reading as though it were the reality rather than a representation."
Zencey seems to acknowledge that the GDP number might be useful to economists, but he proposes it be renamed to "gross domestic transactions"—which people would not likely interpret as a measure of general welfare. He proposes a new measure called "net economic welfare," which would put nonmarket goods, unpaid services, and ecosystem on the benefits side while putting defensive and remedial services and loss-of-ecosystem services on the debit side.
He quotes the economist Simon Kuznets as warning in 1934, "The welfare of a nation can…scarcely be inferred from a measure of national income." Zencey concludes, "We’re in an economic hole, and as we climb out, what we need is not simply a measurement of how much money passes through our hands each quarter, but an indicator that will tell us if we are really and truly gaining ground in the perennial struggle to improve the material conditions of our lives."
vanessa commented:
the net economic welfare; they can conduct goods and services......
Karl commented:
Meredith Poor commented:
