The GDP model is inherently broken.
This is just an extension of a fundamental flaw in GDP: A beautiful, old growth tree provides so many blessings: shade; oxygen, beauty, maybe fruits, etc. etc.
Contribution to GDP: $0.
Chop it down, mill it with horrible chemicals, print up a stack of porno mags.
Contribution to GDP: $1,000.
There are many wonderful ‘free’ things in the world. Home grown food, community cooperative improvements, the value of raising children, coming together with old friends and a guitar.
The GDP of all of them: $0.
We should simply stop thinking in terms of GDP, it’s an inherently broken metric.
Not only are good, free things not compatible with the GDP; costly, bad things are as well.
Such as the drug war. Mmmm, private prisons!
Every accountant needs a way to encode human misery and/or joy on their balance sheet, to provide incentive for stockholders to increase human joy and decrease misery. Then we’d get a much more benevolent system.
GDP is a terrible measure, but it does have the virtue of at least being measurable. It’s not a problem except that some people try to take the number seriously and get all bent out of shape when it’s not doing what they want.
A better measure of the health of the nation would probably be something like average household fulfillment, but there’s basically no way to measure that. This would also be an inconvenient measure in the current US, because it would probably be in decline as wealth is increasingly concentrated at the top at the expense of the poor, but one ultra-rich household would be massively outweighed by the thousands of people who slid into absolute destitution.
[quote=“doctorow, post:1, topic:14578”]“But the impact on the nation is a net positive: first, because existing products get cheaper as they no longer include a Microsoft tax; second, because new products and services emerge that would not have been profitable/possible with the Microsoft tax included. It’s not great for Microsoft, its employees, suppliers, and shareholders, but their pain – which is real and terrible – is dwarfed by the wider benefit.”
I don’t follow your logic. You have:
- a negative change to GDP (MS losing revenue, laying off employees, contributing less to pension plan investments, etc)
- a positive one (new profitable products/services)
The difference between them is the net benefit. Your claim that it is a net positive is only true if the revenue from things that couldn’t exist without GNU/linux fill the hole of laid-off Microsoft employees created by GNU/linux.
GDP isn’t designed to measure health, it’s designed to measure economic health. The fact that the haves benefit more than the have-nots from economic health is another issue that has nothing to do with the measurement of GDP.
It’s counted as a win because it is more efficient. OSes are basically overhead–they don’t do anything on their own, and money spent on overhead is waste. So those laid off employees should instead work to create new content and enjoy the fact that their overhead is lower and they can afford to do more.
The whole point of technology is to make people more efficient. It’s a multiplier effect in the GDP. The fact that Linux isn’t counted in the GDP isn’t a problem, because it means resources were freed for actual productive work.
The old Adbusters mantra “Economists must learn to subtract”
Advertising is counted, and it’s completely overhead. Advertisers spend to take revenue from their competitors, but if they were all to reduce their spending by the same percent, the pie would be split the same way it is now. There are tons of things that are “basically overhead” that are counted in GDP, but they employ people who then turn around and contribute to the economy with their wages.
Advertising is counted as overhead in corporate budgets, but it’s not overhead in the economic sense. A good or service has no value if nobody knows about it. Advertising will provide an essential service until we all form a giant hive mind.
Now it can be said that Coca Cola probably does not get much value from each advertising dollar now, but they aren’t in an industry where you can spend a lot on R&D and innovation so I guess it’s natural that the dollars will tend to flow into advertising budgets instead. Someone with a brand new and awesome product that nobody has heard about gets a lot of mileage out of his advertising dollars though, and actually provides value.
Two economics students are walking down the road. One of them, seeing a pile of dog shit, says to the other “If you eat that dog shit I’ll give you 100 million dollars.” Naturally, the other one eats the shit. A while later, they see another pile of shit, and the first one, not wanting to pay up, says “I’ll tell you what, why don’t I eat that pile of shit and we’ll call it even.” and the second one agrees. Later, they’re discussing this with their professor, who says “You guys are brilliant! You just increased the GDP by 200 million dollars!”
Not only that, GDP measure expenditure, and doesn’t take debt into account. Think of two families with equal incomes. One family drives old cars, lives in small house (which they almost have paid off), they buy lots of things used and they don’t go on vacation. They save. Maybe they even have a garden and grow a significant amount of food.
The other family always has new cars, they have a huge house, they buy the newest, shiniest toys. They are leveraged to the hilt.
Using as a measure GDP the first family is poor and the second family is wealthy.
I like that everyone is mad that GDP doesn’t measure things that GDP isn’t supposed to measure. It’s one of many useful metrics, any one of which doesn’t tell a story by itself.
The difference is that, if the positive benefit doesn’t involve money changing hands, then it doesn’t count towards gdp; if a harm does involve money changing hands, then it does count.
If and only if economic health means the amount of money changing hands, and doesn’t mean the way the economy affects the people living with it.
GDP is a terrible measure, but it does have the virtue of at least being measurable.
The other night I dropped my keys somewhere in the street. I am pretty sure I dropped them over by this car where it was dark, but I looked under the streetlight instead, because I could see better.
I sure do love this idea:
Although I’m saddened to see even Bhutan has abandoned it now. GDP is only a rough calculation of economic health. How hard can it be to come up with a rough measure of general well being to put alongside it?
Even economically, it could have a value by showing a value for those things not accounted for in GDP but that reflect social stability too.
Obviously though, IANAE.
There are any number of measurable indicators that can tell us something about well-being. But they require thought and work to explain and understand, and aggregating them is difficult. Thought, work, difficult - all bad words when it comes to political action, political campaigns, (most) journalism and (most) headlines.
LIfe expectancy, health, education (as a good rather than as job training).
Automation is accelerating, and most of what we think of as ‘jobs’ are going to be automated or gone by the time my kids are 30, and a quaint historical notion by the time they are 60. All that will remain is service work (waiting tables, teaching surfing etc) and creative activity - be it entrepreneurial stuff or artistic or both. I am trying to teach my kids to learn how to do the second - I am also trying to teach myself. The rest of us/them will be collecting some kind of basic income and eating high protein sludge from a dispenser on the wall.
For most of my life, I’ve lived with the realisation that most of the things we do are, on balance, a bad thing.
I lay a good portion of the blame for this at the feet of those who’ve studied economics and drunk the CSE kool-aid.
Quoted for beauty.
In my work as a futurist, I have been aware of the problem with GDP for some years. It is a part of the larger problem that money no longer is a very good measure of wealth (if it ever was).
Apart from the issue of not counting free goods, consider that the monetary value of houses rose and fell with the housing boom and crash, even though their values as homes presumably didn’t change.
Also, time is increasingly a luxury, but if you choose to ‘buy’ extra leisure time by working less, and hence earning less, you count as being poorer even though you feel richer.
Happiness is a poor measure of wealth too: Just pump everybody full of happy juice (soma), and you get a great happiness index!
Better (though more difficult) to measure wealth as the greatest available range of positive opportunities and experiences for the individual.
Sounds like a definition of freedom.
Rather a combination of freedom AND access to opportunities and experiences. What good is freedom if everything costs money and you have no funds?