It measures everything in short, except that which makes life worthwhile

September 16, 2021 5:43 AM

Enough with the GDP — it's time to measure genuine progress - "Unlike GDP, the Genuine Progress Indicator is designed to measure economic performance from the perspective of ordinary American households, not corporations or Wall Street investors."[1,2]

Use of the GPI in federal decision-making processes would correct many of the shortcomings of relying on GDP by differentiating between government and consumer expenditures that are welfare-enhancing (e.g., homes for the houseless and modern infrastructure) vs. those that go toward paying for market failures (e.g., climate disasters and overpriced prescriptions).

The GPI also captures the vast economic contributions from the non-market sector which GDP ignores, such as the value of volunteering, unpaid care work, modern infrastructure and protected natural areas. Unlike GDP, it factors in inequality by counting gains for those least well off more than gains for billionaires, based on well-established economic principles of declining marginal benefits of income, wealth and consumption.

The GPI also factors in costs which are otherwise treated as “externalities” and ignored by GDP and other analysis: namely the damaging economic consequences of unsustainable production and consumption patterns, including the costs of climate change, deforestation, pollution, homelessness, crime and family breakdown, to name a few. Economic textbooks have discussed and quantified such externalities for generations. It’s high time to incorporate them into official economic calculations.

also btw...

• @mileskimball: "Dan Benjamin, Ori Heffetz, Kristen Cooper and I are leading a team for a national well-being index that can stand as a coequal to GDP."
• Racial inequities cost U.S. economy trillions, researchers find - "Daly and her co-authors calculated what the gains to GDP would be if those and other race-based gaps were erased: if Black and Hispanic men and women held jobs at the same rates as whites, if they completed college at the same rates as whites, and if they earned the same as whites." (The economic gains from equity; PDF)

From labor alone, they figured, the gains would add up to $22.9 trillion over the thirty years from 1990 to 2019, with bigger gains in more recent years as the share of non-white populations has increased while the gaps have remained fairly steady.

The larger $51.2 trillion estimate factors in the increase in capital investments that a more productive labor pool could be expected to trigger, Daly said, and includes $2.57 trillion in 2019 alone.

• The Tragedy of America's Rural Schools [ungated] - "Outdated textbooks, not enough teachers, no ventilation — for millions of kids like Harvey Ellington, the public-education system has failed them their whole lives." (One million Nigerian children to miss school due to mass kidnappings, UNICEF says)
• China's industrial planning evolves, stirring US concerns [ungated] - "After taking power in 2012, President Xi Jinping promoted a worldview of industrial and technological dominance as a political and security imperative. Couched in terminology suggesting self-sufficiency goals, Chinese planning took aim at globalized sectors like car making by putting government money and regulation behind new concepts, like electrification." (China to consolidate overcrowded electric vehicle industry - minister)
• Expecting Inflation: The Case of the 1950s - "Ultimately, the experience of the 1950s teaches us that transitory inflation associated with new capacity recedes without necessitating policies that kill jobs as a show of 'credibility' to keeping inflation expectations anchored. The 1950s show that it's possible to do everything the model considers a 'policy mistake' while achieving low inflation and low unemployment."
• Two quick thoughts about Amazon - "I don't think people appreciate the extent to which Amazon puts a wage floor in a community. It's the first thing employers think about when a new Amazon facility arrives in town."[3]
• The housing theory of everything - "Western housing shortages do not just prevent many from ever affording their own home. They also drive inequality, climate change, low productivity growth, obesity, and even falling fertility rates."[4,5,6]

There is another way. Increasing the supply of housing and commercial space, while ensuring that it benefits existing residents, could turn this zero-sum situation into one where everyone can be better off. This might be done, for example, by allowing them to vote on increased density, and benefit from it directly. The new demand could be accommodated and the financial rewards to development could be shared with existing residents without displacing them.

The aggregate, countrywide effect of housing being so limited in supply has been that economic growth in most Western countries has accrued more and more to landowners and less to everyone else. Economist Thomas Piketty famously demonstrated an increase in the share of national income that flows to owners of capital, rather than to labour. But what was less widely acknowledged was that, at least in the US, it was really an increase in the share of income going to landowners, driven by increases in the cost of housing, and that this effect was particularly strong in states that have highly restrictive rules against building more homes.

The rising inequality Piketty demonstrated appears to have been largely driven by housing shortages turning, in one economist’s words, ‘houses into gold’. And this is the case across the Western world: housing inequality, not income inequality, primarily determines how much wealth inequality there is in most Western countries...

Many young people have had to delay forming families and often take poorly paid, insecure jobs that can barely cover rent and living costs as the price for living in culturally attractive cities. They see opportunity as limited and growth as barely perceptible. Meanwhile, older generations sit on housing property worth many times what they paid and, stuck in a zero-sum mindset, often prioritise the protection of their own neighbourhoods over the need to build more homes. Can you blame young people who resent older people, and the West’s economic system itself, when this is what it offers them?

If all this has a solution, then we suggest it is unlikely to be won through a zero-sum political ‘tug of war’. Western countries could become trillions of dollars better off by addressing their housing shortages. A well-designed solution can spread those gains widely enough that everyone is made better off, including people who currently oppose existing efforts to build more that would make them worse off.

We have suggested one possibility elsewhere: radically localized democracy that allows individual streets to opt in to greater density by voting for it. No construction would happen anywhere that a majority did not opt for it, but streets that voted for more density would become extremely valuable, so there would be a big incentive for homeowners in high-demand areas to vote for greater density.

But whether this or another approach is the best solution is not the key question. What matters is that housing shortages may be the biggest problem facing our era, and solving it needs to become everyone’s highest priority. And as important as it is, we should be wary of letting it become politically tribalised: the disastrous politicisation of Covid vaccines in the United States highlights the danger of that. Some kind of creative, below-the-radar solution that turns this zero-sum game into a positive-sum one is likely to have a better chance. In a tug of war, its often surprising how far you can go if you tug the rope sideways.

If we’re right about this, it means that fixing this one problem could make everyone’s lives much better than almost anyone realises – not just by making houses cheaper, but giving people better jobs, a better quality of life, more cohesive communities, bigger families and healthier lives. It could even give renewed reasons to be optimistic about the future of the West.

• Why Family Allowances? - "What entitles the grandmother, the kids, and the wife caring for a newborn to income is not that their household is destitute, which it may not even be. Instead, what entitles them to it is that they exist and cannot receive income from the market and thus need non-market income for egalitarian purposes."[7]
• 'S.Korea's Bernie Sanders' tops presidential polls with talk of universal basic income - "As governor, Lee advocated for universal basic income and instituted cash payments to all 24-year-old people for a year. When the COVID-19 pandemic hit, all province residents also received regular payments... with many South Koreans disillusioned by runaway housing prices, a poor employment outlook for young people and a string of corruption scandals, that populist message has driven him to the head of the pack as he looks to blunt conservatives' efforts to capitalise on voter discontent."

A longtime advocate of universal basic income, Lee vowed to provide 1 million won ($850) to all citizens and another 1 million to people aged 19-29 every year if he takes office.

He also pledged to boost housing supply by building more than 2.5 million homes, including 1 million to be distributed under a "basic home" scheme, aimed at allowing non-homeowners to live in high-quality public housing at low prices for up to 30 years.

To bankroll the programmes, Lee proposed a carbon tax and a national land tax scheme to increase taxes for all property holders and cut transaction costs.

"I will adopt universal basic income as a national policy to pave the way for a grand transition from a low burden, low welfare state to a medium burden, medium welfare state, while minimising tax resistance," he told a news conference in late July.

• Biden's child tax credit pays big in Republican states, popular with voters - "The current expanded tax credit has proven popular, a Reuters/Ipsos poll found, supported by 59% of U.S. adults including 75% of people who identified themselves as Democrats and 41% of people who identified as Republicans. The poll was conducted online Sept. 9-10, based on responses from 1,003 adults and with a credibility interval of 4 percentage points. The policy's support among Republicans far outstripped their 11% backing for Biden's overall job performance in a separate Reuters/Ipsos poll."

posted by kliuless (22 comments total)

Do US Presidents track the daily cost of milk, baby formula, bread, rice, eggs, diapers, and everything else required just to meet daily minimums for merely existing?
posted by Beholder at 6:10 AM on September 16, 2021 [1 favorite]

Beholder, I'd honestly be interested to see how far that expands past just the US. Like, almost a game show with leaders of various countries where they are asked questions about basic conditions of everyday life. I would be stunned if any of the last three prime ministers in Japan could answer what a week's worth of groceries cost, or how much time the average married woman with children (employed or not) spends doing (uncompensated) housework.
posted by Ghidorah at 6:25 AM on September 16, 2021 [6 favorites]

GDP grows when people spend more on college tuition and medical insurance without any corresponding increases in the quality of education or health care. It grows when prison construction booms and more money is spent on incarcerating otherwise productive workers for harmless missteps.(emphasis mine)

That's an... oddly specific situation to call out. Is there a particular industry reference this is making that I'm missing? Because otherwise it sounds like the author complaining that corporate malfeasance is being too aggressively monitored by regulation that somehow leads to workers being jailed.

(edit) Oh I'm a dummy, they're talking 'harmless missteps' like marijuana possession removing people from the workforce entirely. What a weird way to structure that sentence..
posted by FatherDagon at 6:28 AM on September 16, 2021

Kliuless, thanks for another thorough post. I read The Hill article, but I will need to come back and explore the others. This is useful information to have as I talk to well-meaning family members who are receptive to Democrats but have some outdated thinking about the economy.
posted by TheKaijuCommuter at 6:44 AM on September 16, 2021

It grows when prison construction booms and more money is spent on incarcerating otherwise productive workers for harmless missteps.

I understand this is about economics and that's why it has an economics framing but boy I don't love referring to people as potential "productive workers" and the attendant implication that certain types of capital-generating labor are what give someone value as opposed to everyone having inherent worth as a human being. Like I get why it's happening in this context, but I hate reducing human beings to potential "workers" and also the implicit idea about what types of labor quality as "productive". I know a lot of the piece is much better (e.g. when it says "The GPI also captures the vast economic contributions from the non-market sector which GDP ignores, such as the value of volunteering, unpaid care work, modern infrastructure and protected natural areas" and some stuff in the last paragraph), and I'm not saying I disagree with the overall point being made, just depressing that even in a piece about using a metric that better considers the well-being of individuals the idea of "productive workers" remains part of the framing.
posted by an octopus IRL at 6:44 AM on September 16, 2021 [7 favorites]

a game show with leaders of various countries where they are asked questions about basic conditions of everyday life.

I would absolutely watch this. Mostly to watch Ardern smash Morrison.
posted by pompomtom at 6:45 AM on September 16, 2021 [8 favorites]

The GPI also factors in costs which are otherwise treated as “externalities” and ignored by GDP and other analysis...

A question I always have when I read about alternatives to GDP: What if they show that the economy is simply unsustainable? I don't mean long-term, I don't mean X years in the future when the full force of climate change is upon us. I mean, if you factor in externalities and unpaid or underpaid labor, what if the balance sheet shows that your society simply cannot survive and be ethical? Every economy that has ever existed, has been based on someone getting cheated. But we're able to hide that, mostly, from the official numbers. But what do you do if you have an official measure that forces you to recognize that, and what do you do if there's no actual solution?
posted by mittens at 6:47 AM on September 16, 2021 [7 favorites]

That's an... oddly specific situation to call out. Is there a particular industry reference this is making that I'm missing?

"The war on drugs is a false economy", is what that means.
posted by mhoye at 6:51 AM on September 16, 2021 [2 favorites]

I like the idea of the bill mentioned in the first link. Like everything else, it depends on voting rights reform, as the current GOP will block anything that could potentially help out anyone who isn't rich, white, and male.
posted by Hactar at 6:57 AM on September 16, 2021

Do US Presidents track the daily cost of milk, baby formula, bread, rice, eggs, diapers, and everything else required just to meet daily minimums for merely existing?

By my understanding, which admittedly comes largely from a West Wing episode, the "poverty line" is determined by a formula factoring in the costs of a range of necessities, though how up-to-date and realistic that formula is at any given moment may be up for debate.
posted by Navelgazer at 7:30 AM on September 16, 2021 [1 favorite]

A question I always have when I read about alternatives to GDP: What if they show that the economy is simply unsustainable? I don't mean long-term, I don't mean X years in the future when the full force of climate change is upon us. I mean, if you factor in externalities and unpaid or underpaid labor, what if the balance sheet shows that your society simply cannot survive and be ethical? Every economy that has ever existed, has been based on someone getting cheated. But we're able to hide that, mostly, from the official numbers. But what do you do if you have an official measure that forces you to recognize that, and what do you do if there's no actual solution?

I was going to reply to this just "stateless communism" but I feel like that would seem snarky and I don't want to be snarky because I think this is a really good question. I think the thing is that we are learning that our system/society as it's currently structured is not possible without exploitation and unacceptable externalities like climate change, and we have to decide what to do about that. Plenty of people are working very hard to find ways to make the situation sustainable, or, less charitably, they are working very hard to convince themselves that nothing really needs to change, and I think a number of other people have resigned themselves and accepted the exploitation and negative externalities as basically the cost of doing business and have decided that they're basically okay with it, but I, and I think a lot of other people, believe that the way things function now are not sustainable and not acceptable and that a better world is possible but it requires a complete rethink and restructuring of society. Getting there requires a lot of people to accept that what's happening now isn't working and isn't okay, and people are (understandably!) very resistant to that, because change is scary and people feel like they have a lot to lose, and part of the challenge is nudging people to acknowledge that what's happening isn't okay and already isn't sustainable so it's up to us to create that better world.

stateless communism
posted by an octopus IRL at 7:32 AM on September 16, 2021 [7 favorites]

Worth bearing in mind: GDP was never intended to be used as a driver for policy, and the fact that it has in fact been misused as such for decades is a sad indictment of politicians and economists the world over.
posted by flabdablet at 7:38 AM on September 16, 2021 [11 favorites]

Do US Presidents track the daily cost of milk, baby formula, bread, rice, eggs, diapers, and everything else required just to meet daily minimums for merely existing?


There is an entire large organization dedicated to this. You can go online yourself and find this data out monthly. Collecting this data and being transparent about it is something the US Government is actively good at.
posted by JPD at 7:44 AM on September 16, 2021 [6 favorites]

I mean, if you factor in externalities and unpaid or underpaid labor, what if the balance sheet shows that your society simply cannot survive and be ethical? Every economy that has ever existed, has been based on someone getting cheated. But we're able to hide that, mostly, from the official numbers.

When I did macro at uni years ago (don't worry, I dropped out) you'd always have a "balancing item" for international stuff, which meant "Look, this is big and hard to count, and it's not really going to sum right, so we added this so it balances".

In the real world, if you're counting ethics (not a big issue doing undergrad eco) the balancing item is "Africa".
posted by pompomtom at 7:47 AM on September 16, 2021 [1 favorite]

Do US Presidents track the daily cost of milk, baby formula, bread, rice, eggs, diapers, and everything else required just to meet daily minimums for merely existing?

Yes they do, for determining the monthly CPI inflation rate. There's a bag of goods that is included and generally that stuff is included plus housing and medical care and other things. As far as I can tell (I don't really follow it myself), it's pretty flat except for housing.
posted by The_Vegetables at 8:00 AM on September 16, 2021 [2 favorites]

mittens, I once did a scrap paper estimate of the number of lifetime labor hours it takes to directly care for a person who lives to get old (so, infant care nearly 1-1, K-12 education labor shared among students, and then some wild estimates of increasing staffing for eldercare) and it was WAY HIGHER than 40x50x(65-18). I was working in a good nursing home at the time and one of my lifer coworkers referred bitterly to the fact that no-one working there could expect to be cared for there unless they were hit by a driver with great insurance and a bad lawyer. Economic injustice, fixable!

But the hour-for-hour of life didn’t add up either. I hope I was overestimating the amount of senescent care we’ll need on average, but everything I’ve read since about it makes me worry.
posted by clew at 9:34 AM on September 16, 2021

I'm all for this.

I'm curious as to how this measure is calculated and the costs to do so in as much 'real time' as the GDP. My understanding of GDP is that it is used not because it is terribly good, but because it is relatively easy. Collect a lot of data which is already in numeric form with common units and sum it up. Is there a reference that speaks with authority on how they compare?

How do you regularly gather and rapidly update all of this information, especially on factors that were previously externalities without building a house of cards out of assumptions?
posted by meinvt at 11:52 AM on September 16, 2021 [2 favorites]

Last week's Ezra Klein podcast was an interview with economist Tyler Cowen which had some pretty in-depth discussion of GDP as a metric.

The couple main takeaways I had were:
a) Yes, GDP does a terrible job of accounting for environmental externalities.
b) But for lots of other axes, GDP correlates highly (>0.9) with proposed replacement metrics.
In other words, if you want to measure overall happiness, etc, GDP is already a good first approximation.

The 'economic gains from equity' link actually demonstrates point (b) pretty directly. If your country has better access to housing, education, jobs for the entire society, then talent and passion are better allocated, resulting in... A higher GDP, amongst all the other good effects. Economic gains shouldn't be the only reason we work on improving human rights, but GDP does somehow capture the effect of improvement.
posted by kaibutsu at 1:18 PM on September 16, 2021 [1 favorite]

GDP is terrible but it is relatively simple and in one sense ‘objective’ (in a way that alternative measures cannot be) in simply using expenditure on final goods weighted by price, which has a measurable correspondence to income and to production value-added. The derivation of GDP figures is actually a impressive scientific undertaking in this sense, notwithstanding its misuse as an indicator of what truly matters in life. When you begin trying to incorporate things that cannot be measured this straightforwardly you start relying on all sort of essentially arbitrary weights and problematic conventions for trying to put ‘prices’ on things that are basically priceless. Not to say it’s not worth trying, but GDP is not bad at measuring what it actually is measuring, just because it’s misused the way that it is.
posted by moorooka at 3:43 PM on September 16, 2021 [1 favorite]

We certainly need something to change, because the breathless news items telling us how amazing the economy is while everything is obviously getting worse at an accelerating pace are starting to grate somewhat. On my walk from the car park to a client in the city (about 750m through the middle of a state capital), roughly half of the stores I pass are empty. I'm seeing business customers completely abandon all plans for any kinds of major projects, plus severe cost-cutting that's somewhere between "false economy" and "cutting off your nose to spite your face". Any time someone says business or consumer confidence is up, I wonder who they're asking, because it's not anyone I know.
posted by krisjohn at 3:34 AM on September 17, 2021

Thanks Kluiless just read this study on comparisons of Black and European mortality rates.
Have to say I was very surprised that USA life expectancy was 5 years lower than the compared European countries. The 2010 Global Financial crisis has clearly had a lingering effect on USA standard of living.
posted by Narrative_Historian at 2:28 AM on September 20, 2021

Is replacing GDP with the Genuine Progress Indicator going to give economists a clear idea of aggregate demand in the economy? An indicator for when the Federal Reserve should inject liquidity into the economy when there's a drop in demand.
Green economists have regected this Keynesian framework and are opposed to endless economic growth.
Oil exporting countries tend to have higher GDP's and more stable exchange rates.
I really enjoy using Country economy comparison web site to compare GDP's over time, for example Brazil and Australia have similar a national GDP even though Brazil's population is 8 x bigger.
posted by Narrative_Historian at 3:15 AM on September 20, 2021