GNP GDP

two wheels good

Governments are keen to see GDP return to positive values.

Jospeh Stiglitz, Nobel Prize winning economist, once with the World Bank, explains why this is misguided and disregards sustainabiliy. He also explains why the shift of focus from GNP to GDP occurred; in part to 'spin' the figures.

For example:
- if an oil tanker runs aground and we spend huge sums to clean up the spillage, that adds to GDP;
- building prisons adds to GDP as much as building a university
- natural disasters, divorce, advertising all add to GDP

http://www.youtube.com/watch?v=QUaJMNtW6GA&feature=player_embedded

And it's not such a new topic. Here's a quotation from Robert Kennedy.

" [GNP] counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile."
Robert Kennedy, Speech at University of Kansas 18/03/1968

The more I read the more I realise how much needs to change and how inadequate our leaders are to the task; how powerful vested interest and global corporation will do anything to resist any threat to their power and profits.
I read recently that even Abraham Lincoln warned against the power corporations in [FONT=arial,helvetica][SIZE=-1]1864.[/SIZE][/FONT]
http://www.ratical.org/corporations/Lincoln.html (the first link a web search produced)

Time Magazine

two wheels good wrote: »

Governments are keen to see GDP return to positive values.

It's negative? :eek:

nesf

GDP is simple number that reflects an extremely complex entity (i.e. an economy). Few people understand the entity beyond their own little patch in it. GDP is an easy way to say we're doing well, or not too well without forcing people into a complex discussion about economics.

I agree it's horribly abused and focusing purely on GDP as a measure of success for a country is a stupid idea but don't blame the statistic it still has its uses.

two wheels good

Time Magazine wrote: »

It's negative?

Sorry.. positive GDP growth

nesf wrote: »

GDP is an easy way to say we're doing well, or not too well...

I think the point of these articles is that equating positive GDP growth with "doing well" is incorrect (at worst) and grossly misleading (at least). Particularly because it ignores sustainability, social costs, health.

nesf wrote: »

I agree it's horribly abused and focusing purely on GDP as a measure of success for a country is a stupid idea but don't blame the statistic it still has its uses.

I'm blaming the choice of statistic not the stat itself. Of course it has a purpose. But there is a relentless focusing on a GDP indicator to tell us that our economies and by inference societies are in good shape. During the past decade according to GDP growth the western economies have been doing fabulously.

Flamed Diving

This thread is useless without a Ron Paul quote.

Économiste Monétaire

two wheels good wrote: »

He also explains why the shift of focus from GNP to GDP occurred; in part to 'spin' the figures.

For example:
- if an oil tanker runs aground and we spend huge sums to clean up the spillage, that adds to GDP;
- building prisons adds to GDP as much as building a university
- natural disasters, divorce, advertising all add to GDP

Umm, what do these examples have to do with netting out factor income from the ROW?

two wheels good

Économiste Monétaire wrote: »

Umm, what do these examples have to do with netting out factor income from the ROW?

Umm, I'm going to have a wild guess; nothing?

Économiste Monétaire

So, why use them as examples of GNP to GDP 'spin'?

nesf

two wheels good wrote: »

I think the point of these articles is that equating positive GDP growth with "doing well" is incorrect (at worst) and grossly misleading (at least). Particularly because it ignores sustainability, social costs, health.

Well, negative GDP growth is not a good thing. So positive GDP growth is something we want. It doesn't capture everything sure, but no sensible person would argue that it does.

two wheels good

I have re-read my carelessly written post and realise how it gives the wrong impression. Stiglitz does not advocate a negative GDP. But he does think the obsessive focusing on GDP and striving for positive growth in GDP can be misleading and counter-productive.

Instead of doing his argument any further disservice I will refer you to a very short article by the man himself.
http://www.guardian.co.uk/commentisfree/2009/sep/13/economics-economic-growth-and-recession-global-economy

David (must pay more attention)

nesf

two wheels good wrote: »

I have re-read my carelessly written post and realise how it gives the wrong impression. Stiglitz does not advocate a negative GDP. But he does think the obsessive focusing on GDP and striving for positive growth in GDP can be misleading and counter-productive.

Instead of doing his argument any further disservice I will refer you to a very short article by the man himself.
http://www.guardian.co.uk/commentisfree/2009/sep/13/economics-economic-growth-and-recession-global-economy

David (must pay more attention)

Oh I'm familiar with Stiglitz's point, I was just responding to your apparent interpretation of it. He's correct but I don't think it's a conspiracy as much as a general obsession with an easy to see number. GDP grew quickly in the 90s here and most people were better off, cementing it's use as a general barometer of performance in the public and political mind.

The issue is that finding a replacement is equally controversial. GDP is easy to measure and tends to work well regardless of the country you are in. Happiness measures and Health measures are far trickier beasts.

Ronan_L

This smacks of another 'I've got it - I found out what's wrong with economics' revelation. Without wanting to sound too blunt, any economist with any sort of training is all too familiar with the flaws of GDP, GNP, GNDI, etc, as a measure of economic well-being. Hence the development (by economists) of the HDI measure and others.

I would concur with a point of view that the financial markets' addiction to solely GDP as a metric could be tempered.

It remains to them, however, a Churchillian least-worst option for measuring what's going on in an economy.