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GDP – A MEASURE OF WELL-BEING?

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The United States Department of Commerce reviewed its activities during the course of the 20th century and concluded that its greatest achievement of that century was the development of“national accounts.


The national accounts are the brainchild of the accomplished American Nobel laureate Simon Kuznets. The Europeans often credit Sir Richard Stone for the same invention.
Kuznets’ work was completed in the 1930s while Stone’s, much later, in the 1950s. As Pablo Picasso once so eloquently orated; “Good artists copy; great artists steal.”


National accounts, often called macroeconomic accounts, are statistics focusing on the structure and evolution of economies.
They provide a framework for numerically describing and analysing the unimaginably large number of economic interactions within an economy. Gross Domestic Product (GDP) is a central aggregate of the national accounts, measuring the total value of final goods and services.


Dim-witted


GDP is a summary statistic that is generally accessible in its nature; hence a darling of dim-witted politicians - whom, perhaps, are the worst people on the face of the Earth.
Prior to the development of national accounts, policymakers had to guide the economy using limited and fragmentary information. The aftermath of the Great Depression of 1929 highlighted the inadequacy of available economic information.

President Hoover of the United States, and President Roosevelt after him, struggled to design policies to combat the Great Depression. The fact was that comprehensive measures of national income and output did not exist.
The need to develop such comprehensive measures would no longer be ignored.


In response, the Department of Commerce commissioned Kuznets of the National Bureau of Economic Research to develop national economic accounts; and the rest, as they say, is history. It is inappropriate to use GDP as an indicator of human well-being. It was never designed for that purpose in any case (can the politicians at the back hear me).


Useful measures of progress and well-being are those that capture the degree to which society’s goals are met, rather than measures of mere volume of marketed economic activity - which is only one measure to that end.


Two-and-a-half months before his assassination, Robert Kennedy had the following to say about GDP; “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.”

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