Tuesday, October 25, 2005

What is good for GDP must be good for ...

..., I don't know. But, Dilip has a curious post about GDP, presenting some evidence to -- um, ... let me think a bit here and choose an appropriate word -- indicate what is wrong with a focus on GDP as an important indicator of a nation's well being.

Dilip's argument goes like this: Inefficiencies such as voltage fluctuations in electric power supply cannot be bad; in fact, they are good for GDP, because they create and sustain an industry (such as the one that makes voltage stabilizers) that mitigates the effect of inefficiency. He ends it with this threat:

Postscript: Meant to say, I will follow this up with some more exploration of the GDP and possible alternatives.

Perhaps he will start the next post with a few more examples like the voltage stabilizer industry. Will he, won't he? It doesn't matter; in any case, we are here to lend a helping hand. So, let me start off with a small list of things he can use in his next post.

  • Disease cannot be bad. After all, it created, and now sustains pharmaceutical companies that produce drugs (which have side effects, for which there is some more medicine...). Thus, it contributes to GDP.
  • Death is an even more interesting example. Yeah, it does end fun, but it is also the lifeblood(!) of businesses involved in cremating and burying the dead. In fact, death is good twice over. It contributes to GDP, and also to GDP per capita.

Let me stop here before I turn into a morbid mush.

Enough of this bullshit. Do read this Foreign Affairs review of The Moral Consequences of Economic Growth by Benjamin Friedman of Harvard. The review is by Joseph Stiglitz, a Nobel winner in economics.


  1. Anonymous said...

    He is clearly not saying what you think he is saying. He is not saying that because inefficiency adds to the GDP, inefficiency is good. He is saying that because inefficiency adds to the GDP, GDP is deficient as a measure.

  2. Abi said...

    Thanks, Ravikiran, for pointing out that perhaps I didn't 'get' the content of Dilip's post!

    Look at what I said in the first para: "... some evidence ... what is wrong with a focus on GDP ...". Wherever I said some bad thing is "good for the GDP", I am just echoing what Dilip is using in his post: "Put another way, inefficiencies boost the economy."

    Dilip is clearly setting things up for some future post tearing down GNP as a useful measure. I was only trying to help (!) him by presenting some examples he might -- just might -- want to use.