In “G.D.P.: A Brief but Affectionate History,” Diane Coyle, a British economist, conveys a sophisticated understanding of an economic standby, the quarterly measure of gross domestic product. A vital gauge of any nation’s prosperity, the G.D.P. has its strengths and its limitations, which are well explained in Dr. Coyle’s rich and engaging little book.
Shouldn’t we count the increase in national well-being as opposed to national production? Some economists have argued that items they consider negative, like spending on armaments of war, advertising huckstering and stock market speculation, have no place in a measure of national betterment.
Unlike temperature, which we measure with a good thermometer, nothing in nature corresponds to “gross domestic product.” It is a concept invented by learned experts to capture the overall economy’s performance as best we can. It includes what experts decide it should include, with notable omissions —some deliberate, some not.
A major omission is the work we do for ourselves: cooking, cleaning, painting a room, taking care of children or an aging relative. Pay a gardener to mow your lawn, and that’s part of the G.D.P.; do it yourself, and it’s not. If all such tasks were included, and priced at the going wage, their contribution to the G.D.P. would be tremendous.
Nor does G.D.P. count the underground economy, conducted out of sight of regulators and tax collectors, even though this unofficial sector provides many jobs…
If a transaction is priced in dollars, it goes into G.D.P., with no ethical debate over its contribution to human welfare. The G.D.P. accommodates both what we spend on producing electricity by burning dirty coal and what we spend on pollution abatement to keep the air clean.
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