I recently listened to a TED talk on why GDP measurement can't be considered as the interpretation of real growth. I couldn't agree more.
GDP just measures the trade that happens irrespective of whether it's good or bad. For example, it doesn't really shows how productive the people in the country are because it doesn't account for those activities that doesn't directly correlate to any trade activity. Think of the last time you cooked your own food in home. Ohh! It's everyday almost, isn't it? As you have prepared your own food, the cooking time and the time you spent on it is not getting counted towards GDP itself. The cow's milk is considered an industry and accounts for GDP but not our own time well spent in taking care of our kids.
On the other side, it may also depict incorrectly that we are growing even though we may not be really. Also, it depends on what you want to measure - is it really the measure of nice products and services that is imported and exported for the greater good? What about natural and man made disaster as war? After such a disaster, you need lot more work and development to get where you were before, isn't it? Is that considered a great growth all of a sudden even though the greater good is not really achieved? What about the time and effort spent on war and illegal activities - sometimes that get counted too in this accounting.
Biggest takeaway - GDP measures the growth in an accounting way that's not appropriate and needs change. Also, it largely depends on what you want to measure, if it's countries contribution and the people's effort towards that and their growth with per capita measure of something, GDP largely misses the point.
So, next time, you see GDP numbers, take it with a pinch of salt. Also, expect people to modify the way it's calculated multiple times in the years to come.
Please do share your comments and thoughts on what you think.
GDP just measures the trade that happens irrespective of whether it's good or bad. For example, it doesn't really shows how productive the people in the country are because it doesn't account for those activities that doesn't directly correlate to any trade activity. Think of the last time you cooked your own food in home. Ohh! It's everyday almost, isn't it? As you have prepared your own food, the cooking time and the time you spent on it is not getting counted towards GDP itself. The cow's milk is considered an industry and accounts for GDP but not our own time well spent in taking care of our kids.
On the other side, it may also depict incorrectly that we are growing even though we may not be really. Also, it depends on what you want to measure - is it really the measure of nice products and services that is imported and exported for the greater good? What about natural and man made disaster as war? After such a disaster, you need lot more work and development to get where you were before, isn't it? Is that considered a great growth all of a sudden even though the greater good is not really achieved? What about the time and effort spent on war and illegal activities - sometimes that get counted too in this accounting.
Biggest takeaway - GDP measures the growth in an accounting way that's not appropriate and needs change. Also, it largely depends on what you want to measure, if it's countries contribution and the people's effort towards that and their growth with per capita measure of something, GDP largely misses the point.
So, next time, you see GDP numbers, take it with a pinch of salt. Also, expect people to modify the way it's calculated multiple times in the years to come.
Please do share your comments and thoughts on what you think.
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