We need to get past using GDP as a measure of success, quality of life, etc. Its a measure of gross product, which includes negative externalities.
A company pollutes a nearby river and manages to avoid responsibility, so public funds are required to clean it up. The money the company made by polluting, as well as the cost of cleanup, both contribute positively to GDP.
GDP can in some ways be thought of as a measure of conversion of natural resources into monetary capital. Given the declining state of the environment and unsustainability of many commercial practices, we're at a point where we should start considering this a negative.
We need a new measure that factors in negative externalities and utilization of finite natural capital.
The issue is that success and quality of life are subjective. While it would be great to measure them the same way we measure GDP, I do not think it is possible to do so without using many different metrics.
You are correct that GDP is being misused if people suggest it is a measure of success or quality of life. GDP is what it is, a measure of economic activity (any economic activity, more than just conversion of natural resources into monetary capital). That makes it only one piece of a very complicated puzzle. Many practitioners who use GDP understand it for what it is, but some don't and that is dangerous.
I'd be interested to hear if you or anyone else has suggestions of what we could use instead. It is a very difficult problem to solve, but one that has the potential for improving the world significantly.
> "You are correct that GDP is being misused if people suggest it is a measure of success or quality of life. GDP is what it is, a measure of economic activity (any economic activity, more than just conversion of natural resources into monetary capital)."
gdp (and gnp before that) has been trumped up and misused by the mediopolitical machine for decades, so this has (unfortunately) become a distinction without a real difference.
rather than a resource-oriented view (stuff getting turned into money) as the gp posited, i'd suggest that economic activity should be viewed as the total (levered) labor production of the population instead. this makes it more about the flows rather than the stocks, a dynamic measure rather than a static one. it also centers the discussion around the attribute we centrally value and should be focused on, productive activity, not merely any economic activity, which can be entirely unproductive, as we see with more and more capital concentrating without productive purpose.
no matter what, you'd still need to discriminate and discount activity caused by negative externalities, as the gp astutely pointed out. but that could be a simple as adding a minus sign in front of that activity, as the term itself suggests.
If I pay you $1 trillion to write a song and you pay me $1 trillion to draw a picture, we have just increased the GDP by $2 trillion yet nobody is better off.
A company pollutes a nearby river and manages to avoid responsibility, so public funds are required to clean it up. The money the company made by polluting, as well as the cost of cleanup, both contribute positively to GDP.
GDP can in some ways be thought of as a measure of conversion of natural resources into monetary capital. Given the declining state of the environment and unsustainability of many commercial practices, we're at a point where we should start considering this a negative.
We need a new measure that factors in negative externalities and utilization of finite natural capital.