GDP is unscientific and unfair for poor people.

Max B. Sawicky sawicky at
Sun Aug 29 10:41:32 PDT 1999

. . . GDP is scientific insofar as it is a measure of the productivity of capital (which I think it is right to say that there are still many flaws in that, not least the inability to distinguish between speculative growth and real accumulation). Other proposed measures, though, only move further away from that. . . . >>>>>>>

GDP is an effort to measure the value of current production in a period. There is no breakout for "the productivity of capital." There is corporate profits, not necessarily the same thing, and net income of unincorporated businesses, ditto. Changes in the values of financial assets are not included.

Off the top of my head, I don't know if the capital consumption (depreciation) measure is supposed to reflect commercial obsolesence (i.e., a working machine is devalued in the market by the appearance of something newer), or more simply the estimated effect of the capital's aging (wear and tear) relative to its original cost.

Second, since GDP is a flow measure, it does not aim to measure the value of the capital stock. Additions to capital stock -- net investment -- are measured at cost, which is obviously not necessarily the same as 'value.'

There are related Gov stats and reports to measure the value of the capital stock in terms of cost and other ways.

So neither 'speculative growth' nor 'real accumulation' are at issue in GDP: it measures neither.

It is not supposed to measure distribution, so criticisms of it from this standpoint are along the lines of, bicycles are inadequate because they don't fly over rivers.

I'm not sure true that a neglect of other items that are not counted in the GDP is irrelevant to distribution or equity. I'm thinking of the length of the working day, but I'm not going to attempt an explanation right now. Maybe someone else can expound on it; I'd be interested.


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