GDP and American (Non-)Exceptionalism: Again Some More
Any knowledgeable economist will tell you that GDP (or GDP/capita) is a profoundly imperfect and non-inclusive measure of national well-being.
In particular, GDP doesn’t count any work isn’t paid for with money — painting your mom’s house, volunteering for the Rotary Club or your church (David Brooks, are you listening?), caring for your kids and your friends’ kids, cooking dinner for your family — even though that work clearly “produces” immense quantities of real human value. (Can you say “family values”?)
A while back I did a rough calc (based on Census time-use surveys and median hourly wage) suggesting that counting unpaid work would increase U.S. GDP by something like a third (and I think that’s an underestimate.) Since Europeans have much more free time for unpaid work, counting it would presumably increase their GDP by an even greater percentage.
If this thinking holds water, you’d expect to see other measures of well-being giving very different readings from the GDP/capita measure.
You would be right. Kentaro Toyama laid out out ten other measures in The Atlantic last month, all of which show the U.S. trailing European countries — often by quite dismaying amounts:
(ODA is official development assistance.)
The U.S. only stands out by one measure (and it’s still not #1) — GDP/capita — and that only if you calculate it by purchasing power parity. (How large a basket of goods would your share of GDP buy in different countries?)
Conservatives constantly point to the U.S.’s high GDP/capita to “prove” that their preferred model of unfettered capitalism and stripped-down government is superior in delivering national well-being.Even if they ignore all those other measures (which conservatives are happy to do, as with any facts that contradict their faith-based beliefs), their claims for GDP superiority themselves contradict their own beliefs.
Think about it: PPP adjustment — the procedure that’s necessary for conservatives to claim American exceptionalism by the one measure that they cling to — by its very nature asserts that currency exchange rates are wrong – that they’re not being properly arbitraged by the market to represent the “true” value of the different currencies in terms of real goods.
So yeah: America kicks everybody else’s ass (except Norway’s) — as long as you assume that markets are imperfect.
Cross-posted at Asymptosis.
“Conservatives constantly point to the U.S.’s high GDP/capita to “prove” that their preferred model of unfettered capitalism and stripped-down government is superior in delivering national well-being.”
They do? I’m not aware of any case of this. Conservatives say “we’re better than they are” in broad statements that often seemed to be crafted to be unfalsifiable, but I don’t think I’ve ever seen the claim you say is made constantly. Can you show an instance?
Thanks for a nice job
In regard to the last column, which I think is roughly foreign aid or charity, this came up, as I remember, about 4 years ago, and the right wing argument was that official foreign aid is low per capita in the US, but we have a lot of unofficial foreign aid (Churchs, etc).
The right wing argument was that the total percapita foreign aid of the US, govt+private, was greater then the total percapita foreign aid of most European countrys.
Any comment ?
Per capita GDP is somewhat misleading; how about median income per worker? (not per family, which depends on women’s labor participation)
I see it a little differently. To me, GDP(/cap – whatever) is not any kind of measure of national well being. It is a proxy for economic activity.
Sure economic activity affects well-being, but that does not, per se, make it an effective barometer. Most obviously, GDP says nothing about distribution, which will have an immense effect on well-being, at both the individual and societal levels.
Now, what you’re calling unpaid work, like making dinner for the family, or chauffeuring the grandchildren, does effect well-being. If I cook dinner for myself is that unpaid work, or just paying attention to a basic human need? Why would doing it for the rest of the family change that assesment? Should I assign some quasi-economic value to cleaning the bathroom? I really, seriously don’t think so.
Further, these are activities that are exactly orthogonal to GDP. Adding them to GDP is liking adding an apple to a billiard ball.
Economics is an interesting and worth-while endeavor, but it is not the right tool for understanding every aspect of human existence.
Cheers!
JzB
Easy kharris. I see it all the time. A quick google search turns up this Forbes item (which links to a Carpe Diem blog post as the source–Perry is an AEI consultant):
Mississippi Is Richer Than the European Union
If we measure the wealth of a place by its GDP (not a bad although not a perfect way) then the US state of Mississippi, the poorest in the US, is richer than the average of the European Union as a whole.
We can do this calculation (OK, you and I don’t have to, Mark Perry has done it for us) by looking at the state level GDP figures just released and comparing them to the EU numbers. We do need to adjust for purchasing power parity (PPP) or the difference in what things cost.
Worth looking at the whole list. The US in general is a lot richer than almost all of Europe.
If this thinking holds water, you’d expect to see other measures of well-being giving very different readings from the GDP/capita measure.
If this thinking does not hold water, you’d still expect these differences, because the other things might be* measures of different aspects of well being, while GDP most assuredly is not.
JzB
* I seriously doubt that Olympic medals/cap are related to well being in any way. Cf the old Soviet Union.
jazz
eactly, i think. if the little woman gives up cooking so she can get a job and take the family out to McDonald’s for every meal, it is hard for me to see how “human well being” is improved, but the GDP certainly would be. As, or course, would be the income of Ronald mcD.
but let us consider another aspect of all this fun with statistics
suppose 99% of the country lived in wealth and genuine comfort. while 1% of it lives in squalor and desperation. should we look at our statistics and congratulate ourselves, or should we attempt to do something about (for?) the 1%?
at the risk of incurring the wrath of women, i am sure there are many women who would rather work for wages than cook for love. more power to them.
but then don’t turn around and ‘count’ home cooked meals as part of GDP, much less count private charity as “foreign aid.”
at some point you tend to notice when people are weaseling words for political purposes in which your happiness counts for nothing.
Jazz: “Should I assign some quasi-economic value to cleaning the bathroom? I really, seriously don’t think so.”
You probably shouldn’t (I shudder to think… 😉 ), but we, collectively, probably should.
What if everyone in America stopped cleaning their bathrooms. Would that affect our quality of life, our well-being? Does all that bathroom cleaning produce real human value (“utility”)? Heck yeah.
And imagine when the mold starts to build up, and eventually you just have to tear the place down. Can you say accelerated “consumption of fixed assets”?
Measuring it in dollar terms is not any kind of be-all or end-all, but it’s not a useless exercise like, say, measuring “effort required to deliver love to children.” Makes more sense than that.
@jazz:
There’s the old saying, “when a man marries his maid, GDP declines.”
@jazz: “suppose 99% of the country lived in wealth and genuine comfort. while 1% of it lives in squalor and desperation.”
Or the reverse.
The fetish for GDP reminds one of the wise old tale of the man who knows the price of everything and the value of nothing.
For 50 years or more our culture and our government have been discounting anything that cannot be counted into the GDP. Which means pretty much anything an individual citizen does, besides go to work or consume. For the font of GDP is corporations so the government can ignore the millions of forclosed or troubled citizen homeowners while making sure the banks loose as little as possible and reach a settlement on mortgage and title issues without ever hearing from a single citizen. Thus healthcare is reduced to financial transactions and education is a matter of costs, etc. etc.
As the last dozen years have indicated the growth of GDP is being divorced from the wellbeing of an ever greater percentage of our citizens. Economics has become utilitarianism where people must serve the system. The system comprised of government and corporations, not the other way around wherein the system serves people.
Nicely put, Rapier. I’ve always said: people that are obsessed with keeping score, don’t know how to add.
in that case even I might see the point in growing GDP. but i hoped the example i offered would suggest that growing GDP might not be the most obvious way to improve general quality of life.
nicely put nanute. oh, and rapier too.
This emphasis on GDP reminds me of managers who focus on performance metrics and teachers who “teach to the test.” Metrics can take on a life of their own when institutionalized. Ghandi once offered a metric: “A nation’s greatness is measured by how it treats its weakest members.” Maybe we need quarterly reports and periodic international comparisons of how the bottom 1 percent is faring economically (and otherwise).
PJR
brilliant!
Steve –
Continuing the ugly bathroom example – If my house falls down and I do decide to live in the tent that I’ve rescued from my garage, how does that effect GDP? I would think not at all.
I like GDP. I think it’s a useful tool.
But let’s use it where it makes sense. You don’t repair a watch with a hammer.
Cheers!
JzB