It’s true that the value we give to things doesn’t represent something that we might want to call their “real value.” The best we’re able to do is come up with an appraisal, or market value, what they might be sold for. What is the real value of this country’s production? Is it GDP, or the measure of what gets made in the United States, no matter who makes it, or where it goes after it’s made?
Eric Zencey, a professor of historical and political studies at Empire State College, in an op ed piece in today’s Times, G.D.P. R.I.P., says that GDP is more correctly just a measure of gross domestic transactions (than output, or production, or value), and that it fails miserably to represent our economic reality.
Certainly it’s true, as he says, that GDP doesn’t include a good part of our productive wealth, such as all sorts of volunteer work, such as the huge volume of unpaid domestic services including housework, child rearing, do-it-yourself home improvement etc.
Nor, and this is commonly overlooked, does the GDP at all reflect the huge economic benefit that we get directly from nature. This, nature’s bounty, is as much, or more the wellspring of our country’s growth and development as the successive revolutions in agriculture, industry, information, and communication.
My wife has been telling me for years that clothes left out to dry in the sun is an economic benefit that goes uncounted. Whenever she’s had the opportunity to do so, as now in Tampa, she has never failed to put our clothes out in the sun. What value should we attach to this? Similarly, Zencey asks, what is, or was the real value of the natural services provided by the Louisiana bayous? Was it $82 billion, the cost of Katrina?
Perhaps worst of all the GDP doesn’t distinguish between items that are costs and items that are benefits. Zencey says we need a new, more accurate measure of our wealth production, perhaps something best called net economic welfare [N.E.W.].
Finally, Zencey’s summing up, “In 1934, the economist Simon Kuznets, in his very first report of national income to Congress, warned that ‘the welfare of a nation can … scarcely be inferred from a measure of national income.’… [we need] an indicator that will tell us if we are really and truly gaining ground in the perennial struggle to improve the material conditions of our lives.”