Summary: GDP may be reconceived and redefined in useful ways using the principles of our Rethink.
GDP "measures everything except that which makes life worthwhile." Robert F. Kennedy, 1968
GDP (Gross Domestic Product) was conceived by Kuznets [1934] as a way to obtain a single overview measure of the "economic welfare" of a nation. It is calculated by totalling all the monetary transactions that occur in a nation; totalling usually involves surveys and estimates. It has been much criticised as a measure on a variety of accounts.
Despite Kuznets warning otherwise ("The welfare of a nation can scarcely be inferred from a measurement of national income"), GDP has been (mis)used as a measure of overall wellbeing of a nation, especially by politicians and pundits, who stubbornly continue to use it.
Though there is widespread agreement among economists that GDP should not be used as it is, there is little agreement what, if anything, should replace it. Indices like HDI, GPI and HPI have been suggested (see === for overview of indices). Some suggestions are idealistic, some are partial. Few would make governments abandon their commitment to increasing GDP. Hough-Stewart [2022] suggests we need "coherence in our 'beyond GDP' metrics" yet "GDP is too entrenched to be successfully replaced" [Masood 2016] so that, "instead, it needs radical reform." Reform implies that there is some germ of validity in it.
We enter this debate with caution but it is at least worth exploring where and how our Rethink might offer fresh insights. We look at criticisms of GDP and its possible validity, then apply our main principles from Part II to understand these and suggest a direction for reform, and then propose a modification of GDP that might address many of the criticisms.
Summary: GDP is deeply problematic, but might have some validity, but governments must change their mindset towards it.
What is wrong with GDP, what validity might it have, and why to governments cling to it?
Summary: Plethora of problems is well known to many, not just academics.
The problems of using GDP as a measure of value have been much discussed, sometimes confusingly so. Acknowledgement of problems with GDP is widespread, not just in academic circles but across the board of business, media and government. "A decisive coalition is shaping up in favour of moving away from GDP" [Coyle 2016]. Here are some expressions of this that came up from a Google search of "What is wrong with GDP?"
"GDP is a useful indicator of a nation's economic performance, and it is the most commonly used measure of well-being. However, it has some important limitations, including: The exclusion of non-market transactions; The failure to account for or represent the degree of income inequality in society; The failure to indicate whether the nation's rate of growth is sustainable or not; The failure to account for the costs imposed on human health and the environment of negative externalities arising from the production or consumption of the nation's output; Treating the replacement of depreciated capital the same as the creation of new capital""... the failure of GDP to account properly for digital technologies, including free online services, because the relevant statistics are not collected or do not fit easily into existing categories." [Coyle 2016]
"A train crash which generates £1bn worth of track repairs, medical bills and funeral costs is deemed by this measure as beneficial as an uninterrupted service which generates £1bn in sales. Cleaning up the 2010 oil spill in the Gulf of Mexico was 'worth' more to GDP economically than the carbon absorption provided by the Amazon rainforest. ... Probably its biggest flaw, after not counting what makes us happy, is that it's only a measure of consumption; there is no capital account. If you had a car accident and went to hospital that would be good for GDP; you would have to buy a new car and spend money on doctors. But it would be a negative for you, physically, emotionally and financially. Nor does GDP take into account the sustainability of the resources used in the consumption or whether it's even good for society." [Killelea 2020]
"GDP is flummoxed by the Internet. Wikipedia provides all human knowledge free of charge, but in GDP terms, it is worth zilch // GDP is a gross number. It is the sum total of everything we produce over a given period. It includes cars built, Beethoven symphonies played and broadband connections made. But it also counts plastic waste bobbing in the ocean, burglar alarms and petrol consumed while stuck in traffic. // GDP is born of the manufacturing age. ... Yet in advanced economies such as the US, up to 80% of production is in the service industry. GDP doesn't do services - at least not very well. It is good at quantity, but lousy at quality. If the food or service improves in your local restaurant, GDP will not notice. Ditto, if an airline's safety record improves. In fact, GDP might prefer a plane crash - so that it can build a new plane. // GDP is flummoxed by the Internet. ... Wikipedia provides all human knowledge free of charge. In GDP terms, it is worth zilch. // GDP deals in aggregates ... In an age where a huge cause of social dislocation is inequality, GDP has nothing to say about distribution. ... A rise in average GDP could actually be retrograde, if it leaves 99% of people resentful at how the 1% is making good. // From GDP's perspective, bigger is always better. In the real world, that is not always so. When the financial sector got bigger and bigger, it ended in financial crisis. // In general, GDP measures only cash transactions. In Europe that includes heroin and prostitution. However, volunteer work, housework or looking after an ageing relative count for nothing. GDP has skewed priorities. // In poor countries, the informal sector is practically invisible to GDP. Yet in much of the world, the informal economy counts for most. // GDP is not a measure of 'wealth' at all. It is a measure of income. It is a backward-looking "flow" measure ... // When Nigeria was busy selling high-priced oil to the world before the price crash, its GDP was soaring. But its wealth was falling. Oil deposits were used up, but cash was not reinvested in human, physical and technological capacities to ensure future income. Only wealth accounts could have drawn attention to that. // But we need to pay more attention to other measures to complete the picture, some of which already exist and some of which we may have to invent. Measures of wealth, equality, leisure, wellbeing and net domestic product, adjusted for negatives like pollution, are places to start." [Pilling]
"But a measure created to assess wartime production capabilities of a nation [GDP] has obvious drawbacks in peacetime. For one, GDP by definition is an aggregate measure that includes the value of goods and services produced in an economy over a certain period of time. There is no scope for the positive or negative effects created in the process of production and development. // For example, GDP takes a positive count of the cars we produce but does not account for the emissions they generate; it adds the value of the sugar-laced beverages we sell but fails to subtract the health problems they cause; it includes the value of building new cities but does not discount for the vital forests they replace. // Environmental degradation is a significant externality that the measure of GDP has failed to reflect. The production of more goods adds to an economy's GDP irrespective of the environmental damage suffered because of it. So, according to GDP, a country like India is considered to be on the growth path, even though Delhi's winters are increasingly filled with smog and Bengaluru's lakes are more prone to fires. Modern economies need a better measure of welfare that takes these externalities into account to obtain a truer reflection of development. Broadening the scope of assessment to include externalities would help in creating a policy focus on addressing them. // GDP also fails to capture the distribution of income across society - something that is becoming more pertinent in today's world with rising inequality levels in the developed and developing world alike. It cannot differentiate between an unequal and an egalitarian society if they have similar economic sizes. As rising inequality is resulting in a rise in societal discontentment and increased polarization, policymakers will need to account for these issues when assessing development. // Another aspect of modern economies that makes GDP anachronistic is its disproportionate focus on what is produced. Today's societies are increasingly driven by the growing service economy - from the grocery shopping on Amazon to the cabs booked on Uber. As the quality of experience is superseding relentless production, the notion of GDP is quickly falling out of place. We live in a world where social media delivers troves of information and entertainment at no price at all, the value for which cannot be encapsulated by simplistic figures. Our measure of economic growth and development also needs to adapt to these changes in order to give a more accurate picture of the modern economy." [Kapoor & Debroy 2019]
Killelea S. 2020. Peace in the Age of Chaos; The Best Solution for a Sustainable Future. Summary available at "https://www.visionofhumanity.org/the-problem-with-gdp/"
(We make no apology for citing these non-academic publications, because they express (reflection on) the real-life experience that is so important to us, in a way that academic material does not [Note: Quoted material]. However academic material can add things that might have been missed and arise from more lateral thinking, such as:
Use of GDP "fostered a 'competitive league' mentality where nations and individuals came to see the ranking on GDP tables as a status good of intrinsic value. ... it created incentives for gaming the system ... fostered the illusion that what can be measured can be modeled and controlled." [Syrquin 2016, 579-580].
Which is the impact on our mindset.
Despite these problems, asknowledged by most economists and many others, governments have clung to GDP as a measure that spend much effort to calculate and plan to increase.
Summary: Some alternatives to GDP have been suggested, but none has really caught on.
See discussion of indices in Chapter 5.
Summary: Governments cling to GDP, ostensibly for economic reasons, but also because of pistic commitments.
Why is it that so many governments continue to use GDP as their measure of choice? It is often taken for granted that they do so. The reasons seem to be not often discussed, except to point to a few capabilities of GDP as an overall measure. For example, GDP gives information about the size of an economy, an indication of how it is performing, at least monetarily, and some idea of whether an economy is growing on in recession. Its growth rate is often taken as a measure of the general health of the economy.
Those reasons are restricted to meaningfulness in the economic aspect. There are many other reasons, meaningful in other aspects. Behavioral Economics should inform us - but does not very well, if at all. Reasons in most aspects have not been discussed. What we may notice is a fear by many politicians, especially in 'Western Democracies', of being left behind in what they perceive as a GDP race. This is partly mindset of the absolute rightness of GDP (pistic dysfunction), and, especially nearing elections, a fear of how people might vote (ethical dysfunction).
So, if we are to make a change here, it is not sufficient to pile up the economic arguments about GDP, but we must tackle these other aspects. As in the past, it probably requires courageous politicians (pistic functioning) who are willing to do what is right, even at risk to themselves (ethical functioning).
Summary: Despite its problems, GDP has some small validity, which gives some hope of being redefinable.
So, do we simply reject GDP, replacing it with another index, such as GPI? Governments should indeed abandon their unquestioning (idolatrous) commitment to GDP, but maybe we need not reject it as such.
GDP has a number of potential advantages among its problems. For example, though there are enormous problems in trying to quantify value (as acknowledged by most and discussed in Chapter 5), there is one use of this that is valid: to gain an overview, which can then be compared with other similar overviews across time or jurisdictions. The main problem with this is not the overview figure as such but what is measures and how it is (mis)treated - as full, rich overview of Multi-aspectual Overall Good, or as an over-riding truth and demand focusing solely on the economic aspect. While the former may be a genuine measure of wellbeing or overall quality of a nation, it is too often the latter that is used as such by governments and media.
However, even there, in a tiny way, GDP might already indicate something of Multi-aspectual Overall Good made possible by the economic activity of a nation. This is because, and insofar as, the money flow from which GDP is calculated is some kind of expression of the average value that people put on things in life, potentially in all aspects. Indeed, a society with more money flowing (higher GDP) can usually do more Good.
"Can" not "does"! Any possible validity is swamped by politicians and others misusing GDP, and it being defined in a way that treats Harmful and Useless economic activity as Good. Politicians in democracies use boosting GDP as a reason why the public should vote for their proposed policies: "The likely effect on GDP growth statistics is thus used as justifications for contentious policies" [Coyle 2016,10]. Not only are politicians implicated but so are the public and the media pundits, because all take for granted that growing GDP is an important aim that should be followed at all costs.
There is a mindset problem here. The intransigence of this desire to treat GDP thus might suggest that there is something valid in that desire. If so, then the question is, "Can GDP be redefined so that it does get nearer to measuring such quality, and in particular, Multi-aspectual Overall Good?"
Perhaps it can. There may be a modicum of philosophical soundness in GDP as a measure of value. In choosing to measure amount of money flowing, rather than total assets for example, Kuznets gave us a measure of economic functioning rather than economic entities. As Dooyeweerd, for one, makes clear, it is meaningful functioning that can be good or harmful, and thus have value, not entity types.
So, given its possible validity, we investigate the problems more deeply and make a proposal for recasting GDP.
Summary: We may understand the various problems in GDP by reference to our principles discussed in Part II.
To understand why GDP is a problem we need to understand how different types of problem differ from and relate to each other. Most categorisations of GDP's problems (such as "Limitations of using GDP as an indicator are as follows: (i) Non monetary exchanges ... (ii) Inflation ... (iii) Externalities. ... (iv) Income pattern ..." or things that Coyle [2016] says GDP cannot cope with: free online services like Wikipedia, innovation, shift towards customization, increase in specialization, and extended production chains especially across national boundaries), do not cover everything and there is no clear attempt to understand how the types of problem relate to each other or fit into a wider picture.
To help us in this, we apply our thinking to separate out types of problem. By applying (a) the embeddedness of economics including that GDP should take full account of all aspects (Chapter 4), the challenges of aspectual value (Chapter 5), the functioning of economic activity (Chapter 6), and the need to differentiate Harm and Useless economic activity from Good (Chapter 7), we separate out and reconceive the problems discussed above.
Summary: GDP should measure contribution of a nation towards Multi-aspectual Overall Good.
Chapter 4 challenges us to ask what is the meaning and mandate of GDP. What should it achieve? It is by reference to these that we can understand how the problems might relate to each other. Given the desire to employ GDP as a measure of some overall quality of a nation, it would seem that contribution to Multi-aspectual Overall Good is what it could aim at measuring. Kuznet's formulation of it as measure of monetary transactions is only a start, rather than something that should restrict us. This challenge does not seem to have been addressed in most that discuss the limitations of GDP.
Our response: GDP should calculate the contribution to Multi-aspectual Overall Good or Evil) made by the economic activity of a nation - which might extend beyond the nation and be global. That is, it should take into account every aspect: embeddedness rather than isolation. However, given that the economic aspect sees things and stuff as resources or assets, the ideas of natural assets or environmental capital, social assets/capital, moral assets/capital, psychological assets/capital, cultural assets/capital are valid - as long as we remember that everything treated thus is not only asset or capital but is also meaningful and important in other aspects too. A well-known example is that natural environment is a ecological and biological system (biotic aspect), is beauty and inspiration (aesthetic, pistic aspects), and not just asset. Overemphasis on treating stuff as capital or asset or resource - and restricting the thinking of policy-makers and opinion-formers to the economic aspect - is the failure of the Ecosystem Services approach. This leads us into the topic of mindset.
Summary: Our mindset towards GDP needs to change; use of GDP itself changes our mindset.
Chapter 4 also challenges us to question our own mindset about GDP. Currently, we (politicians, pundits, people) idolise it, treating it as the most important measure to which most other considerations should be sacrificed. This challenge is seldom addressed, though Syrquin [2016] mentions how GDP changes our mentality. Public and media idolising of GDP means that in democratic regimes politicians are trapped into always promising to increase GDP.
Our response: We need to ensure that (use of) GDP changes our mindset in healthy directions, and away from idolising it.
Summary: GDP should take account of all aspectual kinds of value.
Chapter 5 emphasises the variety of kinds of value that are important, and that non-monetary activity is also of value that needs to taken into account. Many recognise this, either implicitly, as most do who point to environmental and wellbeing issues, or explicitly, as Carney [2021] has done. Though Kuznets was adamant that GDP should only be used as an economic measure, i.e. meaningful in the economic aspect, its actual use might indicate a desire to measure multi-aspectual value.
To a small extent, it might take some aspects other than the economic into account indirectly and implicitly, in that the amount of money exchanged for a particular kind of good or service might indicate how valuable the citizens of a nation take it to be - and this can be in any aspect. But GDP needs to take this into account explicitly and directly, not implicitly and indirectly, so that we can be sure no aspect is overlooked or omitted.
GDP is calculated by adding together several distinct components. Sometimes a "dashboard" presents them and allows them to be manipulated. But what components should the 'dashboard' include? Annual spend by departments of government? Sectors of the economy? Coyle [2016] calls us "to value the things that matter and then incorporate this value into the GDP accounts" including environmental and wellbeing measures alongside economic. HDI is an example [see Masood 2016]; Doughnut Economics is another [Raworth 2019===]? We suggest that value in each aspect can be the components.
Our response: Use Dooyeweerd's aspects to understand and relate the different kinds of value and to ensure that all kinds are given their due and can detect when any are overlooked. So no sector is ignored and we can go beyond the standard sectors of the economy, and especially to evaluate the value of unpaid work (e.g. care, voluntary, household), and also the value of attitudes like generosity rather than self-protecton, and mindsets orientated towards the diversity of meaningfulness in Creation rather than hidden agendas or narrow presuppositions, or idols of our time. Though it is impossible for a single measure to do justice to multiple factors, at least aspects have a philosophical foundation for why they do not interfere with each other, and so they may be kept separate right up to the point of adding them together. This is amenable to a dashboard approach.
Using aspects as components in a dashboard has several advantages. One is that problems of an aspectual kind of human or non-human functioning are common across all departments, sectors and criteria, all admitting to common set of types of solution, whichever sector or department they are in. For example, the lingual problem of misunderstanding tends be broadly similar across the board, even though different in detail in each context. Another might be that it overcomes problems introduced by using other categories. For example, HDI tends to value poor lives less than rich ones [Coyle 2016===] (though an inequality-based HDI was introduced in 2010). Yet another advantage of categorizing the components of GDP by aspect is that it offers a clear distinction between Good and Harmful (see later), because each aspect clearly distinguishes these and does so in its own way, whereas for example in sectors of the economy of something like education, the distinction is less clear. A fourth advantage is that aspectual values can be used without reference to money and transactions.
A limitation on most multi-value approaches is that their components tend to be positive Good (such as those in HDI: education, quality of life: "things that matter"), and do not properly address Harm and Uselessness, discussed later. Focus only on the positive can blind us to the negative so it becomes ignored and also so that we fail to think about how harmful activity might undermine even things that matter. Aspects enable us to do both.
Summary: Being a single quantitative measure, economists and those who calculate and use GDP need to be very careful how it represents multiple kinds of value.
GDP suffers all the problems of trying to quantify values that are non-quantifiable. Chapter 5 addresses the problems of assessing value, especially by quantitative measures like GDP. Many are aware of the statistical problems and other quantitative issues of using GDP, e.g. SNA2025 and Dasgupta [2021], of which many are resolved relatively easily. Dasgupta used the Ecosystem Services approach, to find measurable value in the ecosphere, to propose how biodiversity could be included in national accounts.
Our response: Agreed. Capitalize on all the insight into this that has been built up, and always treat quantitative measures of value with caution.
Summary: The problems GDP has with modern economics may be understood by Dooyeweerd's idea of opening up of aspects, in this case the economic.
Chapter 6 discusses the aspectual functioning that is economic activity. The economic aspect enables the functioning of careful use of treating objects as resource, with respect for the object (as also discussed in Chapter 4); its norm is frugality. However, as with all aspects, its potential is continually being opened up. This may explain why the modern economy differs greatly from that of Kuznets' time, and therefore why GDP may not be appropriate today.
Our response: To cope with modern economics, and even future-proof our thinking, reflect well on the kernel meaningfulness of the economic aspect and how all other aspects relate to it, in inter-aspect dependency and analogy and non-conflict (as set out in Chapter 3). Be especially aware to the oft-overlooked relevance of the ethical and pistic aspects (attitude and mindset), mentioned below.
Summary: Since economic activity is multi-aspectual functioning, calculating GDP should take all kinds into account.
Chapter 6 emphasises multi-aspectual functioning, both in the economic aspect and in all other aspects, and the need to understand how they work together, in both directions. GDP tends to ignore all functioning that does not involve money. This is how to understand 'externalities', which many critics of GDP point to. An emphasis on aspectual functioning instead of monetary value automatically brings unpaid activity like child care, household work and voluntary work into consideration, as well as using free online services. There would be no need to make special provision for them.
Our response: GDP needs to be formulated with aspectual functioning in mind, that which is meaningful in the economic aspect and linked closely to that meaningful in all other aspects. For each kind of externality there will be aspects that make is meaningful, often a single aspect. For the kinds of externality that have already been identified, understand them more deeply as results of aspectual functioning in several aspects. However, also use aspects to identify possible externalities that have yet to evoke wider concern. Take all these account in formulating calculations of GDP.
Summary: In particular, calculation of GDP must take attitude and mindset of society, and its impact on, and impact from, economic activity into account.
Chapter 6 also draws our attention to the importance of mindset and attitude (society's functioning in the pistic and ethical aspects), and their retrocipatory impact on our functioning in all other aspects, including the economic. Not many, if any, have discussed how mindset and attitude impact on GDP.
Our response: GDP should take into account the repercussions of our functioning in these two aspects in particular - but it may be that a generic multi-aspectual approach would suffice.
Summary: GDP should subtract the measure of Harmful economic activity from the measure of Good, rather than add it as it does at present.
Chapter 7 argues that we need to separate out Harmful economic activity from Good. Nowhere is this more important than in GDP, which currently increases with Harmful economic activity like production and selling of tobacco, sugar-laced beverages and road fuel. Kapoor above gives us several examples. More hidden is the distinction between Good and Harm in services, in which they are indirect, especially financial services, in which they doubly so.
GDP as currently calculated presupposes the absolute goodness of all economic activity. Since much economic activity does harm, as discussed in Chapter 7, current GDP is grossly unfit for the purposes it is used for. This version of GDP leads most governments of affluent nations to actively subsidise and encourage damaging sectors like aviation and fossil fuels, leaving it to others to make amends for the harm. Too often, these 'others' are those in poorer nations, future generations, animals or the planet, especially since much of the harm is hidden or indirect.
A few critics of GDP refer to this, for example Kapoor & Debroy [2019] who think we should subtract health problems caused by economic activity from GDP rather than adding them as we do at present. The train crash should be treated as a negative rather than a positive in GDP [Killelea 2020], as should the carbon and pollution emissions from road traffic. But the discourse tends to focus on just a few kinds of harm, like ill-health (biotic, psychical), conflict (social), injustice (juridical), biodiversity loss (biotic), climate change (biotic), and bypass others like selfish attitude (ethical), misleading information (lingual), and so on.
Our Response: Subtract the value of Harmful economic activity from GDP, rather than adding to it. Redefine GDP as Good - Harm rather than Good + Harm. Calculate Harm in every normative aspect, omitting none. Note that subtraction is more radical than most indices offered as alternative to GDP. They only suggest some Good factors to add in, and do not deal with Harmful. (It could be argued that Doughnut Economics does tackle Harmful impacts on climate and biodiversity, expressed as "ecological ceiling" but it does not deal with other kinds of Harm such as obesity or overwork stress or the increasing selfishness in society, and it ostensibly allows Harmful economic activity to be added to GDP until it reaches the ceiling.
For example, the problem of GDP ignoring "natural capital" etc. should be deconstructed to identify in which aspects it is Harmful (ask, "What is actually harmful about depleting natural capital?"), rather than treating is as mere amorphous capital. The problem of GDP calculations being open to 'political' abuse, as Martinez [2022] accused China of, may be traced to dysfunction in the pistic aspect, of false self-belief and commitment thereto. The problem of poor lives being valued less than affluent ones - which afflicts not only GDP but other indices too - could be tackled by identifying and understanding the several dysfunctions in various aspects, for example, not only the obvious juridical aspect of injustice, but also the pistic aspect, of beliefs and assumptions about identity (x and the Christian/Jewish idea of every human imaging God x).
Summary: The measure of Useless economic activity should be excluded from GDP, rather than included as it is at present.
Chapter 7 also draws attention to the current inclusion of Useless economic activity in calculating GDP, that which contributes little to Multi-aspectual Overall Good, yet takes up (wastes) a nation's resources of human effort, skill and life, as well as such things as land, in unproductivity (Schumacher, Graeber, Mazzucato) and in producing a surfeit of non-essentials. Current versions of GDP increases when this Useless economic activity is included. GDP should be redefined such that it no longer increases when that wasted human activity is included, but would increase when it is redirected to Multi-aspectual Overall Good. For example, during the 2020 Pandemic when around 50% of trucks were parked up in the UK "because people are not buying non-essentials", this suggests (as a rough figure) that we should halve current UK GDP before subtracting twice the value of Harm done by economic activity in the UK.
Our Response: Exclude all Useless economic activity from calculations of GDP, but include all Good.
Summary: All such suggestions may be incorporated as mathematical equations, to replace those currently used.
For GDP to be valid as people seem to want to use it,
This section makes an initial suggestion for equations that arise from those requirements. We discuss how GDP may be modified to overcome some of the problems with it. Let us restrict ourselves, as Kuznets did, to GDP as a measure of the 'health' of an economic rather than of the wellbeing or status of a nation as a whole, i.e. the contribution that economic activity makes towards Multi-aspectual Overall Good.
Currently GDP is
GDP = Total Good + Total Harm + Total Useless (1). The main principle behind our approach is to subtract Harmful economic activity from the Good, and exclude Useless.
GDP = Total Good - Total Harm (2)Total Good and Harm are defined as the sum of the value of Good and Harmful functioning in every aspect of economic activity, including repercussions ("externalities") thereof. This approach explicitly separates Harmful from Good economic activity. Expressed as equations:
Total Good = Sum( Value( Ga ) )(3a)
Total Harm = Sum( Value( Ha ) )(3b)
where Value() is the quantised value of either Ga or Ha, which are the Good and Harmful repercussions of activity that are meaningful in aspect a, as defined in Understanding Harm.
These equations make the inclusion of all aspects explicit rather than implicit, for example, the biotic aspect as biodiversity and good food, the psychical aspect as mental health, the social aspect of friendship, the juridical aspect of justice (in which inequalities in distribution in both the developed and developing world might be meaningful), the aesthetic aspect of things like landscape value or art, the ethical aspect of attitude, the pistic aspect of meaningfulness, and so on.
Each aspect offers a different kind of value, which is then transduced to the quantitative aspect, during which we must carefully take into account the unique kind of value in each. This implies that Ga and Ha are not merely the total money spent but the contribution of Multi-aspectual Overall Good or Harm transduced to amounts. Calculation of these will probably involve analysis and surveys, not dissimilar to the methods used at present for calculating GDP, but separating calculations into separate aspects. [Note: Calculating GDP]
It may be that the Ga (and Ha) of different aspects should be weighted differently, according to their importance. There is some validity in this, because for example the mathematical aspects usually serve later aspects, but we should remember Dooyeweerd's injunction that, fundamentally, all aspects are of equal importance. We must be careful not to let our biases, societal fashions, political commitments, and 'Overton Windows,' dictate our weightings.
This calculation has at least two interesting implications. One is that unpaid activity, e.g. household, voluntary, will now be included in GDP. This further implies that nations in which a lot of human activity is unpaid, such as in the Global South, would be seen to have larger GDPs than currently believed. Likewise, the positive value of rainforests and the like, such as in maintaining biodiversity and generating oxygen for the world, and also the value of such things as free information, would also be valued positively.
The second implication, which astute readers might have noticed, is that this makes negative GDP possible. This would indicate that the economic activity of a nation is doing more harm than good, and that nation should change direction. This could be an economy devoted to drugs, tobacco, crime, fossil fuels, etc. Or it could be an economy devoted to generate mainly "baubles and trinkets" in goods and/or services, and generate much Harm in doing so. Negative GDP thus fulfils Adam Smith's original condemnation of the idle wealthy, but more fully than he might have anticipated since he did not properly allow for Harmful economic activity.
It might also help ensure that financial services are given their true, rather than a grossly inflated, value, especially if all that cause harm are subtracted and all that are useless are excluded from GDP.
We also need to consider how to bring Useless economic activity (unproductivity and non-essentials) into the equation. In principle, we ignore it, but since some Useless activity contributes some Good, and some Harm, we need to include the proportion of these incurred by the Useless activity. Judgement will be required for this. However, since current GDP calculations involve judgements too, our suggestion might merely adapt current processes.
That is our current, initial, in-principle suggestion for modifying GDP, pending further discussion. If a 'dashboard' were to be created for this, it would display and allow control of Good, Harmful and Useless in each aspect.
Summary: Such a change should be reasonably feasible.
===== More to be written
Is it doable? Given that calculating GDP already involves a huge amount of collecting and analysing data [Note: Calculating GDP] We suggest that, during the stage of calculating value of goods and services, they can be separated into aspects and in each into Good, Harmful and Useless. It may be possible to devise standard amounts for all these, available in a database, rather than having to calculate. The figures could perhaps be weighted according to the type of harm done, the number of people affected, and so on. If this is so, then the extra work involved might not be too onerous. Maryland's calculation of GPI already does this a bit, but it takes account of only one kind of Harm, inequality (interestingly, it dividing by an inequality factor rather than subtracts it), and it does not value unpaid work.
Another challenge comes from ethics theory. By reducing Good and Harm to numbers, do we not get into the territory of utilitarian ethics, e.g. of decisions whether to switch rail points so the train kills 3 consultant surgeons rather than 10 children?
Exactly how all the above is to be worked requires discussion and research.
Summary: We have shown how GDP can be redefined and recalculated, in line with our principles, in order to address most of its problems.
===== to be written, including the following:
All this would have a number of implications
This page, "http://christianthinking.space/economics/gdp.html", is part of the Christian Thinking in Economics project, which itself is within Christian Thinking Space.
Created: 3 February 2024. Before this there was a file "gdp", which has been incorporated into p.html on 26 September 2023. The original may be found on Fairphone. This version is newly minted content 3 February 2024. Last updated: 4 March 2024 rw. 7-11 March 2024 major rearrangement and rewrite. 29 October 2024 some bits from r5.