Current Issue
This Month's Print Issue

Follow Fast Company

We’ll come to you.

4 minute read

What's Wrong with GDP

One of the most remarkable speeches that Robert F. Kennedy made was about what’s wrong with using traditional economic measures as gauges of our success as a society:

"We will find neither national purpose nor personal satisfaction in a mere continuation of economic progress, in an endless amassing of worldly goods. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product. For the Gross National Product includes air pollution, and ambulances to clear our highways from carnage. It counts special locks for our doors and jails for the people who break them. The Gross National Product includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missiles and nuclear warheads…. It includes… the broadcasting of television programs which glorify violence to sell goods to our children."

Bobby Kennedy went on to enumerate things that the GNP does not measure, such as "the health of our families, the quality of their education, or the joy of their play." He concluded by saying that the GNP "measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America—except whether we are proud to be Americans."

I thought of these remarks when I read about a recent report issued by two Nobel-prize-winning economists, Joseph E. Stiglitz and Amartya Sen, that also criticizes traditional economic measures of well-being. Nowadays we generally look at gross domestic product (GDP) instead of GNP, but what has not changed is that we are still looking at economic growth and assuming that it is always a good thing. The examples in the report are perhaps a little more prosaic than Bobby Kennedy’s, but they make the same point. For example, the report points out that increased driving is considered good for growth, because it stimulates production of cars and gasoline, but the increased hours spent wasted in traffic jams and the increased burden of air pollution go unmeasured when we look at GDP.

The report argues that our national policies are based on our goals, and as long as our only goal is GDP-measurable growth, we will not enact policies that can contribute to the many aspects of happiness unrelated to growth. The report offers few specifics for alternative measures, although it says we should focus on the income and spending of typical people and measure their access to education and health care.

One of the reasons economists have focused on GDP is explained by the classic joke about the drunk who drops his car keys one night and cannot find them. A passing pedestrian finds the drunk searching on his hands and knees under a streetlight. The stranger asks, "Is this where you dropped your keys?" The drunk says, "No, but the light’s better here." We use GDP as a measure partly because the numbers for compiling it are so readily available. Other measures of national happiness are harder to find.

One non-GDP measure that we often hear about is the Consumer Confidence Index, published monthly by The Conference Board. To be sure, this measure also is entirely about economic matters: current and future business conditions, current and future employment conditions, and future family income. However, it is based on the perceptions of ordinary citizens and therefore includes a psychological component that is missing from most other measures. It’s noteworthy that this measure fell this month even as most other economic indicators were pointing upward.

I’ll admit that I can be accused of the car-keys behavior in many of the books I write. The "Best Jobs" books rank occupations by a combination of three economic factors: median income, job growth, and job openings. Nevertheless, I should point out in my defense that I don’t use these measures solely because they are the most readily available. They also have the benefit of being the most commonly agreed-upon measures of job satisfaction. Income always ranks very high among rewards people want from work, and (for those of us without trust funds) none of the other rewards of work are available to people who don’t get hired, so it’s important to consider job opportunities. Finally, many of my "Best Jobs" books begin by focusing on a slice of the universe of occupations that’s premised on some noneconomic satisfaction. For example, 150 Best Low-Stress Jobs deals with the matter of how stressful a job is, and 50 Best Jobs for Your Personality deals with the fit between various occupations and six personality types defined by a psychologist. In fact, all of the "Best Jobs" include lists of occupations that suit certain personality types.

I always tell career decision makers to consider many aspects of their career options beyond just the economic rewards. Perhaps economists of the future will devise ways to measure these other aspects of our society so we can make better societal choices.