Saturday, June 20, 2015

Dirk Philipsen's "The Little Big Number"

Dirk Philipsen is a professor of economic history and a senior fellow at the Kenan Institute for Ethics at Duke University.

He applied the “Page 99 Test” to his new book, The Little Big Number: How GDP Came to Rule the World and What to Do about It, and reported the following:
For the last seventy years, major economies around the world have defined their primary goal as growth of GDP. But GDP is merely a measure of quantity, not quality; of output, not development. It counts weapons as much as toys, pornography as much as education, the crippling accident as much as the healing surgery. It never asks after the purpose of economic activity, much less measures its effectiveness – cars, not destinations; computers, not quality of education.

The basic premise is that the more we turn life into commodities — trees into two-by-fours, fossils into fuels, atmosphere into carbon dumps, lakes into resorts, land into parking lots, human skills into labor, conversation into chats, childhood into advertising bonanzas, education into investments — the better.

As a measure, GDP was generated in response to crisis (Great Depression) and conflict (World War II). Its primary architect, Simon Kuznets, struggled with the question of what to measure in an economy, and how best to measure it. For him, the ultimate purpose of economic activity was to enhance the well-being of people, not just the volume of output.

Trying to prevent the misuse of his national accounts, Kuznets warned, as we can learn on page 99 of The Little Big Number, that “the welfare of a nation can … scarcely be inferred from a measurement of national income.” Yet today, GDP is the yardstick of success and progress in every major economy around the world. Collectively, we’re racing, with exponentially accelerating speed, toward the cliff of climate change, resource depletion, community disintegration, escalating inequality, and endless resulting conflict.

Growth should define purpose of an economy as much as, but no more than, getting enough to eat should define purpose of life. One would hope, with all the great economists and moral philosophers of the last two centuries, that the direction of economic activities would point toward development, not just output; quality, not just quantity; better, not just more. And, perhaps above all, toward a future that will provide opportunities to our children and grandchildren that will at least equal our own.

For that to happen we have to break the spell of GDP.
Learn more about The Little Big Number at the Princeton University Press website.

--Marshal Zeringue