Business

WEF On The Trouble With Measuring An Economy

Oil spills, deforestation and divorce are all good for GDP, so why is it still the yardstick we use to measure an economy? The Prime Minister of Norway and leading economists explain the debate.

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The Trouble With Measuring An Economy

Transcript

Some of the things that are good for GDP but terrible for us. For example hurricanes and other natural disasters wars drug trafficking cyber crime. Many of those things require police services or other dedicated services in order to protect. And this is what makes GDP go up. It measures all the activity that goes on in the economy in a single year. You can measure it either by adding up everything people spend all of the incomes or all of the output in the economy like measuring the height of a mountain or the depth of. But it's not natural objects to it's an analytical construct but of course that's the kind of arbitrary definition and lots of judgments involved. And I think it would be really helpful if people could get their heads around the uncertainty that's involved in measuring GDP the term dates back to the Second World War when the need was to understand what resources the war economy needed and what consumption sacrifices citizens were going to have to make to enable that to happen. So a whole set of national statistics now dates from the 1940s it leaves out some important things that leave out the environmental cost of economic growth and it leaves out the value of unpaid work that people are doing. And it also doesn't pay any attention to the national balance sheet if you like to the assets that we used to enjoy today today's income and consumption. So if we really care about sustainability if very important thing is to stop measuring all of those assets properly as well.

It's about equal opportunities for women and it's about having a publicly financed system of education and health care which also makes services accessible. I believe that your history and your culture does affect how societies run four countries can work towards more inclusiveness with understanding how this country is functioning. I think we have been benefited by quite poor society newly becoming more rich but being rich after we've established strong institutions. One of the things we have is a large NGO sector with a lot of voluntary work which is where most of them live their lives in activity with others. And I think that makes very close bonds between a really great appetite at the moment to go beyond GDP and get a better understanding of economic progress. This is partly being driven by all the digital change that we see happening in the economy. We need to track what that's doing which is both you know very good because of all the innovations that bring multiuse but somewhat worrying if it means that that's going to be disruption to jobs as well. So we certainly want to try that. And I think that's the Project for the next few years for research and policy makers to have that conversation about. We want to go beyond GDP for a better measure of economic progress. But what we can to go to.

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