Growth, GDP and everything else

So today I got this in my inbox : Mohamed A. El-Erian is CEO and co-Chief Investment Officer of the global investment company PIMCO, with approximately $2 trillion in assets under management, writes that “[i]t is not often that one can confidently claim that a single remedy could make billions of people around the world significantly better off; do so in a durable and mutually supportive manner; and thus improve the well-being of both current and future generations. Yet that is the case today. The remedy I have in mind, of course, is faster economic growth…”

And then I got also a piece by Klaus Schwab, Founder and Executive Chairman, World Economic Forum, who was also a member of the UN High-Level Advisory Board on Sustainable Development. He writes that “At the dawn of a new year, the world is in the midst of several epic transitions. Economic growth patterns, the geopolitical landscape, the social contract that binds people together, and our planet’s ecosystem are all undergoing radical, simultaneous transformations, generating anxiety and, in many places, turmoil. From an economic standpoint, we are entering an era of diminished expectations and increased uncertainty. In terms of growth, the world will have to live with less.”

And finally I received this new paper published in Nature, by Robert Costanza and his co-authors, entitled “Development: Time to leave GDP behind”.  They re-iterate the point that GDP is a faulty measure of progress by ignoring “social costs, environmental impacts and income inequality.” In addition, the authors write that “ [i]ncreased crime rates do not raise living standards, but they can lift GDP by raising expenditures on security systems. Despite the destruction wrought by the Deepwater Horizon oil spill in 2010 and Hurricane Sandy in 2012, both events boosted US GDP because they stimulated rebuilding.”

The authors discuss that “[t]he successor to GDP should be a new set of metrics that integrates current knowledge of how ecology, economics, psychology and sociology collectively contribute to establishing and measuring sustainable well-being.”

This article in Nature gives a nice overview of the different ways in which we can measure more inclusive measures of progress and discusses advantages and also some disadvantages. Worthwhile the read! Enjoy.

I also refer interested reader to similar points that I discussed HERE and HERE. In any case, to me – still – the surprising thing is that it is so difficult to change the mainstream focus on GDP… After all, it is not like trying to convince the Sahelanthropus Tchadensis to start walking upright, or?

evolution_of_man

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