What GDP Figures Do Not Reveal

Source: EconLog
by Pierre Lemieux

“Janan Ganesh, an often original if not iconoclastic columnist, asked why bad governments such as populist ones don’t seem to undermine economic growth, at least in the short run (‘Why Hasn’t Populism Done More Economic Harm,’ Financial Times, January 23, 2024). This provides us with a good opportunity to review what GDP numbers cannot prove. For seven or eight decades, it has been known to economists (at least to those who studied the issue) that, if GDP might help those who get more of it, it does not measure ‘social welfare’ (sometimes called ‘aggregate utility’). There is much welfare-economics theory behind the reasons for this, but they can be intuitively rendered in a few more or less equivalent ways, or at least that’s what I will attempt to do.” (02/02/24)