gdp is a wrong measure of performance (140517)

11:16 AM

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www.truevaluemetrics.org

MULTI DIMENSION IMPACT ACCOUNTING (MDIA)

GDPA Wrong Measure

of Performance

@truevaluemetric

11:16 AM


GDP was introduced as a proxy measure for economic activity in the 1930s. GDP as a proxy for improved quality of life and standard of living in may have been realistic in a world where labor was a critical constraint … but that ended somewhere around the 1970s.

GDP is a wrong measure of performance

C:\TVMwebsite\WebsiteTrueValueMetricsOrg\TVM-papers\MDIA-Diagrams\MDIA-Pres-B-GDP-is-wrong-measure-of-performance-140517.odp

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GDP growth is even worse as a measure ofsocio-economic performance.



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GDP growth is even worse as a measure ofsocio-economic performance.

Simon Kuznets (1901-1985) helped develop the system of economic measurement that is GDP In the late 1940s, however, he broke with the US Commerce Department over its refusal to use GNP as a measure of economic well-being. He had wanted the department to measure the value of unpaid housework because this is an important component of production. The department refused, and still does.



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Robert Kennedy made a speech at the University of Kansas in March 1968 in which he highlighted issues with GDP. Here is a quote:

'Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product … if we should judge America by that – counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them.(…)

Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.'



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These are better metrics:

GPI … Genuine Progress Indicator

GNH … Gross National Happiness



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These are better metrics:

GPI … Genuine Progress Indicator


MDIA is a better metric … but it is different from GDP and these indicators.

These are macro indicators, while MDIA isa management type metric.



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GPI … Genuine Progress Indicator+ Personal consumption weighted by income distribution index+ Value of household work and parenting+ Value of higher education+ Value of volunteer work+ Services of consumer durables+ Services of highways and streets- Cost of crime- Loss of leisure time- Cost of unemployment- Cost of consumer durables- Cost of commuting- Cost of household pollution abatement- Cost of automobile accidents- Cost of water pollution- Cost of air pollution- Cost of noise pollution- Loss of wetlands- Loss of farmland-/+ Loss of forest area and damage from logging roads- Depletion of nonrenewable energy resources- Carbon dioxide emissions damage- Cost of ozone depletion+/- Net capital investment+/- Net foreign borrowing= GPI



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The term "gross national happiness" was coined in1972 by Bhutan's King, Jigme Singye Wangchuck.

About 40 countries have embraced the idea, but itremains too subjective for universal use.



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May 2014

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gdp is a wrong measure of performance (140517)

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