Last month, I argued the point (admittedly at rather more length than necessary) that GDP does not measure what we’re interested in. I’m currently reading Tim Harford’s fascinating book The Undercover Economist [amazon.com, amazon.co.uk] — which, by the way I highly recommend — and I was pleased to discover that he agrees with me.
Here’s what he says on page 122, right at the end of the chapter on negative and positive externalities:
A pollution tax might well make a number like GDP smaller. But who cares? Certainly not economists. We know that GDP measures lots of things that are harmful (sales of weapons, shoddy building work with subsequent expensive repairs, expenditures on commuting) and misses lots of things that are important, such as looking after your children or going for a walk in the mountains.
Most economics has very little to do with GDP. Economics is about who gets what and why. Clean air and smooth-flowing traffic are part of the “economy” in this sense. […] There is much more to life than what gets measured in accounts. Even economists know that.
From this, I draw two conclusions.
First, it’s comforting to me that I came to the same conclusion as actual economists.
And second, it’s disturbing that politicians (many of whom are economists by training if not by aptitude) largely don’t seem to get it.