GDP Counts Spending, Not Well-Being

What is wrong with GDP? It tells us how much we spend, but not how well we live or what we leave behind. Regular people and economists have been questioning it for many years, and I think they are on to something.

The Backstory

The Gross Domestic Product (GDP) calculation came into use during the Great Depression, when there were no government economic measuring tools and they were desperately needed. The Department of Commerce used a simple measure to fix the problem, and warned that people might oversimplify it.

It is a number made up of:

• Consumer and government spending, including war spending, including the over 100 billion dollars spent on war with Iraq
• Business investment
• Exports minus imports

So what is GDP measuring, really? Let’s get the whole picture by looking at what it doesn’t measure.

What GDP Leaves Out

GDP doesn’t measure the health of our population, yet it counts medical spending. It doesn’t measure well-being or a sense of purpose. And it ignores the real costs of degrading the natural world. Take data centers: GDP will soon reflect their outsize growth, but it will leave out the human costs of planetary warming and the overuse of scarce water supplies.

The list goes on:

• The human and environmental costs and risks of war, including future costs for veterans’ care and the hit to household purchasing power when oil prices rise
• The real costs to our children and future generations
• The massive losses to insurance companies paying out larger and larger benefits as climate-related disasters increase

Does GDP measure a country’s durable progress? No. It measures only short-term gains.

Here is what bothers me. Lawmakers use GDP to plan federal spending and tax policy. Shouldn’t it reflect real costs, real aspirations, and real, sustainable prosperity?

A Different Way to Measure: Gross Domestic Regeneration

The United Nations has a new, promising framework that countries will debate. For now, I’m liking a model called Gross Domestic Regeneration, conceived by Tenzin Seldon, a young mathematician.

So what is her model? It is about taking less and leaving more capacity behind, with living, breathing human beings at the center. Human and planetary well-being belong together.

She makes the point with two farmers:

1. The first farmer takes all that the land and soil will give. Over time, the soil is depleted, cannot hold water, and eventually cannot produce any more food.
2. The second farmer grows ample food while protecting and rebuilding the soil.

Her model recognizes that our human flourishing is part of a living system. That system is the natural world, and its resources are finite.

FAQs

What does GDP measure?

GDP adds up consumer and government spending, business investment, and exports minus imports. It was created as a simple measure during the Great Depression.

Does GDP measure well-being?

No. It doesn’t measure the health of a population, a sense of purpose, or the costs of environmental damage. It does count medical spending, but that is not the same as good health.

What is Gross Domestic Regeneration?

It is a model conceived by mathematician Tenzin Seldon. It aims to take less and leave more capacity behind, with human and planetary well-being at the center.

The Bottom Line: Measure What Lasts

For LCF Country Club, sustainability is not merely an environmental slogan. It is a question of how we live, vote, invest, and care for the places and people around us. Preservation and regeneration make it possible for human life, the economy, and the natural world to flourish, now and for our children and generations to come.

Thanks for reading! And keep flourishing, Pamela Dreyfuss