Channeling some of the logic in our “Health of Nations” podcast, Peter Marber argues in World Policy Journal that it’s time for a “brave new math.” Marber takes issue with economists’ ongoing reliance on old measures of economic health — GDP, inflation, and unemployment:
Traditional measures point to an American economy that’s up even when Americans are feeling down. Across Europe and in Japan, there is also a sense of confusion over current economic directions—a universal sense that the numbers that have been our staples are increasingly meaningless to everyday people.
Newspapers, radio, and television routinely spout headlines about key statistics on GDP, inflation, and employment—astonishingly influential indicators computed in the United States by the government’s Bureau of Labor Statistics and in capitals around the world. Most seem to have little correlation with the realities on the street. Yet, governments, businesses, and individuals still use these yardsticks in their decision-making worldwide, and minor revisions in the data can have major ramifications. Inflation measurements help determine mortgage and savings rates, stock market prices, interest payments on the national debt, and cost-of-living increases for wages, pensions, and Social Security benefits. Despite dramatic shifts in the world over the last few decades, we are still using the same old gauges, nomenclature, and policies of the past.
Marber cites the emergence of so-called wellbeing indexes as a positive development; and he suggests replacing our focus on GDP with an emphasis on the development of human capital.
(HT: Marginal Revolution)