Comment by abeppu
7 hours ago
I don't have any deep background in econ, but do we not need to switch from talking about GDP to talking about a version of Net Domestic Product where "net" includes:
- changes to the value of natural and ecosystem resources (e.g. if I clear a forest to sell timber, we must acknowledge some lost value for the forest)
- amount of economic transactions in service of mitigating problems created by externalities from other activity (e.g. if my pollution gets into your groundwater, you paying to remediate the pollution isn't "value created")
I.e. growth of _actual net value_ still sounds like a good thing to pursue but we let our politicians run around doing anything to maximize GDP without talking about what the "gross" is hiding.
Also this isn't only a gap about environmental issues. If you pay X for child daycare and work but only make X+taxes, and have a dumb pointless job, GDP says the economy is at least 2X+tax larger than if you took care of your own child during the day (bc your employer paid you and you paid your daycare). This seems dumb at an accounting level, even before we consider that you probably get a greater emotional benefit from being with your child than does the daycare worker.
But they’re not measuring nor optimizing for the contentedness of you, or your kids.
They’re measuring money generated for shareholders, they’re measuring tax base.
I think the point they were trying to make is that they are measuring and optimizing for the wrong thing
1 reply →
It's just very hard to measure.
On the corporate scale, see the whole carbon / ESG / impact measure ent industry. Lifecycle Analysis, supply chain extrapolation, Bill of Materials analysis.
You only get some relatively crude estimate and a lot of missing data points, whereas economic growth can conveniently assign a dollar value on everything.
I think it only gets worse as you scale up.
As an example, a forest managed for productivity won't really lose value from a harvest.
You'd have to price the conversion of it to that management strategy.
But we have a lot of sources of information already available that do not seem to be incorporated into any kind of top-level number that we grade ourselves on.
- when we have an estimate of how many hundreds of billions it costs to rebuild after a hurricane that would not have happened but for climate change, existing economic processes generate that number
- when insurers raise rates throughout a region, this reflects an expectation on the cost of damage, and the change over time reflects the increase in risk we've created
- when a heatwave kills a bunch of people, we already have a range of ways of estimating a monetary value for those lives from insurance, healthcare and liability litigation.
Further ... suppose your elderly relative left you a bunch of jewelry. You don't know how much it's worth and getting it appraised can actually be a bit complicated and doesn't give you complete certainty over value. But it would be _bonkers_ to continually take unappraised jewelry out into the marketplace, liquidate it, and pretend that the whole sales price was _earnings_. After the transaction, you don't have a thing you had before. You didn't know what it was worth initially but that doesn't mean that it was worthless, and you probably got scammed. Yes, measuring the full environmental impact of all our industries is hard, but pretending it's 0 is silly.
Mark Carney's book "Values" pitches a system such as this.
In better times, perhaps we have the collective will to try.
You should also include who is profiting. Is it the wealthiest 1% or is it the entire population.