Time Isn't Money: Part 5 - What is GDP and Why It's Bad

Gross Domestic Product (GDP) measures the total economic output in terms of the value of goods and services of our country. It's supposed to correlate with our standard of living - but that, as we all know, has not necessarily improved over the past couple of decades (all things considered). It all depends how you value life, time and money, and how you define these things.

If we value maximization of economic output over all other factors (polution, environmental impact, disease, cancers created by new chemicals and radiation poisoning, stress, obesity, diabetes, etc.) then GDP is the proper metric to use to promote whatever political, economic or business agenda you have.

GDP does not measure time spent helping others, bartering, humanitarian issues, impact on environment, sustainability, underground economics, unreported income, cash-only deals, income from illegal activities, quality of life, charitable giving, and so on - it clearly misses the qualitative (subjective) measures of our economy.

GDP is a complex measurement of thousands of variables, and it is adjusted for inflation and cannot account for dramatic changes in interest rates and their effects on the output of the economy.

Like the corporate quarterly and annual reports that CEO's desparately chase with the myopic goal of increasing price per share (i.e., shareholder wealth, and by the way, CEO's are extremely highly compensated in shares and cash), GDP, it seems, is very highly sought after greedily by politicians. But we have seen time and again that such a narrow focus on results isn't necessarily the best (or even better) approach for corporations or countries.

The point is clear, GDP is promoted by some, including our government, as a sign that the economy is improving, but the reality is, GDP is barely a "gross" estimate of the pulse of the economy, and it could be grossly mistated and grossly misinterpreted.

So let's use GDP as only one of several possible metrics of the 'health' of our economy and temper our enthusiasm (or pessimism) accordingly.