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For almost a century, annual gross domestic product—the sum of goods and services produced by a nation—has been the foremost way for a nation to measure the growth of its economy.
But there’s a sense that the official statistics aren’t telling the full story. In an increasingly digital world with growing concerns about sustainability, dismay is mounting about the use of GDP as the benchmark measure for a nation’s economy. It fails to take into account other things that could be more valuable indicators about how a country is doing, such as inequality, well-being, happiness, clean air, and climate-change mitigation.
Yet this week, Britain’s national statistics office started publishing monthly GDP figures for the first time to give policymakers more timely updates on the UK’s economy. (It wasn’t a healthy picture.) Rather than introducing more GDP, shouldn’t we call time on this early 20th-century metric?
There are other more technical concerns about GDP. Statistics that show productivity growth has stalled out in most advanced economies even as new technologies have never been adopted more quickly. Some economists argue that GDP doesn’t include the value and contribution of digital goods and services that don’t always come with a price, such as Wikipedia, Facebook, or maps on smartphones.
For decades, various alternatives have been floated. The UN publishes a human development index that measures education and life expectancy as well as national income. The World Economic Forum recently started producing an inclusive development index, which considers poverty, public debt, median income, and wealth inequality, among many other metrics. The World Bank would rather measure wealth than income. Median income, a measurement of wealth, or net domestic product all appear to be relatively feasible alternatives. The problem with many of them is that they require value judgements about what to include or exclude.
One answer might be GDP-B, which is an ambitious project being developed by economists at MIT (pdf). It’s a broader metric to measure the economy by looking at how our well-being is changing, thanks to digital goods and services. Their previous work found that Wikipedia, a service provided for free, would be worth tens of billions of dollars to the US economy. The new metric adjusts national accounts to look at the value of free goods—because of their lack of cost, their value isn’t captured by GDP—and new goods (including products that incrementally improve over time, such as smartphones).
The best course of action to dethrone GDP for the 21st century might not be to abandon it, but instead to give it less weight. Our digital economy, which needs to grow sustainably, would be better served by several equally important metrics to measure progress. But the allure of GDP is that it’s a single number.
Unless an alternative can be found that allows for such easy and stable international comparisons, then GDP will remain king of economic metrics.—Eshe Nelson
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Our best wishes for a relaxing but thought-filled weekend. Please send any news, comments, good World Cup final memes, and single-use plastic bags to hi@qz.com. You can follow us on Twitter here for updates throughout the day, or download our apps for iPhone and Android. Today’s Weekend Brief was written by David Wexner and edited by Kabir Chibber.