Is GDP still useful?
OECD – GDP is the sum of total value added in the economy, or total incomes, and involves a large number of assumptions or conventions. For example, government consumption is included even though it is not a market transaction, whereas housework is not.
Many “bads”, from spending on security or activities that cause pollution, are included; many “goods”, notably the huge benefits consumers gain from variety and innovation, are largely excluded. GDP puts equal weight on spending for current consumption and investment spending; it is no use as an indicator of sustainability, or whether future generations will be at least as well off as we are.
Macroeconomic policy requires a measure of total economic activity. However, economists and policy-makers ought to stop using GDP growth as a shorthand for society’s overall economic welfare. That is better measured by a ‘dashboard’ approach, such as the OECD Better Life Index. While these need further development, they have the great advantage of showing the separate elements that contribute to social welfare, and the trade-offs between them. more> http://tinyurl.com/lhb6hsu