How Should We Measure Economic Growth and Wellbeing?
When the news says the economy is doing well, it usually means one number went up. This week you'll find out what that number actually counts, watch it track how satisfied people are just well enough to be useful and just badly enough to be suspicious, and see it climb for thirty years while typical incomes barely moved. Then you'll build a better one.
Reading List
Read these before Tuesday — they're also in Canvas. Two of them attack GDP and one defends it. Read the defence properly; it's the harder argument to make and you'll need it Wednesday.
Required
- Why GDP Is No Longer the Most Effective Measure of Economic Success — World Finance
- In Defence of GDP — Friends of Europe
- How Not to Measure Happiness: Alternatives to GDP — HEconomist
- What Is GDP and How Is It Measured? — BBC. Start here if the term is new to you.
If You Want More
- Is Economic Growth the Wrong Goal? Kate Raworth on Doughnut Economics — Freakonomics Radio
- Why GDP Is a Terrible Metric for Success and Wealth — TIME
- What Is Economic Growth? — Our World in Data
- How Should We Measure the Economy? (with Diane Coyle) — Pitchfork Economics
One-Week Plan
Here's the shape of the week. Your guide will set the exact timing for your section.
Say What You Think First
Five minutes of writing: how would you tell whether a country is doing well? Answer before you meet GDP.
Two terms you'll need. Inflation — prices rising over time, so $100 next year buys less than $100 this year. GDP per capita — a country's total output divided by its population.
Then three charts that build on each other. GDP per capita in five very different countries. GDP against how satisfied people say they are — related, but messier than you'd expect. And GDP against what a typical person actually earns, where since 1990 the economy grew a lot and incomes mostly didn't. That last one is the chart to sit with.
You'll finish with one way the data backed up your opening answer and one way it pushed against it.
Build a Better Number
After the free write, your group takes a position on whether GDP should stay the headline number — then you design a replacement, in two passes.
First, with no limits. Pretend any information you want is available. What goes into your ideal measure of how a country is doing? Be genuinely inventive here — this pass is where the thinking is.
Then, with real limits. Now keep only what could actually be collected. What survived? What did you have to cut? This is where you find out why the world settles for imperfect numbers.
The idea underneath all of it: what we measure is what we end up prioritizing. Measure output and a country works on producing more. Measure carbon and it works on emitting less. Your indicator isn't just a description — it's an instruction.
The Whole Group
Everyone together:
- What does GDP fail to account for? Is that actually a problem?
- Almost everything you read says GDP is a bad measure. So why does the whole world still use it? What is it genuinely good at?
- Present your indicator. What's in it, and what does it do better than GDP?
- If your number replaced GDP, what would governments start doing differently?
Take the second question seriously. Deciding GDP is worthless is the easy move and it's usually wrong.
Before you leave: themes, lingering questions, and one new source for Thursday.
Your Sources This Time
Share what you found and write down what your classmates brought.
Then the tradeoff your design ran into: a number that captures more of what matters is usually slower to produce, more expensive, more arguable, and easier to game. GDP's quiet advantage is that you can compare it across countries and across fifty years. What would your indicator give up there — and is it worth it?
Score Your Own Week
What went well, what to improve, what you learned, and whether anything you believed changed. Then the participation matrix — spoke, used the materials, asked a question, responded to someone, interrupted. Be honest with yourself.