GDP still wins

I published an essay today in Vox called “The only number that really matters.” It’s about GDP, what it actually measures, why critics keep proposing alternatives, and why none of those alternatives have displaced it.

The tl;dr is that no one has come close to coming up with an alternative to capture what is happening in an economy. Yes, it’s one number and any one number is incomplete. But this can be a damn good one, when done right, as it is in the U.S.

GDP carries weight as a metric for good reason; despite its narrowness, it relates closely with nearly every outcome people care about. Higher GDP per capita correlates with lower infant mortality, higher educational attainment, reduced extreme poverty, and higher self-reported happiness. This last point deserves emphasis: life satisfaction, the primary measure used in the World Happiness Report and similar well-being indices that critics often propose as alternatives to GDP—itself highly correlates with GDP.

And these correlations make sense. Economic production is the foundation of tons of other things we care about. You can’t have broad or universal health care without the economic capacity to pay for it. You can’t fund education, build infrastructure, or protect the environment without resources. And GDP tells you how much resource-generating capacity you have by looking at how much you are doing right now.

For those of you teaching economics, I hope it is a helpful tool. For those who have heard about GDP but never studied it, I hope this introduction is helpful, as well, including as an antidote to proposals to “replace” GDP with some half-baked alternative.

Read the whole thing at Vox.