Economists are fixated with what they can easily measure, but sometimes this means they can’t see the wood from the trees and focus on what is really important.
There are very good reasons why Gross Domestic Product, the sum of all goods and services produced for sale in an economy in a given time period, is the most widely watched economic indicator across the world. With adjustments for changes in prices over time and across countries, it is relatively easily comparable. When measured on a per capita basis, it is a useful – if far from perfect – proxy for the standard of living.
However, the intense focus on GDP numbers can distort public debate and political incentives as hitting growth targets becomes a holy grail. All growth is treated equally, no matter how broadly shared its benefits or how environmentally sustainable. People-centered priorities like jobs and incomes become secondary. Continue reading