The trouble with measuring an economy

Oil spills, deforestation and divorce are all good for GDP, so why is it still the yardstick we use to measure an economy? The Prime Minister of Norway and leading economists explain the debate.

Some of the things that are good for GDP,

but terrible for us,

are, for example, hurricanes
and other natural disasters,

wars, drug trafficking, and cybercrime.

Many of those things
require police services

or other dedicated services
in order to protect,

and this is what makes GDP go up.

It measures all the activity that goes on
in the economy in a single year.

You can measure it either by adding up
everything people spend,

all of the incomes

or all of the outputs in the economy,

like measuring the height of a mountain

or the depth of a river.

But it's not a natural object at all.

It's an analytical construct.

But, of course, that's the kind
of arbitrary definition,

and lots of judgments were involved.

And I think it would be really helpful

if people could get their head
around the uncertainty

that's involved in measuring GDP.

The term dates back
to the Second World War,

when the need was to understand

what resources the war economy needed,
and what consumption sacrifices.

Citizens were going to have to make
to enable that to happen.

So a whole set of national statistics
now dates from the 1940s.

It leaves out some important things.

It leaves out the environmental
cost of economic growth,

and it leaves out the value of unpaid work
that people do in their homes.

And it also doesn't pay any attention

to the national balance sheet,
if you'd like,

to the assets that we use to enjoy
today's income and consumption.

If we really care about sustainability,

a very important thing

is to start measuring
all of those assets properly as well.

It's about equal opportunities for women,

and it's about having a publicly financed
system of education and of healthcare

which also makes services accessible.

I believe that your history
and your culture

does affect how a society is run.

All countries can work
towards more inclusiveness

but understanding
how their country is functioning.

I think we have been benefited
by a quite poor society

newly becoming richer

but being rich after we have established
strong institutions.

One of the things we have
is a large NGO sector

with a lot of voluntary work,

which is where most of them
wish to live their lives

in activity with other.

And I think that makes
very close bonds between people.

There's a really great appetite
at the moment to go beyond GDP

and get a better understanding
of economic progress.

This is partlyly being driven
by all the digital change

that we see happening in the economy.

We need to track what that's doing,

which is both, you know, very good

because of the innovations
that we're able to use,

but somewhat worrying

if it means that there's going to be
disruption to jobs as well.

So we certainly want to track that.

And I think that's the project
for the next few years

for researchers and policymakers

to have that conversation about
move on to go beyond GDP

for a better measure of economic progress,

but one that we want to go to.

Subtitles by Maurício Kakuei Tanaka
Review by Jenny Lam-Chowdhury