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Gross Domestic Product is Grossly Inadequate: Why We Need a New Metric to Measure Progress in the 21st Century by Tim Martin

Posted by: | May 10, 2014 Comments Off on Gross Domestic Product is Grossly Inadequate: Why We Need a New Metric to Measure Progress in the 21st Century by Tim Martin |

While GDP seems entrenched as our measure of progress, it literally would not take an act of Congress to change this situation. Although GDP’s status has become institutionalized in modern governments, no law elevates GDP to its current preeminent status. The GDP metric arose during the Great Depression of the 1930’s as a way to measure national economic output and the impact of the economic crisis. GDP became fully ingrained in 1944 at the Bretton Woods Conference when global leaders adopted it as the main tool for measuring a country’s economy in the wake of World War II. However, economists developed the GDP metric as a simplified snapshot of a country’s economy — not as a measure of broader human development (see “The GDP Paradox”). While GDP remains a useful tool for quantifying and analyzing a country’s economic growth, a broader metric should replace it as an overall indicator of prosperity and well-being.

In the wake of the Great Recession, many Americans seem to question the concept that overall economic growth leads to a happier society. This may partly be a response to the “new normal” economy. According to economists and the U.S. government, the recession ended in June 2009. (GDP is, of course, a primary indicator of a recession). While GDP has recovered to pre-recession levels, the recession does not seem to have truly ended for many Americans.

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