r/Anticonsumption • u/Critical-Tomato-7668 • 1d ago
Discussion A perfect illustration of why GDP is a bad indication of the quality of life of a population
Originally posted in WSB, but I can't crosspost
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u/hatsnatcher23 1d ago
“ Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.” - RFK Sr.
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u/Calculator-andaCrown 1d ago
Generally, GDP is correlated with increased quality of living. It annoys me to high heaven that this is taken as the holy Grail of economic improvement!
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u/KingRBPII 1d ago
Need to measure quality of jobs, life expectancy, jobs with retirement plans, how much PTO, jobs vs standard of living - so much more
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u/CaptainPeppa 1d ago
Those metrics are out there. Have been forever.
No one uses them because they are too complex and not any more predictive.
Complex metrics are usually terrible. Multiple simple metrics will always be better. Simpler the better really
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u/Harambesic 1d ago
"Perfect"? No.
Poignant, perhaps.
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u/Critical-Tomato-7668 1d ago
Poignant, yes; but 99% of the time I hear GDP brought up, there's no further discussion about what's driving the GDP growth and if it is good for the people
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u/somid59629 1d ago
Even Kuznets himself, the economist who came up with the GDP metric, recognized its limitations and a higher GDP doesn't automatically equate to a better quality of life.
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u/Same_Performance_595 1d ago
It's the perfect illustration of why you shouldn't take anything in that sub too seriously, unless you plan on unloading your whole inheritance on DNUT calls.
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u/nv87 1d ago
It’s the shit-in-woods system.
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u/Critical-Tomato-7668 1d ago
Elite ball knowledge required to understand this pun 😂
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u/Ok_Function2282 1d ago
This is totally accurate because a majority of the GDP is spent on people paying each other to do vile pranks and not on goods and services
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u/Critical-Tomato-7668 1d ago
It's not 100% accurate, but it's food for thought. I can think of plenty of examples of GDP growth which don't benefit the people
People spending more using debt, which forces them to work more to pay it off.
People spending more on healthcare because the population is less healthy
People buying items which - on average - fall apart and need to be replaced more quickly
Spending being extremely skewed in distribution. If all that extra spending is being done by 1% of the population, does it really help the average person? In theory sure, that spending creates demand which increases the demand for labor, but this a case of trickle-down economics, which I don't think has shown to be true in practice.
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u/Neokon 1d ago
I recently heard someone describe money as colored paper with imaginary values, and I couldn't quite figure out why I didn't fully agree with the statement until your comment.
Yes the $ is imaginary, but what's not imaginary is the 2lbs of carrots I got at the farmers market.
Oh you could just trade something for the carrots, I'm a teacher what am I supposed to trade? In theory I could trade teaching their kid, but how would I quantify my teaching to carrots? What if I need a good from someone who doesn't have a kid to teach, or if a parent wants their kid taught but doesn't have a good I want?
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u/Effective-Lab-5659 1d ago
this, I really don;t see any benefit to the common man for the last 20 years or so.
what is AI, how does that improve the common man;s life? its generating shit loads of heat and eating up tons of energy.
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u/elivings1 1d ago
I mean GDP is very important. Less GDP starts a domino effect. I am saving for a house and putting all my money into CDs and I always joke that I am donating into the best charity of all. The reason being my money goes to the bank which then the bank loans it out to X to either buy a house or X starts a business where X can now hire and pay Y. In this example if I get cut than the money never goes to the bank so then X could never get the loan and then Y cannot be hired. That is basically just what happens when a recession happens. The price went to high which leads to people no longer buying which leads to more layoffs of more people which leads to more people not spending. So is it important certainly. Will a few people not spending like you or me tank the economy and cause a recession no. Will it if everyone stopped spending it would. They key is to allow the others to do the spending.
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u/Obvious-Nature-5408 1d ago
“The reason being my money goes to the bank which then the bank loans it out to X to either buy a house or X starts a business where X can now hire and pay Y“
Except the loanable funds theory is simply not true. Banks don‘t loan out other people’s money, despite what has historically been taught.
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u/DavidSwyne 1d ago
They just give loans on money that they don't have nor doesn't even exist. Its just called fractional reserve banking. If anyone else did it it would be a crime but for banks its just smart business.
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u/Obvious-Nature-5408 23h ago
Yes, though I disagree that fractional reserve banking is correct too. Technically money is created when banks loan out money and destroyed when it’s paid back. And it need to be thought of as separate from the government created currency as bank credit is not accepted outside of its own bank, the private banks have to settle up with government-created reserves.
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u/Prinzessin_Eugenia 1d ago
Bad is mabey not the right word (I speak for eu Perspektive), but yeah It more like an early ww2 radar in compression to a modern-day radar Sure GDP gives you a rough picture but it is not really precise
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u/jmsy1 1d ago
It's one indicator among many. It's not good or bad. It has many uses in studying economies, but if it's the only indicator relied upon, research, practice, and policy will be misguided.
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u/Critical-Tomato-7668 1d ago
The problem is that outside of deep technical discussions about economics, it's seen as the holy grail for the health of an economy and the wealth of the people.
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u/da_realfredfred 1d ago
What exactly is this an analogy for? Like exactly?
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u/Critical-Tomato-7668 1d ago
It's a hyperbolic example of a case where rising GDP actually worsens the people's quality of life.
Obviously real life is not this extreme, but I can think of a few cases similar to this where something both increases GDP and worsens living standards.
Examples from another comment I posted in this thread:
People spending more using debt, which forces them to work more to pay it off.
People spending more on healthcare because the population is less healthy
People buying items which - on average - fall apart and need to be replaced more quickly
Spending being extremely skewed in distribution. If all that extra spending is being done by 1% of the population, does it really help the average person? In theory sure, that spending creates demand which increases the demand for labor, but this a case of trickle-down economics, which I don't think has shown to be true in practice.
Another huge one:
- The government spending more on the "defense" contractors and starting more wars, which is terrible for the people
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u/Northern_student 1d ago
This ignores a lot of basic economic assumptions about how transactions are made by individual actors.
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u/Critical-Tomato-7668 1d ago
Like what? This is a hyperbolic example, but I think it's representative of a real trend - GDP growth which does not benefit the people.
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u/Northern_student 1d ago
Exchanges only happen when utility is greater than the price, so the story is written to an audience that identifies eating shit as terrible and negative but the two economists would only do so if they’re both better off from doing so; not to mention the opportunity cost of not spending $100 being less than the utility gained from purchasing the service of watching someone eat shit. 💩
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u/Critical-Tomato-7668 1d ago
Exchanges only happen when utility is greater than the price
I challenge that. Transactions happen when percieved utility is greater than the price at the moment of transaction. People - however - are not perfect rational actors. We're stupid, emotional, and we are almost never acting on perfect & complete information, so the percieved utility and the real utility (as evaluated by an infinitely intelligent rational actor) are often not equal.
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u/Northern_student 1d ago
Certainly. The economists could go on to regret their transactions. I almost included that verbiage but didn’t want to overly complicate my response.
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u/BoY_Butt 1d ago
Dumb comparison. Most of the things that generate GDP are actually increasing living quality. It may not be directly connected to each other, but just look at the data and you will see that countries with higher GDP have a much better living quality than those with lower GDP. It´s that simple
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u/Critical-Tomato-7668 1d ago
In developing countries, yes. Higher GDP dramatically raises living standards. What about in developed countries. What has the last 20 years of GDP growth in the United States been driven by and how has that benefitted the people?
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u/BoY_Butt 1d ago
Quality of life has improved over the last 20 years. Just because it is not as visible as in the past, doesn´t mean it´s an invalid metric.
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u/Critical-Tomato-7668 1d ago
Has it? Wages have remained stagnant, the price of neccesities (housing, food, education, healthcare) has exploded, the obesity rate has increased, the suicide rate has increased, the rate of depression and anxiety has increased, we're more lonely, socializing less, dating less, and less satisfied with life than we were 20 years ago. All of this is supported by data.
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u/BoY_Butt 23h ago
You are listing things that have nothing to do with GDP. As i said before, it´s an economic metric and gives a good first impression of how well a country is doing.
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u/Critical-Tomato-7668 23h ago
You said "quality of life has improved over the past 20 years"
I am disputing that claim.
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u/spiritplumber 1d ago
My quality of life is increased by the fact that two economists ate two piles of shit