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GDP is intended to stand from Gross Domestic Product, with the “P” meaning the value added (“produced”) in an activity, “D” meaning the whole country and “G” meaning total.  There is a problem in defining “value”.  It is assumed the activity results in a price determined in part by demand in the market, and that payment is able to be paid by the buyer because somewhere else in the economy the buyer was also adding value (receiving wages, profit or rent).  In modern economies, due to the sophistry of “financial products” and the drive to gain commission on loans where payback is divorced from the creditor, churning out product and claiming it is valuable, can turn out to be a hollow claim.  Housing bubbles are a clear example.

After GDP data became popularly used to represent a nation’s well-being the common criticism was that important benefits were not counted because they were not transacted in markets and had no price.  Housekeeping within a marriage was often used as an example of unpriced service.  But now there is another kind of flaw even more misleading.  It is goods and services priced in the market which end up not being paid for, and thus by definition are not in demand and should be not considered as “valued” outputs.  The property glut is an extreme example.

In a planned economy there were also common examples of factories exhorted to race to meet production targets only to find they had yards full of goods that were not saleable and even not appreciated under forced distribution schemes (because costs could be deducted somehow from real outputs such as harvested grain).  To claim these produced goods added value (at listed price) is misleading.

The distinction between doing something and doing something of value needs to be pursued.  Housekeeping would seem universally a beneficial service, though typically is unpaid and not accounted for in official GDP data.  Deliberately crashing an airliner into remote alps (this is being written 29 March 2015) must be universally agreed as bad (technically, a negative contribution to wellbeing) yet the consequent recovery actions are and should be valued and many millions of dollars.

Again, a comparison could be made between 2 people working at keyboards, one punching keys senselessly and of no value to anyone, whilst the other uses the same effort to either a) play beautiful music or b) write a valuable business plan.

The point to consider is that now GDP is unthinkingly promoted as indicating a positive attribute.  GDP creator, Kuznet (1927) warned that GDP should not be used as a measure of well-being, and subsequently its misuses has recurred on a number of occasions.  As President of the World Bank 1968-81, Robert McNamara digitized the socio-economic status of nations.  The Asian Development Bank was headquartered in Manila based on the Philippine’s exemplary GDP indicators.

On an individual basis, the perception of ourselves by ourselves, and by others, includes some preset notions on judging “action”.  “What did you do all day,” asks the stereotype husband on return from “work” where he is cognizant that his pay makes him worthy.  The stereotype response is the wife has to detail and justify her actions because they were unpaid.

But whether an action has a price or not is a bad way to make judgements.  The high percentage of GDP in Macau attributed to gambling is “good economics” but the social downside that definitely exists is difficult to measure (failed gamblers resort to many negative activities affecting themselves, family, friends and colleagues).

To remove human value judgment it can be edifying to monitor and attempt to quantify, analyze and even pass judgement on a community of ants.  One approach could be to track individual ants and see what they “do”, mainly travelling out and carrying food back, or mainly digging and carrying soil away to build tunnels, or carrying soil up for above ground nests.  Another approach would be to monitor materials transported in for consumption, or transported out as waste.  The “GDP” by whatever details would have some relationship to the overall size of the ant nest structure.  What would be a human observer’s conclusion. The ants could survive cycles of weather and other factors? Maybe whether the ants could withstand encroachment from enemies – other ants, predator animals, humans. Not whether the ants were “happy”.

: http://www.coulterexergy.com/archives/1245

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