The Gross Failures of Gross Domestic Product

The world economy is often measured in terms of money, but is this the best method?

The Gross Failures of Gross Domestic Product
Is this enough to judge an economy by?

The economy stupid”. These words skyrocketed James Carville to political fame and helped to elect Bill Clinton in the 1990s. The state of the economy is one of the most important questions there is economically, politically, and socially, and how well the economy is doing is often listed as the most pressing issue for the public in opinion polls.

But, how do we measure the overall state of the economy?

The most common method of measuring an economy as a whole is by means of GDP, or Gross Domestic Product. GDP is simply the total value of all goods and services produced in a country in a given period of time, most often a year. Brought to the forefront of global economics in 1944 by the Bretton Woods Conference, it continues to be the primary means of measuring a country’s economic health.

It is a very general measure, often difficult to make, that can be interpreted in many ways. It is extremely useful when you are trying to grasp a lot of information in a single figure, like how exports and imports affect an economy, how two countries compare in overall wealth, and so on.

Here is a map of the world colored by GDP. You can see China and the United States are far richer than most other countries, that nations in the south are often poorer than those in the north, and smaller nations generally have less money than their larger neighbors as well.

Is this everything there is to see?

Well, no, and there lies the problem. Here is a map of GDP per person in any given country.

In this image, the darker the color, the higher the GDP per person, black being highest. Light blue is the lowest end of the scale. Notice the changes in apparent wealth in Asia.

As you can see, the values change a lot. China, the second richest nation in the world, becomes a middle-tier country on this map, while little Luxembourg in Europe, which has less money than Warren Buffet, has a remarkably high GDP per capita, showing that its population is better off, on average, than most other countries in the world.

Neither of these maps, however, show us the actual distribution of wealth. It is possible in both maps for one person in each country to have all of the money to themselves. This is another failure of GDP: it tells us only the general facts about how much money there is, and little more.

Are there any alternative measures to use, ones that might give us a better picture?

There are a slew of alternative measures for a nation’s welfare and economic health that give more detail than GDP or GDP per capita does. One of the more interesting is the Capability Approach pioneered by Indian economist and philosopher Amartya Sen.

This method is focused on the “capability” of individuals to “to achieve outcomes that they value and have reason to value”, including the ability to live to old age, engage in economic transactions, or participate in political activities”.

This method is put to use in the Human Development Index, based on data compiled by the United Nations, which measures a cross section of societal details such as education opportunities, healthcare access, and expected wealth, to give us an idea of the welfare of the individuals in a given nation. Here is the world map for HDI.

The darker the green, the better the HDI, and the higher the welfare for a typical citizen. Red and yellow, not so much. Credit to wikicommons.

Again, this index can suffer from generalization. There does exist, however, a corrective version of this for inequality, termed IHDI (Inequality-adjusted Human Development Index). By the UN's definition, "the difference between the IHDI and HDI is the human development cost of inequality, also termed – the loss to human development due to inequality." Shown here:

The darker the green, the better the IHDI. Red and yellow, not so much. Credit to wikicommons. As you can see, the benefits of development are not evenly shared across the world.

This measure attempts to make up for the failures that GDP can have in measuring how strong an economy is, by trying to tell us how well off the people in a country actually are. There is a great deal left out if one focuses only on how much wealth a nation produces. Perhaps Robert F. Kennedy said it best about the predecessor to GDP, when he described the shortcomings of GNP.

Gross national product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them.  It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities.  It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. 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 everything in short, except that which makes life worthwhile.

The key problem of our key economic indicator is that it can only measure money. This is a useful tool, but not the only one. Is it time to switch the world’s major countries over to a system that relies on HDI or IHDI? Is there a better option than that? Or is our current tendency to report GDP as the most important statistic fine as it is?

Golden blood: The rarest blood in the world

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What is the rarest blood type?

Abid Katib/Getty Images
Surprising Science
  • Fewer than 50 people worldwide have 'golden blood' — or Rh-null.
  • Blood is considered Rh-null if it lacks all of the 61 possible antigens in the Rh system.
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China's "artificial sun" sets new record for fusion power

China has reached a new record for nuclear fusion at 120 million degrees Celsius.

Credit: STR via Getty Images
Technology & Innovation

This article was originally published on our sister site, Freethink.

China wants to build a mini-star on Earth and house it in a reactor. Many teams across the globe have this same bold goal --- which would create unlimited clean energy via nuclear fusion.

But according to Chinese state media, New Atlas reports, the team at the Experimental Advanced Superconducting Tokamak (EAST) has set a new world record: temperatures of 120 million degrees Celsius for 101 seconds.

Yeah, that's hot. So what? Nuclear fusion reactions require an insane amount of heat and pressure --- a temperature environment similar to the sun, which is approximately 150 million degrees C.

If scientists can essentially build a sun on Earth, they can create endless energy by mimicking how the sun does it.

If scientists can essentially build a sun on Earth, they can create endless energy by mimicking how the sun does it. In nuclear fusion, the extreme heat and pressure create a plasma. Then, within that plasma, two or more hydrogen nuclei crash together, merge into a heavier atom, and release a ton of energy in the process.

Nuclear fusion milestones: The team at EAST built a giant metal torus (similar in shape to a giant donut) with a series of magnetic coils. The coils hold hot plasma where the reactions occur. They've reached many milestones along the way.

According to New Atlas, in 2016, the scientists at EAST could heat hydrogen plasma to roughly 50 million degrees C for 102 seconds. Two years later, they reached 100 million degrees for 10 seconds.

The temperatures are impressive, but the short reaction times, and lack of pressure are another obstacle. Fusion is simple for the sun, because stars are massive and gravity provides even pressure all over the surface. The pressure squeezes hydrogen gas in the sun's core so immensely that several nuclei combine to form one atom, releasing energy.

But on Earth, we have to supply all of the pressure to keep the reaction going, and it has to be perfectly even. It's hard to do this for any length of time, and it uses a ton of energy. So the reactions usually fizzle out in minutes or seconds.

Still, the latest record of 120 million degrees and 101 seconds is one more step toward sustaining longer and hotter reactions.

Why does this matter? No one denies that humankind needs a clean, unlimited source of energy.

We all recognize that oil and gas are limited resources. But even wind and solar power --- renewable energies --- are fundamentally limited. They are dependent upon a breezy day or a cloudless sky, which we can't always count on.

Nuclear fusion is clean, safe, and environmentally sustainable --- its fuel is a nearly limitless resource since it is simply hydrogen (which can be easily made from water).

With each new milestone, we are creeping closer and closer to a breakthrough for unlimited, clean energy.

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  • Dr. Fisher, professor Ted Fischer, and psychiatrist Gail Saltz explain the different types of love, explore the neuroscience of love and attraction, and share tips for sustaining relationships that are healthy and mutually beneficial.

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