Kicking the GDP Habit
The World Economic Forum’s annual meeting in Davos this year will focus on how to create a cohesive and sustainable world. But a growing number of economists fear that an excessive emphasis on GDP growth could jeopardize progress toward that goal.
In this Big Picture, Columbia University’s Joseph E. Stiglitz, a long-standing critic of the GDP metric, sees plenty of scope to reduce significantly the environmental impact of growth without condemning billions of people to lives of deprivation. Similarly, fellow Nobel laureate economists Esther Duflo and Abhijit Banerjee of MIT urge Chinese and Indian policymakers to avoid focusing solely on GDP as a means of improving people’s lives.
Instead, says Klaus Schwab, the WEF’s founder and executive chairman, policymakers should adopt new wellbeing and sustainability indicators, which could help to end the short-termism that underpins current economic policymaking. Meanwhile, Kemal Derviş of the Brookings Institution argues that GDP could easily be improved with a complementary metric that weighs citizens more equally.
Finally, Alexander Friedman, Jerry Grinstein, Larry Hatheway, and Charles C. Krulak call for national income to include the costs of externalities such as environmental degradation and greenhouse-gas emissions, so that net income more accurately reflects sustainable growth.
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