% of GDP can be a bit misleading as rich countries easy fall to the left of the graph. I would rather see $ spent per person
I always think of a toy-world example of a circle of 10 people cooking their own dinners. The GDP of that circle is 0$. Now if every person in the circle cooks not his own dinner but sells his dinner to the person on the right of them for 100$, suddenly the circle's GDP has shot up to 1.000$, while in fact nothing has changed.
Now I know very well that this is an oversimplification, yet it is not so outlandish and illustrates quite well how our economic ideology relentlessly pushes 'financialization' of service activities that used to be non-commercial. You need a job, and when you have one then you need to spend the money you earn on others to provide daycare and school lunches and house & garden maintenance ...
Financialization is key because it not just allows 'profits' to be made, but is essential to the 'rent seeking' economy as they can only exist by the nature of intermediating on transactions.
The example downplays the positive impact of the increase in GDP (eg the drunk driver creates jobs for car manufacturers, police officers, and doctors) but it shows how our narrow focus on GDP rewards behavior that may not be desirable.
That evening, sure. In the long run, their productivity is likely diminished. You see a similar binge-and-reckoning cycle in macroéconomies, the difference being practically nobody is rewarded for higher GDP. Governments are rewarded for having larger tax bases.
First a question: how come 'productivity' has gone up by 2% annually for nearly a century (if you know compounding you know how massive this is), yet we all have to 'work hared' and 'longer' for less, while our social security is being eroded?
'productivity' in a 'Red Queen's Race'[1] economy has 0 value. We're not doing work to ensure 'survival' or 'progress' anymore. 10% of People could carry that. We long ago stopped having a production problem, we have a(n artificially sustained) distribution problem.
At the 'economic ground floor' level we're in a self accelerating 'service economy' which at the systems level is both driven and preyed upon by a 'rent-seeking' economy that in socio-economic power far outplays the former. Transactions are the key, not what actually goes around.
Failure to equitably distribute gains, a capricious allocation such that individuals might make mint one year, be skint the next. No viable pensions or annuity system. Etc.
Value extraction from labour is the age-old economics problem. It faced feudal peasants, it faces the modern urban/suburban knowledge wage slave paying it all out in rent or mortgage interest. David Ricardo's two bugbears were the laws of rent and wages, in opposition to one another.
GDP's distortions are legion, but you still have the rent/wage dilemma without that.
... Though some measures of gross happiness or support might address that. Hrm. We mearsure GDP. But Smith says:
POLITICAL œconomy, considered as a branch of the science of aThe first object of political economy is to provide subsistence for the people statesman or legislator, proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign.
http://oll.libertyfund.org/titles/smith-an-inquiry-into-the-...
That is, his standard for economic performance is support of the population, generally, and financing the state. Elsewhere and earlier he calls explicitly for improving the lot of the poorest especially.
GDP does none of this.
I've beeen meaning to read Kuznts's notes specifically for some time.
I know it sounds silly but I don’t see why it wouldn’t work.
Short term happiness resulting from consumption that ensures a relapse and thus the need for more short term relief through further consumption is what the action side of our economy optimizes for. A furniture maker that produces quality tables that last for centuries will soon be bankrupt as he eats his own market. An IKEA that sells you a fashionable crap table that you want/need to replace real soon, either by induced need or low structural resilience quality, creates its own perpetual demand. That gives you an indication why despite major advances in manufacturing technology our physical goods now are so feeble when we could still make a decent washer that lasted for a lifetime just 50 years ago.
GDP is a fairly good indicator for the 'rent seeking economy' that rules our system, as it is more or less aligned with transaction sizes and volumes.
Some of it translates into better research, e.g. ability to lure international researchers, access to better equipment because you're in a richer nation, but at least partially the number is inflated without any benefit to the research itself.
If the research is constrained by resources that can be acquired from global markets, then, yeah.
However, a lot of research tends to consume capital in form of wages to researchers. In this instance a percentage of GDP is a much better indicator of the resourcing level of research.
However, I don't know if there is any way to compare research on a high level by any financial meter in a way that would not be open to critique.
Edit: What's interesting to me is just how dominant business R&D spending is for the larger economies. The top spenders in nominal terms are all large diverse economies. The main industry that came to mind for me is the auto industry. The top countries all have massive auto industries.
Would still need to adjust for poverty.