Why we should't judge a country by its GDP
ideas.ted.com
ideas.ted.com
Freedom of speech in Finland is supposed to be the same as in Afghanistan? I'm sure they theoretically have it in Afghanistan if the table says so, but the consequences will be very different.
Health and Wellness: Life expectancy is a good overall indicator, but how can you quantify the situation of people who fell ill? Cheap access to good medical care varies a lot between countries.
Globally ranked universities: how about normalizing this by size of population, e.g. Switzerland vs. Germany?
Personal Freedom of Choice/Early marriage: where's the freedom of choice part in this? I don't think the relatively early marriages in the US, Canada and New Zealand are all arranged.
Similarly Belarus gets a top score for religious tolerance, while western Europe gets second bottom. Belarus's form of religious tolerance is 'you're free to be whatever religion, as long as it's the state religion' (Orthodox). You don't get any protections from the state if you're not Orthodox.
There's quite a few spots where things look iffy in their rankings.
The highest level of religious tolerance is exhibited in the Islamic Republic of Mauritania, which handed out a death sentence to a blogger for apostasy at the end of last year. Western Europe, apparently, should look towards them to as an example.
This is not just a bit iffy. This is dangerously bad ranking.
Defining success in a more utilitarian "Greater good for greater number of people" sense does seem more sensible than counting money coming in.
EDIT:
To give an absurd example:
If a country has HUGE GDP but a government policy of destroying so many tons of dollars/gold/oil every year (i.e wealth destruction). It would still rank highly... even though being absurdly bad.
Your absurd example is how signalling often works. In this case, if they can afford to waste gold and oil for no reason then they're clearly doing well. It's like lighting a cigar with a $100 bill, or buying a diamond ring for your fiancée.
I think we have to accept that there is no objective measure of success of a country. In fact we haven't even figured out how to measure success of a company reliably, even if we constrain our self to measuring shareholder value. The best we can do is try finding measures that somehow correlates with quality of life and be explicit about what we are measuring.
* In case you are not sure, you don't want to be born into Saudi Arabia as a woman.
Now, you can argue that formal higher education is not the only way to instill that knowledge and skills, and also varies widely between education systems. That much is true. But the point is to get easy to measure proxies for what you are really trying to measure. Does the amount of people that go through public education predict the average level of knowledge and reasoning of that country's citizenship better or worse than looking at the amount of things they produce and sell? (not a rhetorical question, both answers can be supported, and each leads you to either HDI or GDP as a "better" measure.)
[1] Well, very little compared to what GDP+GINI would tell you
Well that's a bogus comparison. You would have to compare to GDP + luxury cars.
Perhaps if r varies a lot between countries knowing the actual number of cars gives you some extra information about how much that country in particular values cars as symbols of status. But, would that be useful?
Either way, this is very tangential to the point I was trying to make, which is that education and cars are not equal measures of the development of a society and that an educated population is more that some sort of social status scorecard :)
What evidence do you have of this?
Further, even if true, you are still measuring the inputs rather than the outputs. Energy consumption is also highly correlated with the technological and social development of a civilization, but it would be as silly thing to include.
> leaving (most of) value judgements to buyers
A working, fair market is a law of nature; assuming that markets will fix everything is a just-world hypothesis[1].
Markets (and capitalism in general) work wonderfully as a way to efficiently allocate scarce goods, iff the buyer has access to good information and the opportunity to shop around. For things like "democracy" and "discrimination", these conditions usually do not exist or they require some significant additional cost. For example, moving to another city for a job can be costly, but is done by people all the time; moving to another country to "shop around" for democracy is difficult and often impossible. Capitalism - in a pure form that is judge only by GDP - is the wrong tool for this kind of goal.
That said, I am not familiar with the specific index mentioned in the article (SPI), so I can't say anything good or bad about it. My point here is only that while GDP is certainly useful, other goals need to be included as well when we consider how to judge a country (or state, or city, or business, ...), or we end up getting what we asked for: a society that is very productive, at the expense of everything else, which usually ends badly.
Instead, I suggest at least some type of balance, pragmatic approach where many topics are considered. Yes, it will include value judgements - just like the value judgemet to exclude those topics. Solving this kind off political mess is time consuming and annoying, but it's a maintenance cost of running a free society.
The real issues with GDP in this regard are definitional issues (e.g., man marrying his maid), positional goods (college degrees, suits, and similar things are not intrinsically useful but let me get the job over someone else), compulsory goods (legal defense against lawsuits, obamacare) and govt spending (valued at cost).
You've captured a bunch of interesting nuances, but I think those things are hard to measure in the form of an index.
http://www.theguardian.com/business/2012/nov/20/economics-gh...
Not true in the case of:
* Currency manipulation
* Corruption
* Waste
For some countries you've accounted for about 1/3 of their GDP just with those 3 things.
>Whereas HDIs and progress indexes give (undue imho) weight to things valued by the creators of the index
For the man who values money above all else, GDP is the ideal measurement.
Is that you?
And the terrible living conditions for the general population: http://www.bbc.com/news/world-latin-america-19649648
Correct me if I'm wrong, but GDP includes government spending so if the government increases the public debt in order to spend more, the GDP increases without any relation to the value of goods and services.
And then there's the downright manipulation done in the European Union by introducing estimates for prostitution and drug trade to cater for differences between countries where those are part of the official economy and those where they are completely in the black market.
As engineers I think we are aware of the danger of optimizing around the wrong fitness function. The GDP is used as shorthand for "the economy" in federal policymaking, so now there are many ways to "stimulate" the economy by creating various forms of inefficiencies and misery. [1]
Want to boost your country's GDP? Here's some tips. Become terminally ill. Get involved in a costly divorce. Try gambling or drinking habitually. Take a job where you commute long hours wasting gas in traffic. Hell, open a strip mine - every resource extracted is a net positive on the national ledger. Bonus points if you can coerce your fellow citizens into compulsory spending - a nasty coal plant triggering asthma in the local population is a great example.
Even worse, a focus on GDP directly contributes to income inequality because as a measure it is blind to the distribution. If the top 1% gain more than every one else loses in a year, GDP still rises. For this reason Rowe calls GDP a "statistical laundry operation that hides the suffering at the bottom".
Measuring and tracking GDP is a splendid idea, but using it as even a proxy for national welfare is insanity. I encourage anyone interested to read the linked article, which is as true today as when Rowe testified before the US senate 8 years ago. Also at the end he takes a first pass at laying out principles around new metrics to fix the situation.
1. Democracy Index (http://en.wikipedia.org/wiki/Democracy_Index) 2. Human Development Index (http://en.wikipedia.org/wiki/Human_Development_Index) 3. OECD Better Life Index (http://www.oecdbetterlifeindex.org)
For example if you value freedom of speech a lot, the US would be way up compared to say, Germany (illegal to deny the Holocaust), if you value human rights, the death penalty is an aberration and the US would be at the bottom part of the index. If you value safety over rights, Singapore would have a high index, otherwise low etc.
I would add a general "comfort index" of how people feel about the future. In the USA we have a strange situation. We have lots of raw materials, good education systems, and we are relatively geographically isolated. All nice advantages. Yet, we have very poor governance. A huge majority of our population does not trust Congress and the office of the President. Statistically, people respect our military and the Supreme Court and that is about it. Couple this with a general uneasy feeling about the future of the dollar vs. SDRs, etc. and lack of confidence our ability to be highly productive, and I would have to give my own country a mediocre "comfort index."
That said, Ireland still performs very well in recent nominal GDP rankings, even relative to the likes of Germany, yet has huge unemployment problems and is universally agreed to be in a worse economic state than Germany. The poor in the US are usually regarded as being far worse off than the poor in most Western European countries, but the US almost invariably comes out on top.