My apologies for the lengthy rant, but this is a pet peeve of mine. GDP is is not a meaningful economic indicator in any way, shape or form. Any economist who focuses on GDP when discussing economic development or economic well-being is a fraud, no matter how many Nobel prizes he/she may have. GDP is a measure of economic activity. (And a pretty bad one at that.) It is not a measure of economic development, of economic well-being, or anything like that.
It’s like tracking your health by how much you eat every day. Maybe you eat a lot, but you’re a very active person, so you have a strong, healthy body that everyone is jealous of. Or maybe you eat a lot and you’re just fat. There’s no way to tell by looking only at how much you eat. It’s a single data point. It doesn’t tell much of the story, and if you assume that it tells you the entire story, you will be very wrong. Yet politicians, economists and journalists everywhere keep using GDP when discussing the economy. It’s madness. It’s a very real case of collective insanity. (I have a master’s degree in economics, so I’m not just pulling stuff out of my ass. This collective insanity is the main reason I left the field. I wanted no part in it.)
Another common example of a bad indicator is using weight as a proxy for health, with the assumption that losing weight is doubtlessly good and gaining weight is doubtlessly bad. If you weight 200 pounds, train hard a couple times a week for a year, gain 50 pounds of muscle and lose 30 pounds of fat, you’ll now weight 220 pounds, but you’ll probably be healthier than you were before. Your weight going up or down, on its own, doesn’t mean anything. GDP is exactly the same kind of useless non-sense.
If you’re fat and want to get healthier, waist circumference is probably a much better indicator. If your belly is melting, you’re probably moving in the right direction. You should track more than that, ideally, but if you put a gun to my head and forced me to choose between either weight or waist circumference – and only one of them -, I’d say waist circumference is by far the more meaningful thing to track.
If we were serious about tracking how well we’re doing economically, we would use GAAP accounting instead. It tracks assets, revenues, costs. It would be an infinitely saner approach to economics, but most people’s reaction to the idea is “Governments are not businesses and should not be run as if they were”, which completely misses the point. If you manage your family’s budget the way governments manage the economy, you’ll all be sleeping on the street, starving, in no time.
The biggest problem with GDP is that it does not take into account value destruction (or value creation, for that matter – it only tracks economic activity). If I buy a nuclear bomb for a billion dollars and then blow up the planet, GDP will go up by a billion dollars because I bought a bomb worth that much. The destruction caused by blowing up the planet (and ending all life on Earth) won’t be accounted for in any way – until the next period rolls around and GDP is down for some reason. (This is an extreme example. Value destruction in the current period does not necessarily cause future GDP to go down. GDP going up or down doesn’t say anything about value creation or destruction.) Using GAAP, we’d be down one planet, with everything valuable on it. The value destroyed would get accounted for directly, immediately, and we’d make smarter choices because our cost-benefit analyses would be based on much more meaningful numbers.
So when politicians are talking about the cost of reducing our carbon footprint, what they are actually saying is that we should continue subsidizing pollution by allowing people to destroy the environment without compensating the community for the destruction they cause. It’s the same as allowing people to destroy your property without compensating you. If my neighbour drives a tank over my car and turns it into a pancake, everyone would say I obviously deserve compensation for my lost car. If someone puts toxic chemicals into a lake on land I own, I could sue for damages because it’s obviously not OK in our legal system to destroy someone else’s property without their explicit prior consent. If I destroy a city bus, the city can sue me for damages to city property. There’s no reason the environment should be treated any differently.
When polluters have to pay the real cost of their pollution, we’ll see real investment in green technologies. For example, if Canada adopted a 200$-per-tonne carbon tax, the average Canadian would probably pay a whole lot more for fuel, and green tech would become a whole lot more of an issue when election time comes – because having the government invest in green technologies could help lower the citizens’s fuel expenses. That said, businesses would probably do most of the investment because they would feel the most pain, and they could earn a lot by re-selling the technologies they developed to consumers, governments and other businesses.
Pain is a fantastic motivator. When business-as-usual costs too much, people (and organizations) look for better ways of doing things. If we had had a 200$-per-tonne carbon tax since the 1970s, all cars would have gone electric a long time ago, coal-based power centrals would have been phased out ages ago, smog would be a distant memory of times long gone, etc.
Maybe GDP will go down if the world’s various countries all implement a high carbon tax, but we have to let go of the idea that GDP going down means we’re worse off economically. It’s simply not true. It has never been. I’m not anti-science. I’m not saying we should fly blind. I’m saying that there are smarter ways to look at economic development, and we should have started using them ages ago. Better now than never though. It’s time for us to wake up. It’s time for us to shake ourselves out of this collective insanity.
Victor Stewartsays:
I’ve always heard that heart and brain cells don’t regenerate and once gone are gone, etc.
But this has always made little common sense to me. Speaking of heart cells, athletic training in the highest heart rate zone builds denser heart muscle that contracts with more strength, and the zone just below increases the volume of blood pumped per beat. And top athletes are known to have enlarged hearts for these reasons.
Thus… clearly change is afoot?
And there are similar arguments about brain plasticity.
(accidentally posted this on the Dec 8 thread, with no way to delete lol)
Victor Stewartsays:
RE “senescent cells” and other cellular dysfunction, autophagy activated through fasting seems to keep the house in order.
Regarding number 6 (climate change)…
My apologies for the lengthy rant, but this is a pet peeve of mine. GDP is is not a meaningful economic indicator in any way, shape or form. Any economist who focuses on GDP when discussing economic development or economic well-being is a fraud, no matter how many Nobel prizes he/she may have. GDP is a measure of economic activity. (And a pretty bad one at that.) It is not a measure of economic development, of economic well-being, or anything like that.
It’s like tracking your health by how much you eat every day. Maybe you eat a lot, but you’re a very active person, so you have a strong, healthy body that everyone is jealous of. Or maybe you eat a lot and you’re just fat. There’s no way to tell by looking only at how much you eat. It’s a single data point. It doesn’t tell much of the story, and if you assume that it tells you the entire story, you will be very wrong. Yet politicians, economists and journalists everywhere keep using GDP when discussing the economy. It’s madness. It’s a very real case of collective insanity. (I have a master’s degree in economics, so I’m not just pulling stuff out of my ass. This collective insanity is the main reason I left the field. I wanted no part in it.)
Another common example of a bad indicator is using weight as a proxy for health, with the assumption that losing weight is doubtlessly good and gaining weight is doubtlessly bad. If you weight 200 pounds, train hard a couple times a week for a year, gain 50 pounds of muscle and lose 30 pounds of fat, you’ll now weight 220 pounds, but you’ll probably be healthier than you were before. Your weight going up or down, on its own, doesn’t mean anything. GDP is exactly the same kind of useless non-sense.
If you’re fat and want to get healthier, waist circumference is probably a much better indicator. If your belly is melting, you’re probably moving in the right direction. You should track more than that, ideally, but if you put a gun to my head and forced me to choose between either weight or waist circumference – and only one of them -, I’d say waist circumference is by far the more meaningful thing to track.
If we were serious about tracking how well we’re doing economically, we would use GAAP accounting instead. It tracks assets, revenues, costs. It would be an infinitely saner approach to economics, but most people’s reaction to the idea is “Governments are not businesses and should not be run as if they were”, which completely misses the point. If you manage your family’s budget the way governments manage the economy, you’ll all be sleeping on the street, starving, in no time.
The biggest problem with GDP is that it does not take into account value destruction (or value creation, for that matter – it only tracks economic activity). If I buy a nuclear bomb for a billion dollars and then blow up the planet, GDP will go up by a billion dollars because I bought a bomb worth that much. The destruction caused by blowing up the planet (and ending all life on Earth) won’t be accounted for in any way – until the next period rolls around and GDP is down for some reason. (This is an extreme example. Value destruction in the current period does not necessarily cause future GDP to go down. GDP going up or down doesn’t say anything about value creation or destruction.) Using GAAP, we’d be down one planet, with everything valuable on it. The value destroyed would get accounted for directly, immediately, and we’d make smarter choices because our cost-benefit analyses would be based on much more meaningful numbers.
So when politicians are talking about the cost of reducing our carbon footprint, what they are actually saying is that we should continue subsidizing pollution by allowing people to destroy the environment without compensating the community for the destruction they cause. It’s the same as allowing people to destroy your property without compensating you. If my neighbour drives a tank over my car and turns it into a pancake, everyone would say I obviously deserve compensation for my lost car. If someone puts toxic chemicals into a lake on land I own, I could sue for damages because it’s obviously not OK in our legal system to destroy someone else’s property without their explicit prior consent. If I destroy a city bus, the city can sue me for damages to city property. There’s no reason the environment should be treated any differently.
When polluters have to pay the real cost of their pollution, we’ll see real investment in green technologies. For example, if Canada adopted a 200$-per-tonne carbon tax, the average Canadian would probably pay a whole lot more for fuel, and green tech would become a whole lot more of an issue when election time comes – because having the government invest in green technologies could help lower the citizens’s fuel expenses. That said, businesses would probably do most of the investment because they would feel the most pain, and they could earn a lot by re-selling the technologies they developed to consumers, governments and other businesses.
Pain is a fantastic motivator. When business-as-usual costs too much, people (and organizations) look for better ways of doing things. If we had had a 200$-per-tonne carbon tax since the 1970s, all cars would have gone electric a long time ago, coal-based power centrals would have been phased out ages ago, smog would be a distant memory of times long gone, etc.
Maybe GDP will go down if the world’s various countries all implement a high carbon tax, but we have to let go of the idea that GDP going down means we’re worse off economically. It’s simply not true. It has never been. I’m not anti-science. I’m not saying we should fly blind. I’m saying that there are smarter ways to look at economic development, and we should have started using them ages ago. Better now than never though. It’s time for us to wake up. It’s time for us to shake ourselves out of this collective insanity.
I’ve always heard that heart and brain cells don’t regenerate and once gone are gone, etc.
But this has always made little common sense to me. Speaking of heart cells, athletic training in the highest heart rate zone builds denser heart muscle that contracts with more strength, and the zone just below increases the volume of blood pumped per beat. And top athletes are known to have enlarged hearts for these reasons.
Thus… clearly change is afoot?
And there are similar arguments about brain plasticity.
(accidentally posted this on the Dec 8 thread, with no way to delete lol)
RE “senescent cells” and other cellular dysfunction, autophagy activated through fasting seems to keep the house in order.