By Bryan Caplan
GDP is an agnostic statistic. If someone spends money on something, it counts as GDP. This agnosticism helps statisticians avoid controversy. But it’s hard to see any other epistemic benefit. If we really want to measure output, we have to try to cope with some undeniable facts. For starters:
1. Some “output” is actually destructive. At minimum, the national “defense” of the bad countries you think justifies the national defense of all the other countries.
2. Some “output” is wasted. At minimum, the marginal health spending that fails to improve health.
3. Some “output” doesn’t really do what consumers think it does. At minimum, astrology.
Note: None of these flaws have any definitional libertarian component. Even if there’s no good reason for tax-supported roads, existing government roads really are quite useful. Still, coercive support is often a credible symptom of pseudo-output: If the product is really so great, why won’t people spend their own money on it?
Once you start passing output through these filters, the world seems full of pseudo-output. Lots of military, health, and education spending don’t pass muster. Neither does a lot of finance. Or legal services. In fact, it’s arguably easier to name the main categories of “output” that aren’t fake. Goods with clear physical properties quickly come to mind:
- Food. People may be mistaken about food’s nutritional properties. But they’re not mistaken about its basic life-preserving and hunger-assuaging power – or how much they enjoy the process of eating it.
- Structures. People may overlook a structure’s invisible dangers, like radon. But they’re not mistaken about its comfort-enhancing power – or how aesthetically pleasing it is.
- Transportation. People may neglect a transport’s emissions. But they’re not mistaken about how quickly and comfortably it gets them from point A to point B.
Lest this seem horribly unsubjectivist, another big category of bona fide output is:
- Entertainment. People may be misled by entertainment that falsely purports to be factual. But they’re not mistaken about how entertained they are.
None of this means that people in the First World don’t experience incredible standards of living. Once you stop being agnostic about GDP, though, you realize that large shares of measured output contribute little to that experience.
If I’m right about education, for example, then educators contribute a lot less to our living standards that our share of GDP suggests. Of course, this doesn’t mean that educators‘ living standards are especially low. The point, rather, is that educators consume a lot more value than they add.
Who makes up the difference? The unsung workers who pull more than their weight: farmers, constructive workers, transportation workers, entertainers, and many more. Be careful, though, to define these occupations broadly: In essence if not in name, Norman Borlaug may have been the greatest farmer of all time.