Friday, November 27, 2009

Not economist, just wrong 

Al Gore, apparently not content with the job of cleaning the Climategate mess, is now opining on GDP accounting.
Surely a broader accounting of economic activity will enhance economic policy and decision-making. We commend the work of Professor Joseph Stiglitz and the Commission on the Measurement of Economic Performance and Social Progress for recognising that while facts and figures are important � indeed critical to thoughtful decision-making � we have placed too great an emphasis on outdated modes of distilling economic value. The longer we defer the proper accounting for externalities such as global warming pollution, the greater the strain we place on our already fragile economies.
This concept of green GDP has been around for a long time. Minnesota had some group write a report on how to restate the state's economic growth with environmental factors. But it isn't just environmental -- if it was, you could have a reasonable discussion of a "net-of-resources domestic product" that would include some depletion charge for nonrenewables that would have a basis in real national accounting. But once you start this process you get a "genuine progress index" where "genuine" is determined by some elitists who decide whose income matters, which goods matter more, etc. Once one starts down the road you often don't like the result. The Chinese government tried green GDP in 2004, but killed the idea a few years later when the "deductions" decided to count against measurable growth of goods and services gave an answer decidedly against the political judgment.

GDP is a score, not a judgment. And it should be that way, so that we don't have to worry about whether we get the east German judge.

(P.S. the title of this post refers to the new film, Not Evil Just Wrong, which we need to show somewhere in St. Cloud soon.)

h/t: SCSU emeritus Professor Pat Mattson.