The mother of all economic indicators may need a facelift.
The benchmark concept of national accounts – the Gross Domestic Product – is widely attributed to economist Simon Kuznets, who was born in Belarus and emigrated to the United States at age 19.
Kuznets, who later won a Nobel Prize for his work, was quick to warn that he hadn’t invented the wheel: “The welfare of a nation can scarcely be inferred from a measurement of national income”, he said in 1934, shortly before delivering to the US Congress a whole new way of understanding the Great Depression. GDP had fallen by half, according to his innovative figures.
Today, GDP’s critics are legion, although far from united. Many lament that the aggregate figure tells almost nothing about human wellbeing, a point that even its champions admit, noting also it was never designed to do so.