THE TROUBLE WITH GDP

there are basically three kinds of economic activity — there is positive economic activity, negative economic activity and redistributive economic activity, which has no positive or negative component.  lets take an example of positive economic activity: i plant a garden from little seeds that cost hardly anything and i get from that food — quite a bit of food — and that food is sold into the local economy and is then considered positive economic activity because i have added it to the gdp, to the wealth of society. 

negative activity is still counted as part of gdp the way things are presently calculated.  here is a good example of negative activity: i pull out a gun and i shoot you.  okay, thats going to generate positive economic activity.  first, i had to buy the gun which had to be manufactured.  thats considered positive economic activity according to the gdp calculation.  then i had to buy the bullets and then once ive shot you we will have to call for emergency medical services, which is considered positive economic activity, and then there will be the medical services that try to save you, which is also considered positive economic activity.  and when that fails there will be the funereal services, which is again considered positive economic activity, and then there is going to be a very expensive investigation and trial with detectives and lawyers and judges and a jury and thats all considered positive economic activity.  and then there will be a long prison sentence for me and the cost of my going to prison will be considered part of the positive economic activity of society that will go on for years.  all that is added to the calculation for gross domestic product but it is in reality all below the line.  it is all negative economic activity.  if i hadnt shot you we wouldnt have had to spend any money to get back essentially to the baseline, which is zero.  so thats an example of an incredible miscalculation of gdp, which is negative activity. 

now neutral activity is what financial services mostly does.  it is just redistributive.  they take a little money from everywhere and concentrate it in certain big piles somewhere, mostly in certain people’s bank accounts, and a bit of this may be usefully distributed to stimulate improvements in society but most of it doesnt really generate any wealth of any kind, and yet it is all financial services, it is all considered a part of the gdp — in fact, in united states and great britain it is somewhere between a quarter and forty per cent of gdp — but that is mostly a zero, that is largely just redistributive, it doesnt really make anything, it doesnt add anything to the productive wealth of society. 

so, thats the problem with gdp and thats the problem with an awful lot of people’s life work and the energy they expend.  like war and other destructive activity including its ensuing reconstruction, it is all truly below the line — below the zero baseline that was there before any of these monkeys got out of bed in the morning and started doing things.