GDP and Well-Being

Update: This isn't a real journalism outlet so, based on feedback from an anonymous reviewer, I'm editing this for clarity for tone, voice, subject matter, central argument, supporting evidence, and breadth and, also, now it's like 3 times as long. Just a quick rewrite.

I'd like to talk briefly and inadequately about a recent economic controversy. Bernie Sanders' single-payer health care plan--and economist Gerald Friedman's model which favors this plan--has been attacked by several eminent economists, perhaps most notably NYT columnist Paul Krugman. Matthew Yglesias has a nice summary of the feud here.

I won't rehash the central arguments, but the dispute basically revolves around Friedman's optimistic projections for GDP growth. Economists who have weighed in have run the gamut between "sensible", "optimistic", "highly-implausible", and "I wouldn't believe this unicorn crap if it were the plot of a fictional My Little Pony episode!" (and I'm paraphrasing here).

These economists are, of course, actually economists, versus me, who has no experience with the dismal science whatsoever. So I'm inclined to believe that they're all making a decent case. But there's some extra baggage caused by the current political situation, and it gives everyone some pause: Friedman's backers on one hand claim the pessimistic economists are really just propagandists for elite Democratic establishment. On the other hand, Friedman's critics claim that these economists are simply reporting the facts of the matter, regardless of what any idealistic lefties might want to think. There's some truth to both sides, if marred by oversimplification.

In short, the Friedman controversy has become just one more microcosm of the general fight between Bernie Sanders and Hillary Clinton.

Yglesias captures this tension well:

And to an extent, mission accomplished. The coverage has been generated. But for better or for worse, the entire premise of the Sanders campaign is that the existing Democratic Party establishment needs to be overthrown, so imperious dismissals by establishment figures don't really hurt Sanders. His policy director, Warren Gunnels, told Danielle Kurtzleben that the economists in question are "the establishment of the establishment" and claimed to be unbothered by the criticisms. 

"That does not bother us at all," he told her. "What bothers us is the fact that the U.S. has more kids living in poverty than nearly any major country on earth."

But if this is simply one more Sanders vs. Clinton dispute, it's one that touches on something I've been thinking about a lot: The way neoliberals count things, account for things, and achieve their practical goals.

The original version of this piece (as a helpful reviewer noted) sought to answer the question of whether GDP growth was inherently valuable, but ended up unintentionally pivoting to the question of whether per-capita GDP itself was really a great measure of well-being, even on its own terms. It's a subtle difference, but it does matter.

I don't know anyone who would dispute that GDP captures consumer spending and productive activities extremely well. If I had five seconds to look up a nation's income, I'd look up GDP and GDP per capita, and if you gave me five more I'd look up a graph of their GDP growth. GDP captures the average and the total production of a nation well, and allows us to talk about everything else.

So let's start by talking about what GDP actually is, because I've got a more refined argument I'd like to make. In a nutshell, GDP measures consumption plus investment plus government spending, and, in this way, accounts for a nation's trade balance.

In math-y terms:

GDP = Consumption + Investment + Gov't spending + (eXports - iMports)

In other words, GDP captures the total value of what we spend on goods, as consumers, as investors, as governmental bodies, and as global traders. It avoids double-counting, and GDP overall does a good, reliable job measuring national production, national consumption, and national income.

GDP (and specifically GDP per capita) is the best single-number tool for differentiating poor countries from medium countries, and medium countries from from rich countries.



One reason I'm writing this is that there's something to be said for the sort of 0% GDP growth that would radically equalize the structure of society. Of course this isn't captured in raw or adjusted GDP, but income inequality numbers have been around for a long time, and

There are nuanced arguments to make that the United States actually transfers a whole lot of its revenue to a public safety net--but aside from Social Security, much of that goes not to cash/near-cash transfers but to the high cost of publicly-subsidized health care, public education, and family welfare, much of it in the form of tax benefits.

The means-tested transfers and tax credits that the United States tends to favor are, I believe, a form of social control which in fact make all Americans' lives more inefficient (and therefore poorer), and do so in ways that won't necessarily show up on an economic balance sheet--or, they will, but will in fact be positive. I believe you can make the same argument for the structure of our work lives and some dominant tendencies of our culture--many such factors that add up to my central claim: Despite our high median and high average GDP per capita, I believe that we, as Americans, have a worse median existence relative to other, less-wealthy countries with more efficient systems of distribution, entirely for that reason.

This bizarre, potentially-true fact of American life (a potentially-true fact I'm coming to believe in) is what I'd like to explore.


My contention in the original version of this piece was that Americans spend too much on consumer goods which exist to compensate for our overstressed, inefficient lives and our crumbling social fabric. This isn't a radical lefty argument--we spend more than anyone in the OECD on health care by a wide margin, higher education is expensive, and we work longer hours than most other countries.

Our public transportation system is lousy, we have more cars than we know what to do with, most poor people, young people and minorities see little opportunity to get into the homeowning middle-class (an artifact of racial discrimination for minorities, and an artifact of inequality for everyone else), and lots of people suffer directly or indirectly from the carceral state.

We have bad poverty rates relative to other OECD countries even in terms of absolute income (see Digression 3 below), our inequality is worse than almost anyone, rich or poor, our citizenry feels relatively powerless over its own existence, and the social fabric is slowly unravelling and Americans are worrying that the rise of Trump may mean we're finally "getting what we deserve".

It's not all bad, and it's often not all that bad. But it is bad.

And, if our society were more humane and efficient in its structure, I don't think we'd spend nearly as much on transportation, rent/housing, food, electronics, pharmaceuticals, health care, guns, or even leisure.


Much of the spending Americans make is not for consumer goods which improve their lives, but on necessities such as housing or rent, utilities, food, transportation, health care, child care, student loans, and credit cards. Every bit of legislation that goes towards making these more expensive also increases "Consumption" in those sectors.

But even the good stuff, the fun kind of spending, has its problems. I believe that much of what is counted in our national Consumption is loaded with goods and services which improve our lives only by ameliorating or perpetuating the parts of our country that are unfulfilling, banal, hateful, brutal, inefficient, and sad. Unhealthy food we can only eat because we have no time to cook. Medicines for mental and physical maladies we might be able to get around if we had more autonomy in our lives. Guns because we don't feel safe. Insurance because we don't feel secure. Electronics that we only buy because we know we'll spend an hour a day or more in our cars. Expensive housing we only spend on to avoid the ghetto. Cars we only need because we need to be able to go into work at a moment's notice. Child care we only need because our welfare has a work requirement. Expensive leisure spending because it's not every day one can make time for entertainment.

And all this palliative spending, like the spending that goes to necessities, goes into our GDP calculation and appears superficially as a national windfall. It's national income and it's consumer spending. There may be crowding-out effects from this less-bad spending, of course, but economics in general --and GDP in particular-- seems to have trouble distinguishing between spending which makes a bad life livable and spending which makes a good life even better.

And I don't think our lives are so good. Even ignoring the systemic stuff, our leisure time is, if anything, overstated by statistics--we're always on-call, always managing something, always being asked to suffer one more indignity of impatience. Many workers, especially in the service industry, don't have a consistent week-to-week schedule. Their quality time with kids is frankly dictated by their company. The higher strata of workers, empowered but bereft of unions, live in constant fear of the at-will employment knife, the retirement funds unvested, the bundled health care that could go away, and the stigma of being jobless for even six months. Students fear they won't get jobs for their loans and desperately fight for any scrap of time or extra income that their personal bearings can afford.

And just look at the current lead/chlorine water crisis in Flint, Michigan--from a GDP standpoint, it's probably not a huge deal in the short- and medium-term. People with aching bones will buy expensive medicines--people will buy new appliances, build new homes. Water coolers so that infant children can bathe in the large source of freshwater of the Great Lakers without losing IQ points. They'll buy cars so that all but the most desperately poor can get water from neighboring regions on a tragically-necessary biweekly commute. All that disruption and privatization probably ends up as a GDP gain until the demographic consequences of massive lead poisoning catch up to them. Depreciation is in fact counted in Net Domestic Product, but I do question the extent to which economists really capture this kind of complexity in their models, as they as a rule tend to talk about other, more gainful things. Economist Joseph Stiglitz notes in The Price of Inequality that environmental damage (often tragically permanent) doesn't count against our GDP, and he points to Green GDP as an alternative, aspirational measure.

Whatever number you choose, you can add it all up and you're still left with a single number or four. Simple indicators to be manipulated by wily policymakers, and an ethic of selfishness that will corrupt our most heartfelt attempts to attack poverty, inequality, and the fundamental unhappiness which our society begets. 

There is inherent value in having a society whose spending, private and public, takes place by and large to improve the lives of its citizens, solve their problems, and gives them the freedom of mobility and creativity that our economy now denies them. When it comes to public goods, the government should be the one to provide them. When it comes to public problems, the government should be able to address them. When it comes to the public advocacy of its citizens both rich and poor, the government should be able and willing to fight. Individually, I've found that Americans try to solve all our problems with consumer goods, and almost never with government spending--to solve all our issues at our front porch (and stopping there), rather than with policy, with the net result that we recapitulate one another's sufferings in silence and leave those who follow us to do the same, ad aeternum.

Consumer goods are often great things and improve everyone's lives--but to some extent, in America, they mostly seem to be necessary palliatives in an inefficient nation of ideologues with a fetish for work and everyone who gets caught in their role playing. 

And even the really good stuff? The consumer goods? Well, that stuff is the really good shit--when we can get around to it. But although Americans are notoriously optimistic, I do wonder if most of us really do get around to it--or if we instead take expensive classes, buy expensive equipment, promise to invest more time in the good stuff every year and consistently fall short of our expectations--not just because this is human nature, but in part because we force it to be so.

Gerald Friedman's argument was about a certain macroeconomic model producing a certain level of GDP growth. Intelligent minds can agree or disagree with his projections, but this discussion--in granting the economists the whole frame--rings a bit hollow to me, and those words "GDP growth" sound now a note of falsehood. What kind of nation has a gigantic bureaucracy to provide what other nations can provide without such bureaucracy, and then deems this same bureaucracy impossibly unrealistic to remove? Who cares what it does to that GDP number on the page which tells us how poor we got this year, if the net result was that people rich and poor can now see a doctor when they need to, when last year they couldn't? Who cares what happens to GDP if we fix all our problems? These questions might sound glib, but their converse is equally so. Who cares how many people on the bottom must suffer if the GDP rises next year? The tone of these dry economic discussions (if amusingly catty at times) seems to treat the economy and its indicators as ends in themselves, rather than as means for creating happiness and prosperity--the shape and silhouette of our institutions mistaken for their whole content.

In the Friedman controversy, I found in most of the economists, Krugman especially, a tone of detached amusement towards their object of study, even as they grew animated at one another and about one another's credentials. While I like some funny crosstalk here and there, the sneering dismissiveness of the establishment's experts towards the common rabble is troubling, and not just because they rarely sneer at their far more ridiculous pundit friends and colleagues.

See, unlike most scientists, economists are studying that part of the world which is populated by these cries of agony--the mass psychology of panic, reaction, and revolt, as well as the calculations that lead people to take a certain action at a given fork in the road. Young people have overwhelmingly affirmed their fealty to the madness of Sanders' plans, and all Krugman can do is patronizingly lecture them about how great they have it, or about how there's nothing they could do to fix things anyway.

These economists are true experts, unlike me. But also unlike me, they seem to find it easy to ignore all the demographic and sociological data that's coming their way and ignoring it as the white noise of an Internet meme that will resolve itself when the dolts in the general public wise up and their comedic futility finally becomes evident even to themselves.

Economists' appeals to indicators may be important, but in the context of an active political debate involving tens of millions of suffering young people crying out in terror, Krugman's amused, detached appeals to indicators constitute an inadequate and fallacious response to human suffering, regardless of whether these indicators correlate with human happiness (which no one doubts). I don't mind whether the economists in question happen to be right or wrong--we're all trying our best. And I'm not, like, offended by their tone, and even if I had been, not every person is the right discussant for every discussion. I would be happy to let Krugman's comments pass into a distant history.

But I just don't think that, for all their dismissiveness, these economists are even correct. These experts--who taxed their precious time to crash the party and bring dismal reality back to the harried masses--appealed not to reality, but instead only to their own manic conceits:

Instead of the poor, uninsured, and disaffected of Sanders' campaign, they hand-wavingly appealed to historical GDP trends and closed the discussion triumphantly as arbiters of the real. Discussion over. Thanks for playing. Get back to me when you have a Nobel Prize. To those of us in this country who are poor and uninsured and disaffected, and those others of us who give a damn what happens to this country--to those of us who happened to read through much of it--we found no answer in the chuckling economists' field to questions in our immiserated field, a field we're becoming experts in.

What was missing--and what has been missing for some time from all of the neoliberal ideologues--is the understanding that all our indicators are answerable to reality, and not the other way around.

We are not answerable to GDP--our GDP is answerable to us, our choices and our policies. If our high GDP is predicated on spending too much for health care, then maybe it ought to decline. If our GDP is predicated on food costs incurred at the workplace solely because there's nothing better available? Maybe it ought to decline. If our GDP is predicated on sending more and more people from our welfare rolls into our horrifically-overtaxed workforce instead of allowing them to raise children full-time? Maybe it ought to decline. If our GDP is predicated on inefficient military spending that is only justified to that extent because of an insane eschatological ideology of warmongers in Washington? Then, just maybe, our GDP should decline on that account. Whether it's GDP, unemployment, poverty, inequality, mobility, or any such measure of our lives, reality is the master of men, rather than the men who claim mastery over reality.

And, if our GDP can't suffer a little infrastructure spending, or welfare spending, or the necessary restructuring of our terrible rent-seeking bureaucracies, both governmental and corporate? Maybe our GDP is not the answer but the excuse, or even the problem. Again and again, the field of economics, while seeming to have a lot of legitimacy in measuring our world, seems equally to be marshaled again and again as pretext for those who would do nothing in the face of suffering whose toll has not been measured yet. I don't think the economists who act in this capacity are privy to special knowledge, or wisdom--they are privy to the interests they serve, and they are privy to whatever reality they must promote to serve those interests. And again and again, the interests that they serve and oppose necessarily hide behind the names of their conceits--growth, deflation, austerity, sustainability, shocks, privatization, realism, rationality, choice. An economist acting in the name of the Kochs or the Gateses or the Clintons or the Bloombergs will never speak their name, but will find in their own work a perfect mapping from their fundamental economic concepts to their deeper personal compromises.

We cannot speak of unemployment without speaking of incarceration. We cannot speak of poverty and inequality and mobility without speaking the names of those programs by which income flows and wealth stocks have been forcibly redirected. We cannot speak about political reality and political feasibility without calling out the names of the enablers and arbiters of what is politically feasible and what is politically feasible.

There is no economy, of any sort, without the political economy to prop its assumptions and institutions up. Our economic statistics reflect reality only to the extent we allow them to, because no one has a right to more than he needs when that right impugns upon others' enjoyment. So it isn't just unkind or thoughtless of these economists to dismiss a wounded young cohort as delusional because the economy cannot support their concerns--but, in fact, the most unrealistic fantasy of all. A world of human institutions conducting itself a certain way in spite of and in opposition to the will of nearly all its constituents? That's the fantasy. That's the apocalyptic madness. Not the scarred and wounded hope of the young.


In my more cynical moments, I sometimes ponder that we in the US of A are so devoid of political agency to accomplish things that it hardly makes sense to treat us as a country in the first place, and measuring our national income simply serves to reify this delusion for another day. But I'll back away from that ledge for now.

We're a rich country by GDP, but we don't function in a rich way, if we ever did. I've often thought about how nice it would be to live instead in a medium-rich country that functions as a rich country, or which functions as a country at all. But for Americans, that kind of country is a distant dream (if it's a dream at all), and perhaps will always remain that way. It's perhaps well to note that I don't say this with the mournful, yearning eyes of a dreamer, but with fiery eyes and apocalyptic grin passing in that order beneath the brow as you crumble over now decades--not centuries--to my feet.

Three Digressions That Didn't Fit Anywhere Else:

(1. On the macro-level, I question whether corporations and finance really embrace innovation with the kind of vigor they always like to claim--sure, the tech industry is surging forward, but what about the industries that didn't get a major head start from Bell Labs, DARPA, MIT, and Berkeley? Have they really plunged into the future without kicking and screaming? I'm skeptical anytime I read about an "advanced scheduling algorithm" that a comp. sci. undergrad could have written in 1983 with little prompting, especially when that algorithm mainly serves to reduce labor costs and decrease labor power. But that's neither here nor there.)

(2. I first heard of Gerald Friedman on a podcast interview he did a few weeks ago, before this controversy really broke--and found him a funny, sprawling, sharp mind who spoke fluently and thoughtfully about political realities and about the direction he wanted the country to go in. I later learned he was supporting Hillary Clinton, which surprised me given how humorless and mean her shills have been. The decent Friedman's endorsement of Hillary is a good argument in itself that perhaps all the fuming, mad, realist hacks in her camp just might have a point worth hearing, even if the true costs of her ideology are sort of the entire reason I'm writing this. But I digress. Again.)

(3. Conservative and libertarian commentators are right to note that relative poverty measurements are problematic. But we're talking about a society where most people who might be classified as poor do not own their own house and must pay for rent as well as utilities, food, transportation, health care, child care, student loans, and credit. And those who do own homes often have onerous mortgages whose value is often determined by residents with more ability to pay who drive the prices up. In fact, the nature of relative poverty/inequality is probably exacerbated in a market economy, because little in the way of goods or services are guaranteed.)