In the world of public policy, econ- omists tend to debate the merits or drawbacks of a policy in terms of what it might do to the gross domestic product " the GDP. And while the GDP is a useful measure of the total value of goods and services produced in the economy, it is impor- tant to remember that it is only that: a measure of output.
But as any economist will tell you, the GDP is not a measure of overall societal benefit. It’s a little like trying to assess one’s health simply by meas- uring how much food one eats. As everyone knows, it’s not how much food we eat, but the type of food we eat that makes us healthy.
Plenty of activities are good for increasing the GDP " cutting down trees, litigation, waging war, for exam- ple. And while each of these things may be at times necessary, it’s hard to suggest that we’d be worse off as a soci- ety if we could avoid them. We don’t cut down trees because they increase the GDP, we cut down trees because they provide lumber for our homes and paper for our offices. The increase in GDP is only a statistical tracking of that activity.
If the GDP were a measure of well- being, then the happiest people on the continent must live in Louisiana. In the year after Hurricane Katrina, the state posted among the highest GDP growth rates because of the necessary rebuilding. But no one suggests that its citizens are better off as a result of its surging GDP. I’m fairly certain that the people of New Orleans would gladly trade a few percentage points off their GDP growth to get their city back. Natural disasters are great for the GDP, but that is not a reason to wish for them to happen.
So if we want to predict if citizens will be better off or worse off as the result of some event (a hurricane, a war, a pollution reduction strategy), what other measures do we have? Employment is one. If people lose their jobs " especially if they have few skills that are transferable to other industries " those individuals are clearly worse off. If the unem- ployment turns out to be chronic and widespread, all of society is worse off as well.
But a growing GDP is not always accompanied by growing employ- ment. Remember the North American expansion of the 1990s, dubbed ”œthe jobless expansion”? Sure, production of goods and services was rising, but more because of growing productivity and increased mechanization (i.e., computers). Employment had stagnat- ed, and McJobs came to characterize the career prospects for a whole gener- ation of young people.
So if a growing GDP is not always accompanied by an increase in societal benefit, why would we believe that a falling GDP would necessarily mean a decrease in societal benefit?
Would we be better off if we could somehow wave a magic wand and stop all crime in Canada? Sure, but we’d throw a lot of people out of work at the same time " lock- smiths, police, prison personnel " and probably a lot of pawnshop operators would lose their jobs. In this respect, crime is good for the GDP.
Of course we can’t wave a magic wand and eradicate crime, but no doubt we would if we could. Cops and pawnshop keepers would find other work to do, which would in the long term bring the GDP back up.
Simply claiming that a specific policy is ill advised because it would lower the GDP is a weak argument. If policy opponents want to make their case more forcefully " and there are often forceful and compelling cases to be made " they must demonstrate that the policy would result in a per- manent and irreversible loss of employment and well-being for Canadians. And that’s a tougher argu- ment to make.
Societal well-being is not meas- ured by the GDP. It’s about increasing productivity, growing new industries and generating wealth from creative ideas. It’s about creating fulfilling employment options and healthy places to live. If we want a good hon- est debate about public policy, let’s not limit the focus of the debate to what may happen to the GDP.off if we could somehow wave a magic wand and stop all crime in Canada? Sure, but we’d throw a lot of people out of work at the same time " lock- smiths, police, prison personnel " and probably a lot of pawnshop operators would lose their jobs. In this respect, crime is good for the GDP.