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size of the task. It became possible
only through developments in
statistics, survey techniques,
and studies of the whole economy.
Crunch number
From their first appearance,
GDP figures presented an almost
irresistible lure for politicians,
journalists, and economists. In a
simple form they appear to present
a figure that sums up all the most
important facts about an economy.
Rising GDP means more jobs and
higher wages, while falling GDP
means unemployment and
uncertainty. After World War II
debates over economic policy very
rapidly turned into little more than
a series of arguments over how best
to increase GDP. Different policies
were pursued, but they all had
the same aim.
However, this overlooked some
important questions. GDP is only
a number, and perhaps not the
most important one. There is no
necessary connection between
GDP and real social welfare, as
Kuznets himself once pointed out
in a US Congressional hearing.
Rising GDP can be distributed very
unevenly, so a few people have a
great deal of money while many
others have very little. Other factors
that make people happy, such as
familial or friendly relationships,
simply do not register on its scale.POST-WAR ECONOMICS
The aim is to
maximize happiness,
not income.GDP was developed
to measure the income
of an entire
national economy.But national income
is not the same as
national welfare.Happiness and well-being
may not increase
with rising income.Other economic
and social variables
may matter more.Nonetheless, GDP became the
paramount statistic in economics
and was taken to show that a
country was doing well. It was
widely believed, if never quite
demonstrated, that even where
GDP did not perfectly match
welfare, both welfare and GDP
would move in the same direction.
A direct challenge to the
concept of GDP and national
income was provided in 1974 by
US economist Richard Easterlin.
He looked at surveys of people’s
reported happiness in 19 countries
for the previous three decades and
suggested that the link between
GDP and welfare was not as robust
as people thought. Easterlin found
that reported happiness increased
with income, much as expected.
But for those earning above
subsistence levels, the variation
in reported happiness across ❯❯Envy is one cause of unhappiness.
Whether or not your neighbors
have more than you can be a more
important factor to your well-being
than how much you have yourself.See also: Measuring wealth 36–37 ■ Efficiency and fairness 130–31 ■ Conspicuous consumption 136 ■
Markets and social outcomes 210–13 ■ Behavioral economics 266–69 ■ Gender and economics 310–11