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Looking Backward: Economics and the Cult of Yesterday

GDP and productivity don't measure what's really going on in the economy—or in people's lives. Jonathan Rowe on measuring what matters.

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By that standard, Bernard Madoff’s teachers were many times more productive than yours or mine. Look at how much more money he made, at least while the game lasted. But then, much of what is called productivity has little to do with work effort to begin with. As oil wells and mines get tapped out, for example, it takes more effort to pull out what remains. “Productivity” declines, but not from a lack of industry among the workers. Rather, the extractive machinery has run up against a geological fact.

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As with the GDP, however, the basic problem is the underlying premise. Where the GDP assumes that more expenditure of money equals a better quality of life, so the productivity dogma assumes that more output is always better than less—that work is always bad and stuff always good. That assumption might have seemed valid centuries ago, when stuff was scarce, toil grueling, and human needs could seem as infinite as the resources available to meet them were presumed to be.

But yesterday is not forever. Can we really say in 2009 that it is necessarily better to produce, say, more cigarettes with less labor? Or violent video games? Or subprime mortgages? Or gas-gorging Hummers? Might we not be better off with less such stuff and more of the work that goes into it—or even better, into something else? At the very least, don’t we have to say, “It depends?" If that's the case, the iron syllogisms that underlie the GDP and “productivity” go out the window.

Then there’s the question of work itself. The syllogism assumes that work is a “disutility,” a nasty and distasteful thing, engaged in only for the consumption it makes possible. Yet today, many people get more satisfaction from their work than they would from the next item that they might buy with the remuneration from that work. Work can provide meaning, dignity, and self-respect. (It is odd that our friends on the free-market right preach the importance of work, and then embrace an economic theology that applauds the continual elimination of that work.)

Some people are actually paying to work—on archeological digs, for example. They pay hefty fees at “health clubs” to make the kind of physical exertion that productivity-enhancing machinery has rid from daily life. People burn gas to drive to the club and then burn electricity to exert on an elliptical trainer or treadmill. Through the alchemy of the corporate market, production has become consumption, and something that was free has become something that we have to pay for. The market creates a scarcity of physical exertion, and then sells us commoditized substitutes for money.

The assumption on which the GDP is based—that more expenditure of money always betokens an advance—is an egregious “value judgment” in itself.

If metrics are to guide us to solutions, then they have to start from an awareness of the problems. Today, for most Americans, the problem is not a lack of stuff, but rather a lack of well-being. It is not an excess of reliance upon human work—if it were, unemployment would not be over 10 percent. Rather, the problem is an excess of reliance upon fossil fuels, land, and other finite resources, along with the waste of capital in arcane financial schemes.

So, why do we still obsess over the productivity of labor, and let energy resources, raw materials, capital, and land loaf on the job? Should we not track—and then prod—the productivity of those, especially when the result could be more of the human employment that we need? Conserving energy provides more work than does wasting it; intensive use of urban land provides more work than does the sprawling wasteful use of it; and so on down the line.

Imagine what would happen if next week, the major news outlets relegated the GDP figures to a News In Brief box, and focused instead on the health and well being that this expenditure betokened—or didn’t. What if the policy establishment worried less about the productivity of labor, which is abundant, and more about the productivity of resources that are scarce? (It would be good, too, if workers got a fair share of the return from increases in their own productivity, in the form of higher pay or more time off.)

The effect would be galvanic. Metrics are silent rulers, in both senses of the word. In defining the task, they also define the steps we must take to carry it out. If we Americans heard about the nation’s lagging energy productivity every day, public pressure would grow to do something about it. As with the gas mileage gauge on a Prius, feedback prompts concern and action.

So again, why don't we hear about it? Entrenched interest is part of the answer. It is not accidental that a corporate economy would embrace metrics that assume that more stuff is always better, and that workers are to be flogged continually while land and resources can be wasted. That script is tailored for those who do the selling, flogging, and wasting.

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There is not much reason, within the existing framework of economic belief, that economists could not shift emphasis from the productivity of labor to that of energy and land. The GDP is a tougher nut. The crude quantitative thinking it embodies is the basis of the profession’s claim to science. Once you acknowledge the need to make distinctions—that is, once you realize that not all “goods” are good and not all “services” actually serve, and that price and value are not always the same—you are beyond the focal plane of the profession's cognitive capacities, and of its ability to turn experience into forbidding math.

Instead, you are in the realm of what economists typically dismiss as “value judgment”. That's as though there is any other kind of judgment, and as though the assumption on which the GDP is based—that more expenditure of money always betokens an advance—is not an egregious “value judgment” in itself.

Not for the first time, those who claim the mantle of science are hung up on an outdated version of it. I do feel for these folks. They have large amounts of intellectual capital sunk in the old faith, and prestige tied up in high positions and awards. But then, they’ve been scolding the rest of us for decades on the need to adjust to new realities. If steel workers have to be retrained as computer technicians, then why shouldn’t the economics establishment take a dose of its own medicine?

At least a few could see it coming. In the past, the likes of Thorsten Veblen, Kenneth Boulding, and John Kenneth Galbraith have challenged the assumptions of their field. (Galbraith’s name still can evoke sneers at meetings of the American Economics Association.) Just recently, a couple of American Nobel winners—Joseph Stiglitz and Amartya Sen—advised the French government to update its national metrics to take more account of economic reality, as opposed to the hoary model embedded in the GDP. French President Nicolas Sarkozy has embraced their report.

The wheels have started to turn. If Old Europe can get out of the rut, then shouldn’t the U.S. be able to do it too? There is no reason to wait for the experts. We can create new measures that include dimensions of life that the conventional ones leave out. We can track well-being instead of just monetary transactions, and the efficiency of our use of land and energy—rather than just that of work.

It doesn’t take a PhD to do this, just clear eyes. The experts will catch up eventually.


John RoweJonathan Rowe wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Jonathan is a contributing editor for YES! Magazine, a fellow for On The Commons and founding co-director of the West Marin Commons.

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