Wednesday, October 08, 2014

A thought about indicators for national planning.

I quote from an article in BloombergView:
It took more than 250 years, the Wall Street Crash of 1929, and a worldwide depression for economists to fully appreciate Petty’s quantitative approach to national income. The first to investigate the concept comprehensively was John Maynard Keynes, in “The General Theory of Employment, Interest and Money,” in 1936. Meanwhile, Presidents Herbert Hoover and Franklin D. Roosevelt had commissioned the economist Simon Kuznets to develop estimates of U.S. income to guide their policy responses to the Great Depression. 
Kuznets’s “National Income, 1929-1932,” was the first comprehensive measure of national income and output. His accounts, a set of industry-by-industry estimates, allowed Roosevelt to describe the performance of the U.S. economy in his budget request to Congress.
Guy, a very competent economist, tells me that there is a huge literature seeking other ways to measure the performance of the economy. GDP was introduced following the second industrial revolution (see my previous post). The first had been related to mass production and machine manufacturing; the second involved electrical power and internal combustion engines, as well as the automobile  assembly line. It is perhaps not surprising that after the Wall Street crash and during the Depression, interest was in the total production of goods and services, as well of course as employment.

I tend to be more interested in welfare. It seems to me that adding $1000 per year per child to a poor single mother's income does a lot more good than adding a comparable amount to Bill Gates income. Can we get to a measure of welfare that would help develop policies that favor a more equitable distribution of income?

I also suspect that we have enough goods and work too much. People might be happier if we organized society so that more work was done by machines and people had more time with their friends and families, where they live healthier lives; where more time was spent improving their mins and information to enable them to be better parents and citizens. Could we build national accounts to help move toward such an economy?

I suspect we need many indicators to manage a nation well using modern approaches. Perhaps it is time to look more closely at those beyond GDP per person.

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