How to measure success.

In our society, it seems societal success has become equated to GDP.

Of course, there are any number of things that could be used to measure success:

  • Health
  • Education and Intelligence
  • Equality
  • Happiness
  • Social Mobility

I’m sure it’s possible to add more to that list. Here are some numbers based around GDP:

$1 from 1865 (around the Civil War era) is worth roughly $15.83 in 2020. That equates to roughly 1.8% annual inflation until today. The US GDP back then based on estimates I’ve seen was somewhere between $9-11 Billion dollars, I’ll use $10 billion for easy calculation, for roughly 31.5 million people.

Scaling the 1865 GDP by the 1.8% annual inflation yields $158.30 Billion in 2020. However, that was for a population of 31.5million. Today, we have between 330 and 400 million residents in the US. Scaing things up appropriately using 400 million residents that equates to a GDP of $2.01 Trillion. Yet the GDP today is actually about $22 Trillion. About 11 times the amount suggested by inflation and population growth!

Why is that?

Things like automobiles, computers, cell phones, software, roadways and electricity weren’t part of the economy back then. These things add to growth that wasn’t accounted for in the scaling from 1865.

There are plenty of things that people ask, “How are we going to pay for that?”

No one had an electric bill in their household budget in 1865, yet here we are, with all of society paying for electricity, a consistent line item in nearly any budget. Considering the costs in a system where the products or services and the associated revenues from them don’t currently exist won’t produce a model that shows things ever panning.

As a result, GDP is a story used to make a case in any direction the person telling it wants the story to go. For example, a person who eats every meal out, then suddenly starts becoming diabetic, and having health issues decides to start cooking for themselves. Spends less on food, saves money, and becomes healthier, yet GDP drops.

“We can’t have people cooking at home, that lowers our GDP.”

It’s true because he spending less on groceries than paying the restaurant. The difference is lost GDP if he doesn’t spend that money on other things and instead saves it. It’s a story that shows the absurdity of putting GDP above all else. If we measured this persons health, he would be improving that metric by making the change.

GDP is not actually a measure of societal success at all. Instead, picking another one of the categories would be much better and make things much harder to spin.