An ambitious project to measure the wealth of nations shows how GDP is a deceptive...

[Chris]

An interesting argument against GDP as a measure of economic success, and for measuring actual wealth.

An ambitious project to measure the wealth of nations shows how GDP is a deceptive gauge of progress

Is gross domestic product a sufficient measure of an economy’s health? Many argue that GDP, which counts the sum of the goods and services produced by a nation, fails to reflect a population’s wellbeing, because it accounts for neither distribution of income nor extractive effects such as pollution.

This week, the World Bank published an ambitious project to measure economies by wealth, to get a more complete picture of a nation’s health, both in the present and the future. The Changing Wealth of Nations analyzes the wealth of 141 countries, from 1995 to 2014. The report argues that wealth is a better judge of economic success because it measures the flow of income that a country’s assets generate over time—although it is significantly more challenging to measure. “A country’s level of economic development is strongly related to the composition of its national wealth,” the report states.

Wealth includes all assets, which means human capital (the value of earnings over a person’s lifetime), natural capital (energy, minerals, agricultural land), produced capital (machinery, buildings, urban land), and net foreign assets.

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For most countries GDP is strongly correlated to wealth.



10 countries and where their wealth lies:



Ranking by wealth:

[Peter1469]

GDP is a Keynesian formula. I have offered a fix to it.

GDP = private consumption + gross investment + government spending + (exports − imports), or

GDP=C+I+G+(X-M)

This equation is fatally flawed. It fails to consider government debt spending. So I will fix it:

GDP = private consumption + gross investment + government spending + (exports − imports) - government debt spending, or

GDP=C+I+G+(X-M)-Gd

Gd = government deficit spending. You know a future liability that must be paid back.