Gross Domestic Product - Definitions and Problems

GDP and its Discontents

GDP

GDP - Definitions, Problems, Self-test
- Key Definitions: National Income and Product Accounts
- GDP and its components
  The link will show the major components of GDP as a percent of GDP.
  You should look at the graphs with these questions in mind:
  - Does the component remain constant, increase or decrease smoothly?
  - How does the component behave during a recession? Does it increase or decrease?
  - Is it a leading, coincident ,or lagging indicator of GDP? That is, does it
    - decline before a recession starts and rise before it ends? (leading indicator)
    - drop during the recession and rise at the end of the recession? (coincident indicator)
    - rise only after the recession ends? (lagging indicator)
  - GDP and GDI from 2006 to 2011
    Note that GDI (correctly) indicated a deeper recession than GDP did.
    Justin Wolfers, in his article We're Halfway to a Lost Decade argues that reliance on the GDP figures misled policymakers in the early stages of the recession.
  - Self-test questions on GDP -- Answers to Self-test
  - Text problems - Chapter 5 (Intro to Macro)
  - Text problems - Chapter 6 (GDP)
- Data Sources
  - BEA NIPA tables
  - FRED: GDP and Components
  - GNI Per Capita, 2009, World Bank.
    Explanations of the methodology are found in the following tables:
    - GNI per capita, Purchasing Power Parity from World Bank datasets
    - GNI per capita, Atlas Method from World Bank datasets
  - GDP in the Recession, 2007-2010 Quick summary of recent GDP numbers. Are the levels, changes, or percentage changes more informative?
Problems with GDP as a measure of welfare
- Gross National Happiness
  - The Happynomics of Life by Roger Cohen. New York Times, March 13, 2011. David Cameron, the British Prime Minister, plans to introduce a happiness index.
  - Does Economic Growth Improve the Human Lot? Some Empirical Evidence by Richard Easterlin, in Paul A. David and Melvin W. Reder, eds. Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz, NY: Academic Press, 1974.
  - The Hippies were Right all Along about Happiness by Andrew Oswald, Financial Times, Jan. 19, 1996. Shorter summary of Easterlin Paradox
  - Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox by Betsey Stevenson and Justin Wolfers, Brookings Papers on Economic Activity , Spring 2008. Criticism of Easterlin's approach.
  - Maybe Money Does Buy Happiness After All , David Leonhardt, New York Times, April 16, 2008. on the Stevenson-Wolfers paper.
- Broad measures of Welfare
  - GDP Fetishism by Joseph Stiglitz, The Economists' Voice,(Sept. 2009), Vol. 6, Iss. 8, Article 5. (May require access from a university computer.) A very brief survey of the problems with GDP. A much longer survey is in Commission on the Measurement of Economic Performance and Social Progress , with Joseph Stiglitz, Amaryta Sen and others. Discussion of the problems with GDP as a measure of welfare
  - Beyond GDP? Welfare Across Countries and Time by Charles I. Jones and Peter Klenow. Stanford Working Paper, Sept. 2010. See the slides for a brief summary.
  - GDP and Beyond. Measuring Economic Progress and Sustainability by J. Steven Landefeld, Brent R. Moulton, Joel D. Platt, and Shauda M. Villones. Survey of Current Business, April 2010. What the BEA is doing about extending the national accounts.
  - There's more to Life than GDP, but how can we measure it? by Jennifer Thomas and Joanne Evans, Economic and Labour Market Review, 4:9(Sept. 2010), UK Office for National Statistics.