With GDP at an all time low in most countries, and the various central banks virtually out of tools to make a difference, should we be looking at different ways to measure how we are doing.

Perhaps if we looked at Maslows theory of motivation as a starting point. As we live on a small rock with ever shrinking reserves of raw mat, at some point even the knuckle grazers will realize that we cant keep consuming at the present rate without dire consequences for most of humanity in the near future.

Chris

Except we live on a rather large rock with an INcreasing supply of meat. Whether that'll continue into the future is anyone's guess but there's no reason to think the trends of the past 200 yrs will suddenly change.

When people call for the replacement of GDP as a measure of growth, what they often want is to install a measure that gives them the answer they want.

GDP is far from perfect but it's better than anything we've got. But it needs to be read in conjunction with a series of other indicators.

GDP isn't a measure of how we are doing.
GDP is a measure of how much we are doing.

However, when the amount we are doing fails to grow, it's a very strong indicator of serious problems.

mhaze
I put this up as a point to discuss as I agree with Aidan, that there are some very serious misalignment in the economic world. I dont have a strong view, that GDP is irrelevant, however it is clear that the oft referred to tool bag available to the central bank governors is now empty.

Conventional wisdom in economics 101 says that if the economy is slow you boost it by lowering the base interest rate, or increaseing the cash flowing around the system.
These have both been done in spades, but still the worlds economy in the west refuses to rise.

So if the problem is not lack, or cost of credit, then clearly there are other issues that dont respond to the present obsession with pump priming.

It is my contention that when all else fails you need to look at alternative solutions that can't be found by simple looking at the GDP.

IMO we need to start realizing that the economic system that operates around the world is capable of providing all needs and most wants with a lot fewer than most people having a job to go to.

I know that some have touted a universal income, which I believe has merit. However as most governments are heavily in debt, this would merely increase the debt cycle.

The base problem that I see is the heavy accumulation of wealth by a small number of families. Until they start to divest some of this accumulation , by way of the taxation system or a debt jubilee,things are going to grind to a halt.

So for me the issues are wealth accumulation and the world economies efficiency. Perhaps we can find a measure of those factors to add to GDP, to use when deciding. what to do.

Chris

Inevitably zero growth or some negative growth, better known as
contraction, is what we will face.
The cost of the energy transition we are facing will need more funds
than we can raise. Somewhere around 2023-2026 there will be a major
shift in petroleum production and cost.
The cause is the cessation of investment in search & development.
A collapse of production must follow about five years after cessation of spending.
That is the time from investment to new production coming on line.
At present conventional crude oil production is declining at about 4% a day/year.
The difference from 2010 to 2015 was buffered by tight shale oil
production which has also started its decline.

The whole situation has been signalled by the poor financial position
of the major oil companies. The decline in their income made their
investment decisions inevitable.
Saudi Arabia has failed to provide the funds needed by Egypt to
maintain its fuel and food supplies over the last two months.
The whole show looks to be winding down.

The trick is in "value adding" to our resources and primary industries. Since the late 1970's and early 1980's our manufacturing sector, viz a viz car manufacturers, steel makers and even the likes of the good old Hills Hoist/Victa Mowers have been eroded by cheaper imports.

The government subsidised, the unions attacked and the inevitable closures ensued...voila - globalised, consumerised and it all went past our eyes, never to be seen again.

Locals simply couldn't compete against the masses of consumer goods shipped here by the container load. Now we are at the stage where even the boots supplied to our troops are being made overseas.

Shortcomings of GDP
In spite of its popular use, there are a number of potential shortcomings of the GDP measure. One such shortcoming is the measure's failure to properly attribute economic upturns or downturns to genuine changes in the economy's health or to just temporary, cyclical fluctuations. Another possible weakness of GDP is it sometimes tends to lead to over-corrections by government authorities, such as the Federal Reserve, creating situations where monetary policy is tightened to reduce inflationary pressures. This leads to a threat of recession, reacted to by easing money supply restrictions, which leads to inflationary pressures ... and on and on. In comparison with GNI, GDP specifically falls short in its failure to consider income earned outside of the country.
See: http://www.investopedia.com/ask/answers/062315/gross-national-income-gni-or-gross-domestic-product-gdp-better-measure-economic-condition-country.asp