In 2014 Britain’s Office for National Statistics revised its GDP methodology to comply with EU standards. It discovered something remarkable: the United Kingdom’s economy was nearly five percent larger and growing faster than previously thought. That is, after accounting for prostitution and illegal drugs.
It would be absurd to celebrate this methodological adjustment as economic growth. Surely socially destructive activities shouldn’t count as prosperity. Yet our public policy debates fixate on measures of growth with seemingly little regard for what is included or excluded. Politicians eagerly await the release of top-line figures. Pundits treat GDP growth as a barometer of economic health and policy success. Aggregate economic growth sometimes appears to be our only virtually unassailable, bipartisan goal.
Growth is good. But as the British example attests, not all “growth” is valuable, nor is every measure a proxy for prosperity. Simon Kuznets, the Nobel prize-winning economist who designed the first ever GDP measure in 1934, cautioned that “the welfare of a nation can scarcely be inferred from a measure of national income.”
Some environmentalists go further. In their view, it is not enough to reduce emissions—those are mere symptoms of a deeper problem. The health of the planet has instead been jeopardized by the pursuit of growth itself. We should aim, they argue, to generate prosperity within fixed, even shrinking, output—to de-grow the economy.