The fundamental problem of economists is their lack of accountability, says co-director of the Center for Economic and Policy Research, Dean Baker.
A debate over measurements and alternatives to GDP is likely to prove a distraction to the more fundamental issue, which is the corruption of the economic profession. The fact is that economists are doing horribly even by their own measure: GDP growth in most wealthy countries has been abysmal for the past three years. However, few if any economists are held responsible for the policy failures that led to this economic disaster. This is due to the fact that the economics profession is largely unaccountable to the general public.
Nowhere is this more evident than in the policies pursued by most major central banks in the wake of the downturn. If it is possible for events in the world to discredit a theory, then the inflation targeting that was the guidepost of policy for most central banks prior to the collapse has been discredited. The idea that if central banks focus on maintaining a low and stable inflation rate it would lead to the maximization of employment and growth, looks about as accurate as claims that the earth is flat. Yet the European Central Bank, the Federal Reserve Board and most other major central banks continue to claim that they are following a policy of targeting 2.0 percent inflation.
This point is relevant to this debate over economic measures, because if the economics profession is not honest in discussions of its pursuit of growth, then there is zero reason to believe that it would be any more honest in its pursuit of any other measure. The fundamental problem is a lack of accountability to the public as a whole, not the fact that they are using the wrong measure.
As a practical matter, no serious economist would argue that economic growth is a comprehensive measure of wellbeing. It is a useful measure in the same way that weight is a useful measure in determining whether someone is healthy. If a person has a near ideal weight, it doesn’t mean that they are not suffering from cancer or some other fatal disease. However, if they are 50 pounds underweight or overweight then it is likely that they have some serious health issues.
A physician assessing the health of her patient would want to know her weight; however, no physician in their right mind would end the examination there. In the same way, any reasonable economist would go beyond a measure of GDP or per capita GDP to look at distribution, the state of the environment, the quality of health care and education and other measures of wellbeing to assess an economy’s health. The problem is not measurement, the problem is accountability.