E-M8 Entrepreneurial Management for Eternal Mission

GDP does not measure productivity. Very often media and economists refer to change in GDP as improvement in productivity. I will argue that is nothing of the kind. It is a measure of how busy we are trading with one another, but not of how much value we create for one another. It is a measure of efficiency, but by no means one of effectiveness. It is a measure of activity, but not performance.

If I mow your lawn and you give me $20 and you cut my hair and I give you $20, GDP will record $40 in financial activity. If we do the same thing for each other at no cost, GDP records $0 in financial activity. It however, does nothing to capture how much better off I am because of a haircut and you are because of your mowed lawn.

A snow storm or a huracane (or clearing out the roads after it) creates lots of economic activity, but it certainly subtracts from the value that we all have.

GDP is a measurement of a mass production era, when there was a connection between efficiency and effectiveness. It is going to be a lot less useful in the information age.

An example of why this matters follows:

We can have the choice of designing our neighborhood in such a way that work, stores, schools, parks and everything we want is within our reach by just doing good planning and thinking things through (information technology). We can have communities that focus on creating quality time for one another through free or nearly free activities. As a result, quality of life can be great, yet the amount of visible economic activity low. 

On the other hand we can build great big freeway infrastructure and zone our cities in such a way that to get anywhere people have to drive 20-40 minutes. We can spend 4 hours a day in traffic while waiting to get to mental help specialists who can explain to us why we are screwed up. We can work long hours doing things we hate, only to continue running on the treadmill of buying more stuff. If we did that our life would likely be quite miserable, but we would be generating lots of GDP.

One of the postulates of TRIZ is that the ideal system is lack of the system but full performance of  its function. GDP advises us to build a bigger system, rather than eliminate the system altogether. Therein is GDP’s problem.

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