GDP: A Brief but Affectionate History

Good

This is is very well written, non-technical overview of GDP, warts and all. Should be made as a mandatory read for all those who seek to comment on Economics.

Read if you are interested in Economics. It’s not too long and written in simple language and almost no numbers

Well written!

The author is clearheaded, clearly writing, and a pragmatist; She is also endowed with a healthy dose of wit rendering interesting a prima facie mundane subject.A couple of things have to be clarified at the outset: GDP (Gross Domestic Product) which is a particular measure of economic activity that takes place in markets and has prices attached should not be confused with economic well being or social welfare though there is a certain degree of correlation between the two. Also it has to be appreciated that GDP is not a physical entity that has to be measured increasingly more accurately but an abstract human construct.GDP can be measured in three equivalent ways: We can add up all the output in the economy, all the expenditure in the economy, or all incomes.Using expenditure as a basis, GDP equals consumer spending plus investment spending plus government spending plus exports less imports (the trade surplus or deficit). But while GDP is conceptually easy, implementing it that is performing all relevant calculations and incorporating all amendments and refinements is fiendishly difficult. And if this were not enough, changes in the nature of the economy and new considerations such as environmental issues increase both the disparity between GDP and well being and welfare and necessitate evolution of the GDP statistic.GDP was an adequate measure for manufacturing physical products and nation state - based economics of the post - Second World War era. Presently we have an economy dominated by services and intangibles, with much greater variety of products, and closely linked across national boundaries. It is not at all clear that GDP measures well the digital, globalized economy, with its proliferation of zero - price services and matching markets. It certainly does not address the increasingly unequal distribution of growth between different people or groups which we are experiencing since around the 1980s. Finally, GDP does not provide us with an insight on how sustain ably the economy is growing , an ever more important question in the wake of both the Great Financial Crisis and increasing concerns about environment and climate change. So while still using GDP to measure economic activity, it is becoming decreasingly useful as a proxy for either well being and social welfare or sustainability.Also in the light of the above it is also clear that GDP itself has to evolve though we do not know how. We cannot also tell whether we shall use a single statistic for GDP or a dashboard of statistics to encompass a wider array of parameters to include not only economic growth but also well being, social welfare and sustainability.

Diane Coyle addresses an often used, but not fully understood term, and through the process of the study, reveals why a full understanding of GDP is almost impossible to ascertain.This reader has long been aware that GDP can be manipulated, misused and abused for political purposes, whether it was the now infamous overstating of the health of the Greek economy, or the general overvaluation of China's economy. As economic growth is often used as a benchmark of sorts for a bill of political health, it made sense to proceed with a comprehensive evaluation of the idea.Coyle examines the history of GDP, from it's origins as a way of accounting the entire wealth of the Engish nation for military purposes in the late 17th century, to it's official coinage in the 20th century.While Diane Coyle does not address the current issue of China, Coyle illustrates how the Soviet economy was vastly overstated, out of pressure of meeting targets and quotas, to the invariables of measuring economy today.Diane Coyle examines other factors, such as Human Development Index and environmental degradation, but she concludes that GDP is a rather flawed measure that fails to account for many factors, such as websites, technological development, variety of products, and other variables that are difficult to quantify.The general conclusion is that GDP is a flawed measure, but one that is not readily replaceable. A decent and concise read, that probably requires a second reading for proper understanding.

An exceptional book, packed full of insight and condensed into a quick read, but capable of being mind for more detail if you wish.The wonders of social media mean that during my reading of this book when i had a question the author was kind enough to respond to my tweets, so for that interaction alone this was going to get 5 stars.But even if i had been roundly ignored it would still be worth the purchase.I have always been interested in just what GDP is, a phrase you hear banned about all the time, and the clarity this book gives as to what it actually means and more importantly how other government policies are manipulated to manipulate it is fascinating.In particular was the revelation about stay at home parents v putting kids to a sitter.A parent staying at home does not grow the GDP figure but a Sitter does, even though the same job is being done.the History of how GDP was just about what you produced, but how it got wrapped up in Government services and War production is also brilliantly informative.Other highlights are:"as so often in life the roots of failure lay in the nature of success""GDP has never measured service-sector activity well, and services have been growing constantly as a proportion of what we spend our money on. Equally GDP has never captured the most striking and important characteristic of modern capitalism, namely that it is an "innovation machine""you can see the computer age everywhere but in the productivity figures""humans excel at wasting time, experimenting,playing,creating and exploring. None of these fare well under the scrutiny of productivity. That is why science and art are so hard to fund. But they are also the foundation of long term growth"Buy this book, it will open up the vox pops of journolists and politician to you...it will also increase GDP .....I think?

The aim of this book is to get across a bunch of messages about GDP1. It was invented to help measure the ability of a state to wage war2. As such, it's rather good at measuring physical production3. It's as good as useless at measuring stuff that has no market price4. It's rather terrible at measuring services5. It tends to catch up slowly with positive developments that are difficult to quantify6. It currently understates how well we're doing because we benefit from a number of novel consumer surpluses7. It overstates the contribution of finance, which affords the authorities an excuse to favor financial institutions8. Regardless, it's better than the alternatives if you had to sum up in one figure if we're doing better or worse than beforeIn terms of making these points, the book is a triumph. But it's not "engaging and witty" as it says on the cover.And it is not in the least technical. The most complicated equation in here is the good, old AD=C+I+G+(x-m). I was kind of hoping to find out about annualizing quarterly GDP or the effect of a surprise in April inputs versus a surprise in June inputs on Q2 numbers. Or a worked example of how to build it for one quarter. Or a comparison of its composition through history. Dunno, something about how agriculture is no longer as important as it once was. Or a comparison between G7 countries and developing countries. You won't find any of that here. The only technical discussion (without the math) is about converting Chinese GDP into western-equivalent GDP via PPP and its alternatives.It's really for the layman, basically, except I'm not 100% sure that it's simple enough for the layman.That said, it kept me good company in the tube and it opens the discussion with an anecdote from my country, so I'll award it 4 stars.

Diane Coyle enjoyable book is not only an entertaining history of how GDP became the most prominent measure of economic output but also a very valuable deep dive in the uncertainties of the measurement of GDP.Lay people who want to get an introduction into a basic economic concept will find this book not too demanding and be able to get up to speed in a very short time.Professional economist on the other hand might find the book too superficial and not detailed enough, but as the author points out early on in the book that is a trade-off that she has made by choice.In my view this book provides the most benefit to professional investors and financial analysts who deal with GDP numbers on a daily basis - often without fully understanding the numbers. How often have we seen a measure of income like GDP compared to specific assets like the debt of a country even though such a comparison is not technically valid? This book will help investors understand the use and limitations of GDP and the uncertainty around its measurements more thoroughly and as a result will help them make better decisions with regards to macro economic developments in different countries.