Financial commentary abounds in the news, but few stop to consider what this commentary says about American values. Although economic analysis is designed to explain our material condition, we frequently look to this analysis to affirm our overall quality of life.
In the November issue of The Atlantic, Megan McArdle argues that financial commentators incorrectly link Gross Domestic Product (GDP) with economic well-being. GDP is only intended to measure the dollar amount of American production, not the actual quality of said production; oddly, analysts often assume that the two are equal.
McArdle clarifies the distinction between “quality” and GDP:
GDP does not, and cannot, reflect the waste of enormous effort, and precious natural resources, that went into building something that suddenly no one wants. Moreover, it misses many other aspects of our existence. . . . [I]n India’s national accounts, all of Mother Teresa’s labors among the poor would have had only the most minimal possible impact. GDP can record how much money we spend on health care or education; it cannot tell us whether the services we are buying are any good.
The amount of resources thrown at a project doesn’t account for actual value. Conflation of economics with quality of life serves to show we over-emphasize material well-being. We neglect traditional values, familial and communal relationships, natural resources and quality education, because it doesn’t add anything to the economic score. Yet all these things improve social and moral standards, thereby improving our quality of life. A fiscal tally can’t pin down social well-being.
Financial advisors point out that some people who drive fancy cars, wearing expensive clothes, maintain an appearance of being wealthy, but in fact, are in the grip of debt or bankruptcy. Economic analysis is similarly deceptive. Our value assessment is based on appearances, rather than inherent worth.
McArdle adds, “much of the progress in important areas of life is invisible to most people.” Material well-being is an essential part of our livelihood, but economic growth ultimately doesn’t determine our values or our happiness. While financial analysts must stop conflating GDP with economic stability, we, the general public, should stop believing that economic stability equals overall wealth. ‘