GDP: A Brief but Affectionate History

GDP: A Brief but Affectionate History (2014) by Diane Coyle looks at how GDP is calculated. Coyle looks at the history of why and how it was originally calculated, the rise of the importance of GDP and how it has been altered to attempt to measure how economies have changed.

The book goes through economic eras while discussing GDP.The book first looks measurement of the economy prior to WWI and then how measures of the economy were needed. Then the creation of GDP in the 1930s and its rapid rise is charted. The book then looks at the golden age of Western growth from 1945 to 1975 and the crisis of the end of Bretton Woods, Vietnam and the Oil Shock into the 1980s. Following this the next Golden age from the early 1990s until the the GFC, the post GFC era and the future of GDP in the twenty first Century.

The book looks at revisions of GDP, how few countries have much of a history of calculation of GDP and the numerous serious acknowledged problems with the measure. The fact that while income from drugs and prostitution has been incorporated into GDP but household work has not, the problem of trying to account for the financial industry and the problem that GDP was created to measure production of more physical items and the problems that are now being encountered with services accounting for most of the economy in developed countries. The huge importance globally and the way that GDP has been altered by many governments to be poorer to attempt to get loans or to attempt to be richer in order to avoid debt to GDP ratios crossing different thresholds.

The book concludes by stating that although GDP is definitely flawed it is still the most useful measure that has been created for measuring economic activity. Coyle points out that other measures of welfare measurement have tended to be more subjective. Improving GDP and properly funding statistical agencies and giving them thorough independence is suggested.

The book is  a very good, short, crisp read that both traces economic history in the twentieth century and provides a thorough critique of a measurement that has become so important in global affairs.

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