Just About All of Us Use “Economic Growth” Incorrectly
Economic growth is per capita gross domestic product or GDP (referred to as the gross national product until 1992), the total value of all goods and services our society produces. It is growing a larger pie, a chance for everyone to get more.
Simon Kuznets, who eventually won the Nobel Prize in economics, invented the notion of GDP in 1934 to provide government decision-makers—then trying to combat the Great Depression—with a standardized measure of economic well-being.
Kuznets warned, however, that his numbers were a rough measure and nothing more than a rough measure intended to show little more than variations contrasted to a fixed baseline. These numbers could be abused or mis-used, he publically told government officials for decades, in exactly the ways–as we will discuss soon–we continue to abuse them today.
Growth, perhaps not surprisingly, is not always called growth. We often hear words like affluence, wealth, prosperity, development, abundance, and boom-times. An economy that enjoys these traits is “dynamic,” “moving” and enjoying a “rising standard-of-living.” And then, of course, there’s the new transitive verb “growing,” as in “we need to cut taxes as a way of growing the economy.”
When there are many words for the same thing, or for what is mostly the same thing, this is a good sign our thinking has become fuzzy.
Nonetheless, these words convey value judgments; e.g. “prosperity” is good and represents “progress” (much more on progress soon).