Monday, August 10, 2009

Cowboy Math and Economic Reality

Excited to see a little love for natural capital in the New York Times today.

Guest columnist Eric Zencey thinks GDP, as a measure of economic well-being, is a worry. It's a measure of transactional activity, not a measure of how things are going. For example...

Consider the 50 miles of sponge-like wetlands between New Orleans and the Gulf Coast that once protected the city from storm surges. When those bayous were lost to development — sliced to death by channels to move oil rigs, mostly — gross domestic product went up, even as these “improvements” destroyed the city’s natural defenses and wiped out crucial spawning ground for the Gulf Coast shrimp fishery. The bayous were a form of natural capital, and their loss was a cost that never entered into any account — not G.D.P. or anything else.

Or, if you prefer metaphorical explanations...

When you’re feeling a little chilly in your living room, you don’t hold a match to a thermometer and then claim that the room has gotten warmer. But that’s what we do when we seek to improve economic well-being by prodding G.D.P.

I'd never thought much about G.D.P. before tonight. But I think Eric makes a good point. And now I want to see a counterpoint. Gotta be at least a couple of G.D.P. fans out there, right?

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