Hooray for GDP!

an article published in CentrePiece Volume 17 Issue 3 (Winter 2012)

The idea of having GDP growth as the main target of economic policy has been under attack in recent years. Nicholas Oulton answers some of the criticisms and argues that continued GDP growth would be good for the UK – and not just in the short term to reduce high levels of unemployment.

This paper was originally published in June 2012 as a submission to the LSE Growth Commission

Abstract

Should raising the growth rate of GDP per capita be a policy goal of governments in general, and of the British government in particular? Many people would say no, for the following reasons:

1. GDP is hopelessly flawed as a measure of welfare;
2. Growing GDP is pointless since most people don’t benefit;
3. Raising GDP per capita is pointless as it doesn’t make people any happier; and
4. The planet is finite, so further growth of GDP (at least in rich countries) is not feasible anyway.

I discuss and reject all four of these objections. I urge the LSE Growth Commission to focus its efforts on policies to increase the growth rate of GDP per capita in the medium and long run.

Full text (PDF 26pp)

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