Is higher GDP a good thing?

Today’s news that the U.S. GDP shrank by 6.2 percent in fourth quarter 2008 got me thinking about the question whether a growing GDP is actually a good thing.

Some people would say I must be crazy (or even evil) to even ask that question. Growth is an important assumption behind the prevailing economic model — the economy must grow so more people can live at a higher level materially.

The Wikipedia entry for gross domestic product (GDP) defines and explains GDP.

Wikipedia also has an entry for an interesting alternative measure, the Happy Planet Index (HPI), advocated by an organization called the New Economics Foundation (nef).

The nef says it is creating “a new framework for real wealth creation by redefining wealth to focus on increased well-being and environmental sustainability rather than on just having and consuming more things.”

AB — 27 February 2009

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Is media bias making the economy worse?

Transferred from Quriosity 2/27/09:

Recently I raised the very gloomy question whether the whole economy is one big bubble.

This got me thinking about the roles of optimism and pessimism in the ups and downs of the economy. Often I hear people claim (or at least express the fear) that all the pessimistic media coverage about the current economic turmoil is actually making things worse. A cynic might point to this claim as yet more evidence of Bubbleconomics at work.

This article by Faye Mallett of the Galt Global Review raises the question,

Could media be held legally liable if exaggerated reports of the global economic crisis prove to further decrease consumer confidence and actually worsen the situation?

(The date of Mallett’s article is given as January 13, 2008, but I’m pretty sure 2009 is meant, so the article is probably more current than one might think.)

Mallett cites research supposedly demonstrating that the media are biased toward economic pessimism in the current economic crisis. On the other hand, media during the Great Depression “invoked a much more positive and optimistic outlook,” she writes.

I read a certain irony into that: Is it possible that the overly positive press in 1929 blinded people to the reality of how bad things really were?

As a source, Mallett references a report from the Business & Media Institute (BMI), “The Great Media Depression.” BMI’s web site describes the organization as devoted to “analyzing and exposing the anti-free enterprise culture of the media.”

AB — 23 February 2009

Bubble Economics

Transferred from Quriosity 2/27/09:

Today the phrase “Bubble Economics” occurred to me as a way to describe the kind of over-valuation and ‘irrational exuberance’ that occurred during the recent real estate bubble and the previous Internet bubble.

One of the disappointing aspects of Internet search is that you can find out very quickly that you were not the first person to come up with a brilliant term like Bubble Economics. For example, here is a Slate article on the topic.

However, the idea that came to me this morning is that Bubble Economics possibly applies at a much bigger and higher level than isolated bubbles like real estate and Internet stocks. (Oh yes, I just thought of the 17th-century tulip bubble in Holland as another example, although interestingly the Wikipedia entry introduces some doubt into this old story.)

My thought, disturbing as it is, is that the entire growth-oriented globalizing economy can be seen as an unsustainable bubble. If true, that would imply that the widespread aspirations for a continually-expanding global middle-class might be ultimately unattainable.

Recent thinking around the peak oil issue speaks to this question. Going back further in time, E. F. Schumacher’s “Small Is Beautiful” book is interesting as well.

AB — 26 January 2009

Peak Oil Notes

Transferred from Quriosity 2/27/09:

Originally posted on The Reluctant Geek:

Just wanted to pin down a couple of resources on the topic of peak oil — the idea that world demand for oil will bump up against the limit of what can be extracted, refined and distributed, resulting in catastrophic shortages. Most advocates I have encountered think this will happen soon.
This is an item that aired on NPR today on Weekend Edition:
Here is a report from energy consulting firm CERA taking serious issue with the peak oil argument:
Chris Martensen’s Crash Course in Economics lays out much of the reasoning behind peak oil thinking, as well as some very interesting ideas about the broader economic environment and limits to growth. Martensen’s course is also an interesting approach to presenting information.
AB — 12/13/08