If it Aint Broken – Don’t Fix it

By |2011-08-11T19:55:47+00:00August 11th, 2011|CFACT Europe|Comments Off on If it Aint Broken – Don’t Fix it

by Einar Du Rietz

A screwdriver often comes in handy. But not as a soup ingredient. Black pepper is essential in any cooking. But don’t try repairing your bike with it.

Calculation of GDP is, not only among laymen like myself, but also among skilled economists, regarded as a tricky tool indeed. Still, it’ very useful, also for the general public, in trying to grasp all sorts of economic facts and development.

Since the mid 90’s, scientists, but predominantly politicians, have been playing with the concept of a Green GDP, expanding the data to include environmental costs. This process is now gaining speed, e.g., in the World Bank.

This is a questionable path. Even as, naturally, growth and hardship can be linked to environmental factors, it’s not the same thing as to say that environmental factors should be regarded as exclusive data in their own right. Further, changing the calculation methods is difficult for several reasons. You need an international consensus, otherwise comparisons will be meaningless. GDP figures are used to calculate changes over time. If you mess with it, you will have to – somehow – compensate against historical figures.

And including “climate change”, as is being more and more talked about? Careful here. This is an ongoing debate and predictions are all but clear. And how do you intend to translate the virtual lack of global warming over the past decade into economic figures?

GDP, with all it’s shortcomings, is at least useful for showing the development of the GDP/Tax pressure ratio, over time, and in comparison with other countries. Adding new, rather shaky variables seems like little more than inventing another tool for the politicians to polish their statistics.

Just think again, before you pour those extra spices in the soup, try to fix the brakes on your bike. Or try to fix international, economic statistics.