Most of the economic statistics that we rely on to understand how the economy is doing (and contribute to the apartment building investment cycle) were created in the 1930s and ’40s, smack dab in the middle of the Industrial Age. They haven’t changed much
since then, you can find out a lot about woodworking-machine-setters but all web developers are thrown into a single category. Such as they are they were an attempt to measure something that seems quite radical especially coming from economists: Is the government making life better or worse for its citizens? Not how many pairs of shoes were manufactured, how long they sat in warehouses and the average price they sold for.
The intellectual leader for this radical thought was Simon Kuznets who as an immigrant had a special respect for the promises of democracy. He believed politicians should be held accountable for improving the lives of those they were elected to represent. The economists faced two challenges; how do you measure the quality of someone’s life especially when everyone has their own definition, and how do you measure it for an entire nation given that the most advanced computational technology available was the mechanical adding machine?
Operating on the bigger is better principle is was decided that the economy (and by extension our happiness) would be measured by the amount of things it produced. If the economy produced more things per capita from one period to the next it had grown bigger and therefore people’s lives were better.
Now I can think of a number of reasons why more things wouldn’t equal happier people but it was decided that this was as close as they could get to measuring how much happiness was being produced. So certain things like shoes were selected to represent parts of the overall production in the calculations that could be done on a mechanical adding machine. Ironically for someone who started out to measure whether our lives were getting better Kuznets largest contribution was in helping turn economics into an empirical science based on hard numbers like how many shoes were produced.
In Kuznets won the 1971 Nobel Prize for Economics “for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development.” That would also arguably make him the founding father of what’s been termed Physics Envy, applied to economists who believe that if the right equations are used and the correct data is measured precisely enough future changes in the economy can be predicted accurately. In other words they are attempting to turn a social science into a hard science.
The problem is just as language shapes the culture it’s spoken in, what gets measured matters so if we are measured by the things we produce or have, our focus will naturally be producing or acquiring more things… unless we remember that those measurements are just an approximation of whether our lives are getting better. For that Gross Domestic Pleasure as measured by the five components in Andrew Rae’s great illustration above will give a much truer answer. I hope this July 4th weekend you get to improve your gross domestic pleasure and have some time to help improve your family’s and friends’ as well.