History of Gross Domestic Product (Gdp)

8/2/2019 History of Gross Domestic Product (Gdp)

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HISTORY OF GROSS DOMESTICPRODUCT (GDP)

Out of the carnage of the Great Depressionand World War II rose the idea of grossdomestic product, or GDP: the ultimate

measure of a country's overall welfare, awindow into an economy's soul, the statistic to

end all statistics. Its use spread rapidly,

becoming the defining indicator of the lastcentury. But in today's globalized world, it's

increasingly apparent that this Nobel-winningmetric is too narrow for these troubled

economic


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1937:Simon Kuznets, an economist at the National Bureau ofEconomic Research, presents the original formulation of grossdomestic product in his report to the U.S. Congress, "NationalIncome, 1929-35." His idea is to capture all economic production byindividuals, companies, and the government in a single measure,which should rise in good times and fall in bad. GDP is born.

1944: Following the Bretton Woods conference that establishedinternational financial institutions such as the World Bank and theInternational Monetary Fund, GDP becomes the standard tool for

sizing up a country's economy.


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1959: Economist Moses Abramovitz becomes one ofthe first to question whether GDP accurately measures asociety's overall well-being. He cautions that "we mustbe highly skeptical of the view that long-term changes in

the rate of growth of welfare can be gauged evenroughly from changes in the rate of growth of output."

1962: But GDP evangelists reign.Arthur Okun, staffeconomist for U.S. President John F. Kennedy's Councilof Economic Advisers, coins Okun's Law, which holds

that for every 3-point rise in GDP, unemployment will fall1 percentage point. The theory informs monetary policy:Keep growing the economy, and everything will be justfine.
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2001: The bursting of the tech bubble and the 9/11 attacks sendthe U.S. economy into a temporary tailspin. During the subsequentrecovery, something unexpected happens: Although GDP risesbetween 2002 and 2006, personal incomes fall.

September 2006: China creates a new index for "green GDP" --

a measure of national economic output that takes environmentalfactors into consideration. The first report finds that environmentaldamage, had it been accounted for, would have knocked 3 percentoff China's GDP in 2004.


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September 14, 2009: The French government releases a report,co-authored by Nobel Prize-winning economist Joseph Stiglitz,that calls for an end to "GDP fetishism."

November 15, 2010: British Prime Minister David Cameron's

government announces that it will, for the first time, surveyhappiness in addition to other economic measures. Who knewausterity would be so warm and fuzzy?

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History of Gross Domestic Product (Gdp)