Those who know the price of everything, know the value of nothing.
With the COVID-19 pandemic wreaking havoc worldwide, a lot of attention has
been cast on the effect on the world's Gross Domestic Product (GDP). With this mind, I decided to revisit an old haunt and join a
socially-distanced Zoom-powered teleconference stuffed with some of the most
decorated economists in the world.
The event was dubbed "COVID-19 and the Economy: Looking Back and Thinking Ahead", hosted by City University and moderated by Professor of Economics Saqib Jafarey.
As a side note, City University's existing business school, CASS, has been pressured into changing its name because the original benefactor profited from slavery in the mid-1700s. Most eye-brow raising of all, is that a significant contingent of City's alumni have set up a petition to reverse the decision and intend to initiate court action, claiming that a name change would devalue their qualifications. What a tangled web we weave, eh.
Professor Saqib Jafarey received a BSc in Chemical Engineering from the University of California and a PhD in Economics from New York University. His previous academic positions have included the University of Essex, University of Liverpool, SUNY at Buffalo, Renmin University of China, the Lahore University of Management of Science and the University of the South Pacific.
Original question from George Tchetvertakov to Saqib Jafarey:
Do you think now could be the ideal time to transform the very fabric of how economies are measured and evaluated?
In other words, instead of everything gravitating around GDP and inflation, an alternative system based on capacity utilisation, working efficiency, sustainability, could be set up instead. This would reduce the whole "more more more" culture globally.
Response from Professor Jafarey:
Dear George
Thank you for asking this very interesting question and apologies that we ran out of time before we could answer it.
It is a very open ended
question and one I am not sure that economists are the most appropriate
experts on. At the end of the day, these are philosophical and societal
issues. A lot of economists are libertarian in philosophical orientation,
whether they realise it or not, but by no means do they represent a clear
majority.
I, and many economists that I know, would answer
your question in the affirmative (although I suspect some colleagues would
disagree). I cite the work of Richard Layard and his associates on happiness
and well being, both for the advances they have made in measuring such
intangibles and for their finding that higher income increases personal
well-being up to a point, but after that, income become a means to get ahead
in the rat race. This alone, not counting climate change and other ills,
suggests that a ceaseless pursuit of GDP growth might be counter-productive.
One of the arguments against replacing GDP as a measure of
economic well being has been logistical: there is an established science as
well as long-standing data gathering mechanisms for measuring GDP and verify
measurements from several directions. Replacing it with subjective measures
would reduce the reliability of headline national accounts. Over the years,
this argument has worn thin. The ONS now publishes regular statistics on UK
well-being and in 2008, Bhutan famously declared increasing GNH to be its main
national target.
There are other considerations that need to
be taken into account. First, while GDP and inflation forecasts are not just
useful for governments to gain (or lose) brownie points, they act as signals
which help both firms and consumers make decisions. How would GNH affect such
dynamics?
Second, the current economic model is built on
consumerism and mobility of capital. Both of these tend to act against moving
to a slower, greener economy and the latter does a lot to empower large
corporations vis-a-vis national governments. It does not seem possible to
reform the world order without considerable multilateral effort (assuming that
consumers do not spontaneously boycott it in large numbers). These days we are
moving in the opposite direction.
Third is the issue of
R&D. According to statistics that I have seen, the private sector accounts
for about 60-70% of investment in R&D, even allowing for crowding out
effects from public investment. Much of this is driven by the profit (i.e.
growth) motive. I accept that in an alternative model, R&D would not stop;
rather we would be back in the 1970s world where small start-ups were laying
the grounds for a fundamental revolution in how we add x+y, from which an
entirely new way of living and communicating emerged. But again, how do we get
that model?
I hope to hear back from you, If you respond
soon, and don't mind, I will add your response to the document we are
preparing on post-event Q&A. Also, a link to the video of the evening will
go live soon and a notice sent out.
Kind regards
Saqib
Saqib
My response:
Hi Saqib,
Thank you for your detailed reply and your thoughts on the subject. My view of GDP is rather different and here's why...
First of all, looking at this subject from one perspective or in view of a rudimentary policy shift, will not suffice.
To truly determine the most effective/best way of ascertaining group outcomes, it is essential to consider the subjects of philosophy, Natural Law and morality.
Fundamentally, regardless of the way people measure output/performance, every individual forms an existential view of the world around them.
They have no choice but to accept one of two outlooks: Either the collective is preferential over the individual or vice versa. This is a nuanced step people do not realise they must make (and unfortunately, the vast majority have picked the former). People have tacitly or expressly accepted that it's OK to make an individual suffer if the collective breathes easier.
If we assume that collectives do take preference, then GDP is a superb tool and only improving the accuracy of data is required -- a reckoning and an evaluation of what is actually "best" doesn't need to occur. If the collective trumps the individual, then measuring the total sums of various things makes sense.
However, if we assume that individuals take precedence over groups i.e. that sovereignty can only be found where "agency" is found -- i.e. within the individual mind and body of an individual human being. Therefore, concepts such as rights, freedom, tastes, preferences, guilt, regret etc -- can only occur from an individual's perspective. A "group" cannot think or feel or do, or be responsible for something, only individuals can.
Under the second assumption, measuring what aggregate output (GDP) or other headline figures are, becomes largely inconsequential. If every individual has sovereign rights equal to what a nation or a monarch currently has -- they could issue their own currency, be free from all mandatory taxation, and therefore, would likely concentrate on statistics that point to what really matters in life. Namely, prosperity, efficiency, health, vitality, fitness, longevity, purity and excellence. If people knew that harming others was an inherent wrong in Nature, they wouldn't do so. However, most people do not know this and consider "might" to be "right".
There are plenty of ways to measure actual values of prosperity and indications of aggregate performance, BUT ONLY IF an objective standard is recognised and used as a valid benchmark.
Currently, there are no "objective" principles for health, prosperity, wealth etc -- every individual/country/region picks their own version, and if given enough time, harmful behaviour dressed up as fun or profit quickly becomes commonplace and becomes known as "Culture" and "Civilisation". When in fact, such behaviours are rather uncivilised and foolish. Good examples here would be legalised abortions, pharmaceuticals, synthetic diets, pollution, gene editing, animal cruelty (and the list could go on).
Why GDP is surplus to requirements
GDP is a nominal and transitory statistic that
merely shows a static image of something without any other qualifier or how it
relates to practical real-world events. As a crude analogy, it is like ap
photo instead of a motion picture. Moreover, the concept of GDP only benefits
a particular layer of society rather than serving as a useful tool for society
as a whole. Having access to accurate GDP stats benefits industrialists and
multinationals far more than schoolteachers for example.
There are plenty of statistics that can give various insights, but GDP is used as a barometer (and policy trigger) for almost everything. Alternatives to GDP are multiple including % of resources used efficiently, % of goods recycled, productivity, environmental sustainability, literacy, doctor visits before the age of 10 -- as just a few examples.
However, health and environmental sustainability isn't "cool", it's not easy money and there's no quick buck in it. As a result, the majority of people gravitate toward quick bucks and don't stop to ask whether it may be wrong to do so. That's the larger problem: people just don't care about what is healthy and "good", but only that which suits the agenda of their collective.
If, as both individuals and an economy, people embraced the true principles behind healthy living (natural law, healthy food, no synthetics, no need of government) then all the ills of the world would dissipate away. Alas, the issue is that people simply do not believe that objective principles in accordance with Nature actually exist. And they've also bought into the lie that governments are required for people to be safe while living in groups.
The spread of moral relativism and atheism to the point of being the most dominant world view (especially among the scientific class), has made it almost impossible for people to realise that most economic statistics including GDP are measuring the wrong thing. They are measuring GROWTH but not whether that growth is healthy, or not.
Either you or I, could easily dump a bunch of chemicals into a field and increase the rate of growth of various plants --- but those plants will become warped, mutated, and deviate from the natural order. They would be unhealthy abominations that cause illness. That's the agribusiness industry in a nutshell and it's symbolic of the wider economy -- ill health is considered OK as long as it generates commercial growth (GDP), production, expansion, larger, bigger, more, more, more.
Another symbolic example is pharmaceuticals. As an extreme example to prove the principle -- if you imagine every person being diagnosed with a ghastly illness that will mean years of pain and suffering -- that's clearly a bad thing for individuals and on aggregate in society --- but if this happened, pharma stocks would appreciate immensely, they would generate larger tax revenues, while GDP would rise as more doctors are being hired, more people are spending money, more goods are being bought etc. But as you can see, this is insanity and not civilisation.
Clearly, the architects of society have become so obsessed with GDP, to the point of creating economic monstrosities with a self-reinforcing compunction to win a race to the bottom.
There are plenty of statistics that can give various insights, but GDP is used as a barometer (and policy trigger) for almost everything. Alternatives to GDP are multiple including % of resources used efficiently, % of goods recycled, productivity, environmental sustainability, literacy, doctor visits before the age of 10 -- as just a few examples.
However, health and environmental sustainability isn't "cool", it's not easy money and there's no quick buck in it. As a result, the majority of people gravitate toward quick bucks and don't stop to ask whether it may be wrong to do so. That's the larger problem: people just don't care about what is healthy and "good", but only that which suits the agenda of their collective.
If, as both individuals and an economy, people embraced the true principles behind healthy living (natural law, healthy food, no synthetics, no need of government) then all the ills of the world would dissipate away. Alas, the issue is that people simply do not believe that objective principles in accordance with Nature actually exist. And they've also bought into the lie that governments are required for people to be safe while living in groups.
The spread of moral relativism and atheism to the point of being the most dominant world view (especially among the scientific class), has made it almost impossible for people to realise that most economic statistics including GDP are measuring the wrong thing. They are measuring GROWTH but not whether that growth is healthy, or not.
Either you or I, could easily dump a bunch of chemicals into a field and increase the rate of growth of various plants --- but those plants will become warped, mutated, and deviate from the natural order. They would be unhealthy abominations that cause illness. That's the agribusiness industry in a nutshell and it's symbolic of the wider economy -- ill health is considered OK as long as it generates commercial growth (GDP), production, expansion, larger, bigger, more, more, more.
Another symbolic example is pharmaceuticals. As an extreme example to prove the principle -- if you imagine every person being diagnosed with a ghastly illness that will mean years of pain and suffering -- that's clearly a bad thing for individuals and on aggregate in society --- but if this happened, pharma stocks would appreciate immensely, they would generate larger tax revenues, while GDP would rise as more doctors are being hired, more people are spending money, more goods are being bought etc. But as you can see, this is insanity and not civilisation.
Clearly, the architects of society have become so obsessed with GDP, to the point of creating economic monstrosities with a self-reinforcing compunction to win a race to the bottom.
The Solution
There IS a better way
-- and it starts with accepting the simple premise that an ABSOLUTE standard
of health, prosperity and what ought/should be in the world DOES exist. This standard is recognisable and can be determined by human thought/emotion but
not by static utilitarian statistics that cannot capture or ascertain the
inherent value in organic living beings. Moreover, from the statistics
governments do generate, they are focusing on the wrong ones in terms of
setting policy and incentivising private sector investment. Good examples here
would include policies on drugs, healthcare and education --- all three are
overfocused on short-sighted targets and chasing their own tails in attempting
to deliver their objectives. They're all failures in achieving their set
targets and it's because a genuine benchmark has not been set.
What all these archaic institutions and policymakers are missing, is that just like when you want to grow a tree -- you don't start off with cutting out branches from wood and sticking them together with green bits of paper attached as leaves. That's just a fabrication and not the real thing. The same thing has happened on a macro scale with how policymakers (led by elitist skullduggery) are trying to "grow" their businesses and economies. They are not doing it organically or naturally -- and instead, forcing the issue with taxation, debt, derivatives, government policy, threats, penalties, coercion and abuse. The use of financial derivatives (the lovechild of GDP-focused growth merchants and state apparatchiks) is very much like pesticides -- they provide a boost today and create a desert tomorrow. If you look at any industry in any country, you will notice this propensity for toxicity at the expense of actual health everywhere. It's not an accident and it's not civilised.
Any true system that people should actually be proud of rather than trying to overhaul every 4 years, is one where people are voluntarily first in line to offer a voluntary donation for something to be built or made. Where the most popular celebs are celebs BECAUSE they're the most healthy, able and wise, rather than simply the best revenue generators and marketing pin-ups. A truly good society would be where inventors, healers and teachers of true morality are the most revered and worshipped like rock stars and athletes are today.
For that to happen, people have to understand that the individual matters more than the collective and that according to Natural Law, it is everyone's sovereign right to make a better life for themselves without asking for government permission or a bank loan. Billions of people have been raised with false principles and have been programmed to love materiality, accumulation, self-image worship, hedonism and minimalism. A social engineering program of epic proportions that has left even learned academics and renowned captains of industry to lose their minds in pursuit of their little piece of the cake.
Getting off this archaic system and back onto a path towards genuine health and prosperity requires every individual to realise that Natural Laws including how people should behave are objective, not subjective -- they are not for us to determine, but simply to understand correctly and choose from the available options. This deep spiritual awakening, in itself, takes hard work, introspection and going outside the comfort zone -- but considering how lazy, demoralised and defeatist society has become nowadays, in terms of understanding the inherent principles of life, it will be a miracle if the World Bank, the IMF, the banking sector and the cavalcade of Keynesian sycophants dropped their love of GDP anytime soon.
Regards,
George Tchetvertakov
What all these archaic institutions and policymakers are missing, is that just like when you want to grow a tree -- you don't start off with cutting out branches from wood and sticking them together with green bits of paper attached as leaves. That's just a fabrication and not the real thing. The same thing has happened on a macro scale with how policymakers (led by elitist skullduggery) are trying to "grow" their businesses and economies. They are not doing it organically or naturally -- and instead, forcing the issue with taxation, debt, derivatives, government policy, threats, penalties, coercion and abuse. The use of financial derivatives (the lovechild of GDP-focused growth merchants and state apparatchiks) is very much like pesticides -- they provide a boost today and create a desert tomorrow. If you look at any industry in any country, you will notice this propensity for toxicity at the expense of actual health everywhere. It's not an accident and it's not civilised.
Any true system that people should actually be proud of rather than trying to overhaul every 4 years, is one where people are voluntarily first in line to offer a voluntary donation for something to be built or made. Where the most popular celebs are celebs BECAUSE they're the most healthy, able and wise, rather than simply the best revenue generators and marketing pin-ups. A truly good society would be where inventors, healers and teachers of true morality are the most revered and worshipped like rock stars and athletes are today.
For that to happen, people have to understand that the individual matters more than the collective and that according to Natural Law, it is everyone's sovereign right to make a better life for themselves without asking for government permission or a bank loan. Billions of people have been raised with false principles and have been programmed to love materiality, accumulation, self-image worship, hedonism and minimalism. A social engineering program of epic proportions that has left even learned academics and renowned captains of industry to lose their minds in pursuit of their little piece of the cake.
Getting off this archaic system and back onto a path towards genuine health and prosperity requires every individual to realise that Natural Laws including how people should behave are objective, not subjective -- they are not for us to determine, but simply to understand correctly and choose from the available options. This deep spiritual awakening, in itself, takes hard work, introspection and going outside the comfort zone -- but considering how lazy, demoralised and defeatist society has become nowadays, in terms of understanding the inherent principles of life, it will be a miracle if the World Bank, the IMF, the banking sector and the cavalcade of Keynesian sycophants dropped their love of GDP anytime soon.
Regards,
George Tchetvertakov
Response from Professor Jafarey:
Thanks George, for the detailed response.
I feel in agreement with you that the significance of GDP as a measure of economic well-being is a philosophical one. Many (but not all) economists end up promoting a particular philosophy mainly because they mistake it for science.
I would like to hear your views on using GNH as an alternate headline measure of well-being.
All the best
Saqib
My response:
The GNH index is a step in the right direction because it does step 1: admitting that the current system is broken, not fit for purpose and does not help institutions achieve the goals they say they're trying to.
However, the GNH index is a purely descriptive tool. It may provide an alternative insight into what is actually happening in a country and how people are actually living, but as I said in my previous email, an understanding of objective principles is required to put any observations/data into context.
For example, I could generate an alternative GNH index that is heavily weighted towards wastefulness, harm, toxicity etc -- and if enough people support this index, or, it is enforced by enough henchmen, then it becomes civilisation and culture. If enough people agree this is the best way to live, then it becomes automatically so without any ability for anyone to dissent. Any dissenters are labelled as subverters of culture, discredited and penalised by a raging rabble, usually.
In my book, any concept of "happiness" involves sovereign individual rights to their full extent, and without them, there can be no happiness.
For example, if someone were to be given the opportunity to have all material items or services they desired, for free, for the rest of their life -- but -- they could only participate in these goodies if they were locked up in a warehouse which they could never leave.
Could that person be "happy"? Should that person take the offer? If someone forcibly kidnapped someone else and put them in that situation, would they be doing them a kindness or a disservice?
The reality is no one should want to give up their freedom in exchange for material wealth or security -- because if you're a slave, then any material items you have are meaningless because you're missing what's most important: Sovereignty.
Going back to the HND example, no matter how great that index is, if an individual says "No, I want to be a fat slob and never do anything because this makes me happy" -- then the Bhutan government is going to initiate policy responses to change people's behaviours. If someone in Bhutan says they hate Buddhism and they hate Buddha and that they want to expand their ego as the path to true happiness -- they would be mistreated and their happiness would arguably be reduced.
This is inherently immoral and this is the root problem why "happiness" is not prospering globally -- it is because there is an entity called Government that comes along to enforce often noble principles with sticks and guns without regard for the concept of consent, and thereby making the entire conversation about creating a good/prosperous society completely moot.
I don't know about you Saqib, but I would rather live with the Flintstones as a free human being that is capable of deciding my own path in life, rather than living with the Jetsons in a futuristic material wonderland where everyone is a defacto slave and must conform to consensus standards of health and prosperity.
You may wince at my use of word "slave" but that's exactly what someone is if they are forcibly prevented from exercising their immutable naturally-given sovereign rights.
