Measure the Economy Better

I keep seeing people talk about increasing GDP or raising the stock market in order to “improve the economy”, but all that big talk really seems to be missing the point.

One of the things that distinguished the American economy for many years was our self-production within the home.  It was not so long ago that hand-knit sweaters were a regular Christmas gift, and the ability to make things for yourself means you don’t have to buy them.  That improves your material life dramatically, but generally is not going to show up in the GDP since you did not buy the finished product (just the raw materials).  Likewise, if a person leaves their home to earn money while paying for all the things they used to do for themselves (cooking, cleaning, etc), the result is that the GDP increases even though overall productivity and quality of life decreased.

I sincerely think one of the problems with our economy is our inability to be more self reliant, especially for our basic needs.  When the only way you can increase your worth is to work for somebody else, and you cannot produce anything for yourself, then you will be trapped forever making somebody else rich while you are left with nothing.  (While I think our schools are part of that problem, since they removed most of the practical coursework, one of the ways to fix it is to use the information available on the Internet to learn new and useful skills.  But I digress.)

I think the way we are measuring the “economy” in regular press and economics is failing to capture the individual experience of living within the economy at all levels.  Taking the aggregate production and sales for the entire country completely misses who or where that money is changing hands.  Hypothetically speaking, ten extraordinarily rich men could keep our GDP exceedingly high just exchanging money among themselves, but that is not going to do the average American any good if they don’t get anything out of it.  That sounds like an extreme example, but there are less than six hundred billionaires in our country today, and around eleven million millionaires, but over three hundred million people.  Just because things like the GDP and the stock market are easy to measure, it does not mean they are good indications of the entire economy, and it definitely does not reflect a typical experience in that economy.  Those measurements matter most to the richest among us, who are less than 4% of the population.  It should be no wonder that our economy is broken when we obsess over the fate of such a tiny part of the population when taking our measurements.

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