Date: 7 Oct 13
By: Frank Gue, B.Sc., MBA, P.Eng.,
2252 Joyce St.,
Burlington, ON Canada L7R 2B5
For: Editors, The Economist
Re: (“We shouldn’t let GDP … guide our decisions”). ( Letters, Oct. 5)
At mention of GDP, all present will face Washington and genuflect.
All will now rise and take note of the fact that GDP is an undifferentiated blend of Value Added (VA), Non Value Added (NVA), and VS (Value Subtracted) activities.
It might well be impossible to create an authentic Net Domestic Product defensibly classifying each of an economy’s trillions of daily transactions into VA, NVA, and VS. Yet the extremes are clear enough:
* Manufacturing, mining, and agriculture are VA activities.
* Criminal activities, the clearing of rain forests, use of non-renewable fossil water, etc, are VS activities.
* Between these extremes lies the vast, infinitely debatable NVA aggregation, whose main occupant is the modern financial system based on Monopoly® money. It is exemplified by financier Greg Smith, who, in Why I left Goldman Sachs, explains how he accumulated personal millions without doing a tap of useful work for anyone.
The fact that we cannot hope to quantify much of this does not excuse us from trying to find a more rigorous guide to economic policy than GDP, which is a broken reed.