Is The State of the USA designed to replace GDP as the primary measure of economic performance? Macro3 Econ, Chapter 6 McEachern
I am not able to access the online case study that McEachern refers to in his chapter on “Tracking the US Economy.” Therefore, I do not know what is said in that study. Based on what is said in the text and on what is said on the website for The State of the USA, it is best to say that The State of the USA wants to compile a set of measures (but not one single measure) that people can use to determine how well the US economy is performing. These measures would not necessarily replace gross domestic product (GDP), but they would give a more complete picture of US economic performance.
Things like The State of the USA’s measures are needed, some people would say, because GDP is not a very good indicator of economic welfare. GDP only measures the value of the final goods and services that are produced in a country in a given year. This is a good measure of how much the economy is producing, but it is not a good measure of how well the economy is doing in terms of creating a good life for the people of the country.
As McEachern points out in his text, GDP counts even the value of things that might be seen as a bad thing. For example, we count the value of cigarettes that are made and we count the value of the medical services that a smoker needs if they get lung cancer. By counting such negative things, GDP can overstate the quality of life that the country’s economy is creating. GDP also fails to look at how well wealth is distributed among the people of the country.
This is why The State of the USA wants to create new measures to supplement and compete with GDP. It wants to look at things like the level of wealth inequality. It also wants to look at things the amount of pollution that exists in the US or the gap between men and women’s incomes. All of these measures would (The State of the USA hopes) provide a more detailed picture of the quality of life of people in the US.
Thus, we can say that The State of the USA wants to expand on GDP and to provide new measures to tell us more about the state of the US economy. However, this does not mean that The State of the USA’s measures would supplant GDP as the main measure of economic activity in the US.