GDP: A Brief but Affectionate History - Revised and expanded Edition

by Diane Coyle

Why did the size of the U.S. economy increase by 3 percent on one day in mid-2013—or Ghana’s balloon by 60 percent overnight in 2010? Why did the U.K. financial industry show its fastest expansion ever at the end of 2008—just as the world’s financial system went into meltdown? And why was Greece’s chief statistician charged with treason in 2013 for apparently doing nothing more than trying to accurately report the size of his country’s economy? The answers to all these questions lie in the way we define and measure national economies around the world: Gross Domestic Product. This entertaining and informative book tells the story of GDP, making sense of a statistic that appears constantly in the news, business, and politics, and that seems to rule our lives—but that hardly anyone actually understands.

Diane Coyle traces the history of this artificial, abstract, complex, but exceedingly important statistic from its eighteenth- and nineteenth-century precursors through its invention in the 1940s and its postwar golden age, and then through the Great Crash up to today. The reader learns why this standard measure of the size of a country’s economy was invented, how it has changed over the decades, and what its strengths and weaknesses are. The book explains why even small changes in GDP can decide elections, influence major political decisions, and determine whether countries can keep borrowing or be thrown into recession. The book ends by making the case that GDP was a good measure for the twentieth century but is increasingly inappropriate for a twenty-first-century economy driven by innovation, services, and intangible goods.

Genres: Economics, Nonfiction, History, Business, Finance, Politics, Money

170 pages, Kindle Edition

First published February 23, 2014

About the author

Dame Diane Coyle is a British economist, academic and writer. Since March 2018, she has been the Bennett Professor of Public Policy at the University of Cambridge, co-directing the Bennett Institute.
Coyle's early career as an economist was followed by a period in journalism including being economics editor at The Independent from 1993 to 2001. She was professor of economics at University of Manchester from 2014 to 2018. She was vice-chair of the BBC Trust from 2011 to 2016 and a member of the UK Competition Commission from 2001 until 2009.
Coyle has written nine books on economics.

Reviews

[Riku Sayuj · Rating 3 out of 5]

The Mismeasure of "Progress": A Race to the Bottom?

This is a quick history of macroeconomics, dressed up as a history of GDP. It does cover the initial struggles of measurement, standardization etc, and also covers the modern debates over the efficacy of GDP/GNP as a useful aggregate measure. But in the end it is just a very compressed history of the evolution of macroeconomic ideas - primarily because the measurement tools of any science will closely follow the ideas that create the imperative to measure in the first place.

GDP: History’s Puppet

One interesting thing to note is that it was always crises that led to adjustment in measuring:

The need to pay for the World Wars made us realize the need to quantify the economy better. It was the experience of the Great Depression had already naturally focused political attention on how fast—or not—economic output was growing, and governments wanted both to measure and to influence it.

Economic crisis has always been trigger for interest in alternative measurements. The combination of the Great Depression and World War II brought us GDP in the first place. The crisis of the mid-1970s combined with the nascent environmental movement to prompt an initial wave of interest in new types of indicator, although these took a decade or so to come to fruition.

The present crisis has breathed new life into a range of alternative approaches such as “happiness,” welfare indexes, and dashboard approaches, not to mention raising a serious question mark over the current standard method for calculating the contribution financial services make to the economy.

Is this crisis (or this cascade of interacting crises) the time for leaving behind GDP and turning to some new way of understanding and measuring “the economy”?

+++

Which brings us to the following discussion on what could happen if we fail to adjust GDP to reflect the new crisis and the urgent requirement to orient our economy better by measuring it better.

Standards-Lowering Competition: A Race to the Bottom?

As Herman Daly says in his 'Ecological Economics':

At the same time that international trade agreements make it difficult for countries to legislate against externalities, the need to compete for market share reduces national incentives to legislate against externalities in what is known as standards-lowering competition (a race to the bottom).

The country that does the poorest job of internalizing all social and environmental costs of production into its prices gets a competitive advantage in international trade. More of world production shifts to countries that do the poorest job of counting costs—a sure recipe for reducing the efficiency of global production. As uncounted, externalized costs increase, the positive correlation between GDP growth and welfare disappears or even becomes negative.

Recall the prescient words of John Ruskin: “That which seems to be wealth” becomes in verity the “gilded index of far reaching ruin.” The first rule of efficiency is “count all the costs,” not “specialize according to comparative advantage.”

+++

The continued use of GNP/GDP as a proxy for welfare should remind us of the quote often attributed to Yogi Berra:

“We may be lost, but we’re making great time.”

[Athan Tolis · Rating 4 out of 5]

The aim of this book is to get across a bunch of messages about GDP

1. It was invented to help measure the ability of a state to wage war
2. As such, it's rather good at measuring physical production
3. It's as good as useless at measuring stuff that has no market price
4. It's rather terrible at measuring services
5. It tends to catch up slowly with positive developments that are difficult to quantify
6. It currently understates how well we're doing because we benefit from a number of novel consumer surpluses
7. It overstates the contribution of finance, which affords the authorities an excuse to favor financial institutions
8. Regardless, it's better than the alternatives if you had to sum up in one figure if we're doing better or worse than before

In terms of making these points, the book is a triumph. But it's not "engaging and witty" as it says on the cover.

And it is not in the least technical. The most complicated equation in here is the good, old AD=C+I+G+(x-m). I was kind of hoping to find out about annualizing quarterly GDP or the effect of a surprise in April inputs versus a surprise in June inputs on Q2 numbers. Or a worked example of how to build it for one quarter. Or a comparison of its composition through history. Dunno, something about how agriculture is no longer as important as it once was. Or a comparison between G7 countries and developing countries. You won't find any of that here. The only technical discussion (without the math) is about converting Chinese GDP into western-equivalent GDP via PPP and its alternatives.

It's really for the layman, basically, except I'm not 100% sure that it's simple enough for the layman.

That said, it kept me good company in the tube and it opens the discussion with an anecdote from my country, so I'll award it 4 stars.

[Nandakishore Mridula · Rating 3 out of 5]

I must say that this entity has always intimidated me a little (maybe because it resembles DGP - "Director General of Police" - I've always had an unreasonable fear of the gentlemen in khaki): or maybe because I don't know what the hell it means. All my politically and economically erudite friends use it left and right (pun intended) to prove that the government is doing well (if the party they support is in power) or the government is a mess (if their opponents are in power). In such situations, I nod my head sagely, try not to look too foolish, and slowly sidle away from the conversation.

But no more! Diana Coyle has explained very clearly what is meant by the GDP, and now I can talk intelligently about it... er, well, reasonably intelligently... or, again, maybe not...

Don't get me wrong. This is an excellent book, very short, concise and clear. It explains the concept of GDP, how it can be measured, what it is good for, and what are its limitations. I tried to wrap my head around these concepts, but got totally lost when the author came to the section about financial services: I could not make out what is a product and what is expenditure, or whether these terms have any meaning when the product is just a number on a computer screen, like share prices.

But I took away one thing very clearly - GDP does not measure welfare! So a high GDP does not necessarily mean the people of a country have it good! Well, put that in your pipe and smoke it, you apologists of market economy and capitalism!

(To be expanded further when I get time.)

[Jeroen Vandenbossche · Rating 4 out of 5]

It is somewhat ironic that Gross Domestic Product or GDP, one of the measures most central to the contemporary debate on economic policy, is also the one which has fallen prey the most to what Marx refers to as “commodity fetishism”.

While GDP figures are pervasive in the media and often thrown around in policy making discussions, few people have a more than superficial knowledge about the production process underpinning national accounts data. Like the religious fetishes Marx alludes to in the first chapter of “Capital”, GDP is often perceived as an objective reality, something that exists “out there” as an independent reality that can be measured; not as the constructed reality (i.e. a “product of human labour”) that it actually is.

Although far from being a Marxist manifesto, Diane Coyle’s “GDP: A brief but affectionate history” offers the perfect anti-dote against contemporary GDP-fetishism. For all end users of GDP figures who wish to know more about how they are constructed but feel daunted by the prospect of having to read the official UN 2008 System of National Accounts manual*, this little book is a useful and well-written reminder of what GDP stands for and of the many conceptual judgment calls which underpin the seemingly routine production of national accounts statistics.

As its subtitle suggests, the book recounts the history of GDP from its inception until the present day. The first chapter briefly refers to the early days of national accounting in 17th century Britain and 18th century France to then zoom in on the birth of modern national income accounting between the late 19th century and the second World War. Subsequent chapters deal with the golden age of GDP between 1945 and the 1975, the legacy of the 1970s, the period between 1995 and 2005 and the questioning of GDP following the global economic and financial crisis. The book concludes with some personal reflections on whether GDP is still fit for purpose in the twenty-first century.

This historical narrative allows Coyle to make a number of important points in a convincing and pedagogical way: that GDP never was intended as a measure of (economic) well-being or social welfare; that comparing GDP measures between countries is (a lot) trickier than it sounds; that GDP as a metric of total output is ill-adapted to a service economy; that GDP does not capture such important aspects of the economy as innovation, quality or diversity of output; that it (severely) overestimates the value added by the financial services sector; that it does not take environmental externalities of economic activity into account; etc.

This slim volume obviously does not fully exhaust the topic. It is clearly Intended for the general public and, while it gives a good insight in the basic conceptual underpinnings of national income accounting, it does not engage with the notoriously complex methodological issues of data collection or more technical issues such as the valuation and ownership of natural assets for example.

It is also true, as one reader has remarked here, that Coyle’s historical approach leads to some amount of repetition. That is because the debate about the limitations of traditional measures of economic output and the desire expressed by many to go “beyond GDP” are as old as the measure itself and have resurfaced many times throughout its history.

Precisely for that reason, I found Coyle’s book to be very welcome: in less than 150 pages, it brings the layman reader with an interest in this age-old debate up to speed without overly simplifying matters and while avoiding unnecessary technical jargon. “Faut le faire” is the appropriate French expression I believe.

* Disclaimer: I have not read the full SNA 2008 manual either but I do know a few bright people who have. I credit myself with half a point for that.🤭

[Julius · Rating 4 out of 5]

Diane Coyle es una economista inglesa que ha compartido actividad académica, periodística (mucho con la BBC), empleo en el sector público y consultoría privada. Así que ha acumulado experiencia bastante diversa. Como autora de libros su especialidad es la divulgación del conocimiento económico, haciéndolo accesible a un público amplio. Este pequeño libro sobre el PIB –poco más de 130 páginas de lectura – se ha convertido en un pequeño clásico de exposición popular de tan conocido acrónimo. Producto Interior Bruto, el valor final de todos los bienes y servicios producidos en un año (u otro periodo de tiempo) en una economía. Como tal es el concepto más fundamental para evaluar el desempeño económico del país, y ver qué tal nos va.

La autora establece capítulos más o menos independientes, pero que yo recomendaría leer en orden. Desde cuál es el origen de querer medir la economía, el cual es un concepto bélico, hasta cuál es la interpretación económica a día de hoy del PIB.

Este libro explica el PIB y describe su historia, establece sus limitaciones y lo defiende como un indicador aún clave para la política económica. Con seguridad es un mejor indicador que algunas de las opciones de moda (como “felicidad”) que se han propuesto. También me pregunto si el PIB en sí mismo es todavía una medida suficientemente buena del desempeño económico, y concluyo que no. Es una medida diseñada para la economía de producción física en masa del siglo XX, no para la economía moderna de rápida innovación y servicios intangibles, crecientemente digital.

Una guerra anterior fue la que inspiró los primeros intentos sistemáticos por medir toda la economía. En 1665, un científico y oficial británico, William Petty, elaboró estimaciones del ingreso y el gasto, la población, la tierra y otros activos de Inglaterra y del país de Gales con el propósito de evaluar los recursos del país para enfrentar un conflicto y financiarlo mediante impuestos

Tras leer el libro, me queda perfectamente claro que el PIB no es una medida absoluta. Es más bien una interpretación de la realidad, un modelo matemático. Por esa razón, no tiene sentido tomarse el PIB como una palabra de Dios, ni creo que sirva de mucho los decimales de esta cifra, más aún cuando a lo largo de la historia, la economía ha sido diferente, y el modo de medir la actividad económica, también. De hecho, esas maneras y contribuciones matemático económicas han derivado a varios Premios Nobel.

No existe una entidad llamada PIB en el mundo real en espera de que los economistas la midan. Es una idea abstracta que, después de medio siglo de discusión internacional y de estandarización, ha llegado a ser extremadamente complicada. Los manuales para los estadísticos tienen cientos de páginas; se requiere una inversión sustancial de tiempo y esfuerzo para comprender las cuentas nacionales en detalle.

La primera guía de la ONU del SCN, que se supone todos los países siguen, fue publicada en 1953 y tenía menos de 50 páginas. El documento del SCN de 2008 tiene 722 páginas

La obra me ha parecido de una complejidad un poco alta, que requiere un poco de atención por parte del lector para disfrutar de la lectura.

¿África es pobre? Uno podría pensar que ésta es una pregunta fácil de responder; después de todo, las palabras África y pobreza están íntimamente ligadas en la mente de los occidentales. Sin embargo, es más difícil de lo que parece, y esto muestra por qué los horribles tecnicismos involucrados en la construcción de las estadísticas del PIB descritos brevemente en la sección previa importan sobremanera.

Y si no le doy 5 estrellas, ha sido porque en mi opinión, la autora pasa mucho tiempo en mitad del manuscrito hablando del patrón oro, el dólar y otras cuestiones que en mi opinión, no están tan relacionadas con el PIB. Pero me ha parecido un libro muy entretenido y ameno para cualquier friki de la economía.

[Laurent Franckx · Rating 5 out of 5]

There are few concepts that are discussed so often (certainly in the press) and are so poorly understood as GDP. While some people attribute almost fetishist powers to GDP, other criticize it as completely irrelevant. In most cases, this is because they don't understand what GDP is actually measuring or because they want to use it for something it wasn't designed for in the first place.
In this beautiful little book, Diane Coyle sets things right. She explains the history of the concept, clarifies what it measures, discusses the practical issues related to estimation and evaluates the numerous criticisms. All her points are well informed and balanced.
Actually, I think this is a masterpiece of economics writing for a broad audience. It is clearly and beautifully written, but does not shy away from very advanced issues such as Martin Weitzman's idea that, conceptually, GDP should measure the share of wealth that we can consume without decreasing future consumption. As such, it sets a standard in the field. (For clarity: personally, I haven't learned much of substance in the book but then I hold a PhD in economics. If I would have to teach undergraduate students again one day, I would impose this book as required reading).
Everybody who wants to have an informed say in public affairs should read this book.

[Pat Hornchaiya · Rating 4 out of 5]

The book shows how GDP has been developed over the time. This raises a question that when our economic structure is changed, how we calculate GDP to truly reflects it (e.g. innovation, environmental impact, household work). Otherwise, we might have to use other indicators for measuring our development.

[Oleksandr Zholud · Rating 4 out of 5]

GDP is maybe the most widely used macroeconomic statistics, but even for many economists it is a black box. The book gives the brief history of what is now called the system of national accounts, talks in depth on changing definitions and how they affect the final figure. How to account for services? What if the quality of the product changed? Can we really compare Swaziland and Switzerland? What is the value of Google search or Wiki? Will the GDP be replaced with gross happiness index or other measure? These and other questions answered in a form of easily readable (thus a bit dumbed down) book.

[Dmitry · Rating 1 out of 5]

(The English review is placed beneath the Russian one)

Российское издание: ВВП: Краткая история, рассказанная с пиететом
Издательство: Издательский Дом ВШЭ, 2016 г.

Отрицательная оценка этой книге связна с тем, что с моей точки зрения книга не выполнила поставленной задачи, т.е. я не могу сказать, что книга успешно вводит читателя (объясняет) в короткую историю ВВП.

Я читал эту книгу дважды, и оба раза у меня оставалось двойственное впечатление после прочтения. С одной стороны, как всякую книгу по истории, читать было (иногда) интересно, но вот с другой, было ощущение, что я читают фрагменты из другой, более всеобъемлющей книги по истории. Так как я люблю читать книги по истории и по истории экономики, мне не хотелось давать книге отрицательную оценку, однако после прочтения оной ничего не запомнилось, точнее, запомнились только несущественные детали. Исходя из этого, я убеждал себя в том, что проблема просто в том, что я никакого отношения к экономике не имею, т.е. что книга эта предназначалась только тем, кто учится или работает в этой сфере. Я думал, что возможно эта книга будет интересна (и предназначается) студентам с факультета «Экономика». Однако поразмыслив, я всё же решил поставить книге отрицательную оценку не потому, что книга написана совсем уж скучно для не экономистов, а потому, что в книге содержится очень мало истории появления и развитие ВВП. Как я уже сказал выше, экономика не является моей областью, поэтом я сужу о книге как простой любитель нехудожественной литературы. И как простой любитель я считаю, что автор слишком много внимания уделила истории экономики XX века и слишком мало самому ВВП как явлению.

Возможно всё дело в неудачной компоновке глав, но у меня создалось ощущение, что главы в книге очень слабо связны друг с другом, т.е. они не позволят создать цельную картину. К примеру, сначала автор пишет о проблеме подсчёта ВВП на африканском континенте, а потом рассказывает, как обстояли дела в экономике Европы и США до и после Второй Мировой Войны, а дальше пишет о тех проблемах, которые имелись у Западного мира для подсчёта реального ВВП в СССР. Я хочу сказать, что возникает ощущение, что автор пишет об экономике Западных стран + СССР, а не о ВВП. Возможно дело всё в том, что по-другому написать историю ВВП просто невозможно, но тогда возникает вопрос, а возможно ли вообще написать историю создания ВВП? Да, автор в самом начале книги пишет о первых шагах, которые привели к созданию идеи подсчёта ВВП и ВНП, однако потом уходит в историю экономики и какие проблемы происходили с подсчётом ВВП в Африке, который бы соответствовал реальному положению дел. Возможно, автор неправильно определила главные темы книги? Честно сказать, я не знаю. Одно могу сказать: понимания краткой истории ВВП у меня не сформировалось ни в первый раз, ни во второй. Как правильно сказал один англоязычный читатель этой книги, Википедия даст больше информации, чем эта книга.

Мне кажется, автору стоило описать более специфические вопросы, связанные с ВВП, а не давать краткий очерк состояния экономики как до, так и после WW2. Из-за чего мне просто захотелось взять толстую книгу по истории экономики послевоенного периода, в которой бы во всех деталях бы описывалась сложившаяся ситуация, а не читать краткий пересказ автора.

The negative review of this book is because from my point of view, the book has not fulfilled its purpose, i.e., I cannot say that the book successfully introduces the reader (explains) the short history of the GDP.

I read this book twice, and both times I was left with a double impression after reading it. On the one hand, like any history book, it was (sometimes) interesting to read, but on the other, it felt like I was reading fragments from another, more comprehensive history book. As I like to read books on history and on the history of economics, I did not want to give a negative assessment of the book, but after reading it, nothing was remembered, or rather, only unimportant details. On this basis, I convinced myself that the problem was simply that I had nothing to do with economics, i.e., that this book was intended only for those who study or work in this field. I thought that perhaps this book would be interesting (and intended) for students from the "Economics" department. However, after thinking about it, I decided to give the book a negative rating, not because the book is written in a completely boring way for non-economists, but because the book contains very little (history) of the emergence and development of the GDP. As I said above, economics is not my field, so I judge the book as a simple amateur of non-fiction. And as a simple amateur, I think that the author paid too much attention to the economic history of the 20th century and too little to the GDP itself as a phenomenon.

Maybe it's the poor layout of the chapters, but I have the feeling that the chapters in the book are very loosely connected, i.e., they do not allow to create of a coherent picture. For example, first, the author writes about the problem of calculating GDP on the African continent, then she talks about how the economies of Europe and the United States were before and after World War II, and then she writes about the problems the Western world had in calculating real GDP in the USSR. My point is that one gets the feeling that the author is writing about the economies of the Western countries + the USSR, not about GDP. Perhaps it is simply impossible to write the history of GDP in any other way, but then the question arises: is it even possible to write the history of the creation of GDP? Yes, the author writes, at the beginning of the book, about the first steps that led to the creation of the idea of calculating GDP and GNP, but then goes into economic history and what problems occurred with the calculation of GDP in Africa, which would correspond to the real state of affairs. Perhaps the author misidentified the main themes of the book. Honestly, I don't know. One thing I can say: an understanding of the brief history of GDP did not form with me, neither the first time nor the second time. As one English reader of this book correctly said, Wikipedia will give more information than this book.

It seems to me that the author should have been describing more specific issues related to GDP rather than giving a brief sketch of the state of the economy both before and after WW2. It just made me want to pick up a thick book on the history of post-WWII economics that would have described the situation in great detail rather than reading the author's brief paraphrase.

[Toby Irvine · Rating 4 out of 5]

Really liked how clear this book is in explaining what GDP is through the lens of history, showing its changing value as a measure from WWII up to the present, and has definitely changed my mind on how valuable it is as a measure (not as valuable as I originally thought!).

I think I was a bit disappointed with her conclusion - the book was much more persuasive of the weaknesses rather than the strengths of GDP for the modern day, yet the conclusion says that it is okay to keep using it. Best of a bad bunch of measures I guess.

[Jerome Kuseh · Rating 3 out of 5]

This book covers the development of GDP as a concept from the earliest attempts of national accounting in the 17th Century to Simon Kuznets' groundbreaking work on measuring US national income in the mid-1930s. The major takeaway from Diane's brief history is that GDP is not a natural phenomenon to be measured but a concept to be properly defined.

For instance, how are improvements in technology measured? Why is an estimate of crime and the informal economy included but not domestic labour? Is the financial sector really an addition to the economy when the current system of measuring its contribution rewards it for taking more risk yet does not deduct the costs to the taxpayer of cleaning up financial crises?

I think more time could have been spent explaining the mechanics of measuring GDP instead of concepts like Purchasing Power Parity (PPP) which (from my perspective) is not that widely used at this point. But I guess this was not meant to be an economics textbook.

Overall, a solid read but not exactly fun to get through.

[Kirsti · Rating 4 out of 5]

Clear and sometimes very funny explanation of what GDP is, how it differs from GNP, how it was invented, why it matters, and how it has changed and may continued to change. In short, Coyle says gross domestic product is a flawed but useful way to compare different countries' economies over time. The author does a fine job reading the material, but she recorded this at home because of the pandemic, so there's a slight hiss that may bother you at first.

[mukda teeralertpanich]

GDP คืออะไร
ตัวเลขๆหนึ่งสามารถสะท้อนสภาพเศรษฐกิจในประเทศได้จริงๆหรือ
ตัวเลขนี้ถูกปรับแต่งเพื่อผลประโยชน์ทางการเมืองบ้างหรือไม่
ในเมื่อกระบวนหาค่า GDP เปลี่ยนไปเรื่อยๆ แล้วตัวเลขนี้มันแม่นยำเค่ไหน
หนังสือเรื่องนี้ไม่ใช่แค่เพียงค้นหา concept ของ GDP
แต่เป็นหนังสือที่บอกเล่าเรื่องราวเศรษฐกิจโลกผ่านตัวเลขๆนี้

[Jason Furman · Rating 5 out of 5]

“GDP: A Brief but Affectionate History” lives up to its name in every respect. Diane Coyle situates the story of the development of GDP in the history of the actual economy and economic attitudes of the last 250 years. In particular, she emphasizes that GDP is not a natural concept but one that was constructed and the construction has evolved over time to include services (originally thought to be unproductive by Adam Smith and, as late as the 20th Century, the Soviet Union), the government (which became important in the 1930s), financial services, R&D and other intellectual property (in the United States) and illegal goods like drugs and prostitution (in Europe).

Coyle also evaluates the many criticisms of GDP, endorsing some tweaks (e.g., reducing the valuation of financial risk taking, reflecting natural resources depreciation, and doing a better job tracking home production) but rejecting wholesale replacement of the concept with something like happiness or other welfare measures. Because, as she argues, GDP is not a measure of welfare but of production—albeit with somewhat arbitrary boundaries for what constitutes production.

Coyle is affectionate but not uncritically in love as she worries about the increasing difficulties of valuing the explosion of varieties and customization and free goods as the economy becomes increasingly intangible oriented. This discussion was one of my few quibbles with the book because she was uncharacteristically uncritical in reporting the various measures of underestimated productivity without a fuller discussion of some offsetting factors (e.g., cannot just value the internet but also need to factor in reduced time on other mediums), the ways in which the measurement issues are not entirely new (e.g., radio and TV were a free goods too), and some of the evidence that mismeasurement may have declined recently. I also wished she had included some discussion of noise in GDP measurement and alternative measures of the size of the economy, like Gross Domestic Income (GDI).

Overall, I highly recommend the book. Economists and other already proficient with the concept of GDP may be able to skim some of the more elementary material but I, at least, learned a lot from this lovely little book.

[Travis · Rating 3 out of 5]

The acknowledgments section states the book came out of a talk the author gave in 2011, and that’s exactly how it feels - like she took a great lecture and added a bunch of facts, thoughts, and history to expand it into a (“brief”) book. There is lots of interesting stuff, some of it presented well, but much of it presented without much depth or explanation, often leaving me with more questions than answers. It’s also both repetitive and disjointed - again, like she just needed to fill out a book, rather than a telling a cohesive narrative.

The title states that this is an “affectionate” history of gdp, which I’m not sure I agree with. I think her thesis is “GDP is very flawed, but it’s the best we got, but nonetheless we need to find something better.” She spends most of the book explaining the flaws of gdp (which is really the main point of the book) but also includes sporadic notes of “affection” (the last line says “GDP, for all its flaws, is still a bright light shining through the mist”) that feels more out of, I dunno, professional loyalty or defensiveness than anything else.

[Meg · Rating 4 out of 5]

This is a great brush up on the history of GDP. I agree with Coyle's points that household production ought to be counted toward GDP (and I appreciate her expert opinion that there is no good reason why it is not counted), that financial services are overvalued and that we need an on-going measure of sustainability, preferably built into GDP.

She could have discussed more directly and in more detail whether GDP growth needs to be at the expense of the environment. Additionally, she was too disparaging of the environmental movement is the 1960/70s - in the past environmentalism has led to profound policy changes, like the US's clean air act and superfund act, and that Ehrlich lost the commodity bet to Simon is only half the story - since then, commodity prices have increased.

Finally, I was disappointed that GDP growth vs. trends in inequality was not discussed more.

[Matt · Rating 5 out of 5]

I learned a lot from this book, though as a non-economist listening to it on audio, I think a lot of it went over my head too. The main lesson I got out of the book is this: calculating GDP is much more complicated than most people realize, and it is a *highly* imperfect measure of economic production. Nevertheless, while highly imperfect, the author concludes that something like the GDP is about the best we've got as an economic measure, and recommends against trying to cram everything else we care about - happiness, sustainability, etc. - into it.

For a sense of the complexity, consider the following questions. How should services be counted in GDP? How do we measure, for instance, what a teacher produces? Number of students? Number of hours spent with students? Future earnings of students?

Should unpaid work be counted in GDP? To borrow an example from Pigou, if a woman works as a housekeeper, her wages are counted, but if she subsequently marries her client and performs exactly the same services, her contribution to GDP drops to zero.

What about the informal or underground segments of the economy? Do drug dealers contribute to GDP?

How should quality be taken into account? If a company makes 1000 computers this year, as opposed to 500 last year, has their production doubled? What if the computer processors are 150% as fast?

The economists who work on GDP have thought alot about these sorts of questions, of course. But they're also pretty clearly the sort of questions that don't admit of a single obviously correct answer. This means that calculating GDP is based, in many ways, on a lot of judgment calls. If those calls had gone another way (and not all countries make the same calls), GDP might have been substantially higher or lower than reported.

So, as a philosopher who uses GDP numbers to think about public policy (and PPP numbers too, which Coyle also dismantles), the big lesson here is: take this stuff with a grain of salt. The numbers are useful. They're a helpful way of getting a rough grasp of what's going on in an economy. But this stuff is in no way an exact science.

[รพีพัฒน์ อิงคสิทธิ์ · Rating 3 out of 5]

หนังสือเล่มบางที่ยังไม่รู้สึกว่าถึงเนื้อถึงหนังเท่าไหร่ เพราะอ่านเอาประวัติศาสตร์ล้วนๆ ว่าตัวเลขนี้มีที่มาที่ไปอย่างไร แล้วขมวดปมว่าแม้ GDP จะอธิบายไมาได้ทุกอย่าง แตรสุดท้าย GDP ก็ยังเป็นตัวเลขที่ทรงพลังอยู่ดี

ส่วนตัวไม่ค่อยชอบวิธีลำดับเรื่องเท่าไหร่ เพราะเหมือนจะให้น้ำหนักเยอะมากกับการก่อร่างสร้างตัวของทฤษฎี แต่ที่น่ารำคาญคือการไม่พยายามลงรายละเอียด แต่ย้ำหลายรอบว่า GDP เข้า​ใจยาก และมีรายละเอียดหลายร้อยหน้า

ที่น่าแปลกใจคือไม่อธิบายสมการ GDP (แปะไว้เฉยๆ)​ ไม่อธิบายการคำนวณแบบต่างๆ (แต่ดันไปโฟกัสเรื่องการปรับ real/nominal โดยพูดถึงการคำนวณแบบ chainweighted ยืดยาว แน่ก็ไม่เข้าใจอยู่ดีว่าทำงานอย่างไร)​ และแทบไม่แตะข้อจำกัดของ GDP เท่าไหร่ (ดูเหมือนจะยก index คู่แข่ง แล้วโจมตีแบบนั้นแบบนี้ว่ามีข้อด้อยยังไง แต่ไมืพูดลงรายละเอียดว่าแล้ว GDP จะปรับยังไงให้ดีขึ้น)​

[Robert Jere · Rating 4 out of 5]

A very short book. Straight to the point even though it is loaded with a lot of information. The purpose of the book is to give a history of national economic accounting and the issues that are associated with it. And I found that she did this very well.
One of the things that always bothered me is the inclusion of government spending as a positive. This book explains that this is not some deep science but a product of political convenience. GDP as we know it today was developed during the second world war in the US and the UK. During those years, it was useful to define national income in such a way that war expenditure adds to it.
Perhaps the most important point in the book is when the author points out that GDP is not a measure of economic output, but a definition. The second most important point is that GDP does not measure social welfare and was never meant to.
There were some depressing parts where the book shows how arbitrary some of the things that go into national income statistics are. According to the author, there really isn't a good replacement for GDP. She talks about the human development index but points out that it is not attractive politically. This is because unlike GDP, it is not tailored for intervention. Most of the alternatives mentioned are basically different versions of accounting for "sustainability".
This was educational for me. The book is not very technical and even a layperson can get a lot out of it.

[Gaurav · Rating 4 out of 5]

An interesting perspective on GDP, an all important metric of our times. This is also an interesting book for someone who is uninitiated into economics.
The author gives an interesting historical context of GDP and helps the reader understand it better by juxtaposing it with metrics like HDI and others. The approach of looking at various elements like like sustainability, productivity helps get a deeper understanding of the issues probed by the author.
I think that one may get an even better understanding of this subject matter by reading the references mentioned in each chapter of the book and I plan to do the same soon.

[Ray LaManna · Rating 3 out of 5]

This short book tells you everything you ever wanted to know about the statistical underpinning of the measure of Gross Domestic Production... good description of the various controversies related to this measure.

[Ed Stoddard · Rating 4 out of 5]

A concise and readable history of GDP, with a focus on its flaws, limitations, and merits.

[John · Rating 3 out of 5]

"GDP: A Brief But Affectionate History" by Diane Coyle is a short, well-written, interesting book that ultimately disappointed me for three reasons.

First, as other reviewers have noted, the book really is a concise, narrative history of macroeconomic history instead of a tightly focused discussion of GDP. While the evolution of the GDP measure is inextricably intertwined with the evolution of macroeconomics during the 20th century, the measure has its own nuances. Coyle does point out expertly many of the particular features of the GDP measure and the larger system of national economic accounting, but she doesn't treat many of them in much depth. Yet the attention to the details of GDP detracts from the larger history of macroeconomics, which makes the book a little bit of both but not enough of either.

Second, the book seems to lack a clear audience. The narrative approach employed by the author seems to be designed to attract educated lay readers, yet the discussion sometimes feels too technical for those readers. At the same time, the lack of detail is apt to make the book too general for more knowledgeable readers. So again, the book seems a bit betwixt and between.

Lastly, towards the end of the book, Coyle comes across as a stereotypical two-handed economist. She points out many of the limitations of a measure designed for an economy characterized by industrial production in measuring an economy centered on the provision of services. Yet she never really points out any solutions and is quite critical of recent attempts to offer better measures, particularly measures that try to account for human welfare and environmental sustainability. Instead, the book ends with some general calls for collecting better data and "rethinking." Coyle may be right that GDP still is the best measure in a sea of limited alternatives, but the book simply ends on an unresolved, unfulfilled note.

[Dеnnis]

ВВП, конечно, не секс, но обсуждается это короткое слово тоже часто и жарко. Некоторым политикам этот показатель так нравится, что они с разной степенью успешности пытаются его удваивать. Многие исследователи, наоборот утверждают, что мерить им и опираться на него в долгосрочном планировании уже старомодно.

Действительно, показатель придуман не вчера, он обладает интересной историей, в том числе в части применимости его странами социалистического блока. Порожденный условиями военного времени, он в прямом смысле заточен на оценку промышленного производства и плохо видит сферу услуг. Стояние в пробках подстегнет ВВП темпами потребления бензина, но качества жизни оно точно не улучшит.

Что же тогда использовать и как оценивать благосостояние общества? Койл знакомит с альтернативными показателями и утверждает, что откалиброванный ВВП еще может послужить измерению промышленного роста, но для полноты картины правительствам придется расширять инструментарий.

[Andreas · Rating 3 out of 5]

Definitely a book worth reading, if only to understand properly what GDP is, why it has been conceived and what purposes it has served and will serve in the future. I support the author in her defense of GDP and her scepticism towards alternative 'happiness' measures.
My feeling was the chronological structure of the book is somewhat flawed, which is reflected by the number of times the phrase 'which we will get to later' is used. Also, the environmental challenges to GDP sometimes get a little technical, which hurts the readability of the later chapters.

[Krishan]

Decent summary of the history of the concept of GDP. Coyle goes into detail about the limitations of GDP, yet concludes that GDP is the best measure we have to explain and compare outputs of nations.

[Ankit · Rating 1 out of 5]

Brief. Yes. Affectionate. No.
Honestly a generic Macroeconomics text book would be a more enjoyable read.

[Boris Limpopo · Rating 4 out of 5]

Coyle, Diane (2014). GDP: A Brief But Affectionate History. Princeton: Princeton University Press. 2014. ISBN: 9780691156798. Pagine 168. 11,54 €

Di Diane Coyle avevo comprato nel 2007 un altro libro, A Soulful Science, di cui riferisco in un altro post.

Questo è un libro discontinuo ma comunque interessante, in un periodo in cui il dibattito sul PIL è più vivace che mai.

A parte una brevissima introduzione – che prende le mosse dalla crisi di credibilità della statistica ufficiale greca – il libro è articolato in 6 capitoli, ordinati in una prospettiva storica, dagli albori del calcolo economico nel XVIII secolo al futuro.

All’inizio ero abbastanza entusiasta, tanto da aver suggerito a un amico editore di prenderlo in considerazione per una traduzione italiana, nel caso in cui i diritti non se li fosse già accaparrati una major.

Conosco abbastanza bene la storia del PIL e della contabilità nazionale, per passione (eh sì, ci si può appassionare anche a questo!) e per motivi professionali, e – a parte qualche divergenza su singoli punti o su accentuazioni diverse che avrei dato a vicende o a dibattiti particolari (per esempio, è abbastanza evidente il punto di vista britannocentrico dell’autrice) – ho trovato la “narrazione” di Diane Coyle accurata e scorrevole al tempo stesso.

Quelli che mi hanno lasciato più perplesso sono i capitoli centrali, dove l’autrice mi sembra abbastanza schierata ideologicamente in campo anti-keynesiano e neoclassico sotto il profilo economico e thatcherian-reaganiano sotto quello politico. Il che è ovviamente lecito, ma (a mio parere) è inopportuno in un testo esplicitamente divulgativo, che dovrebbe avere come obiettivo principale quello di fare comprendere gli sviluppi della teoria e della pratica della contabilità nazionale, e non di dare giudizi sui movimenti studenteschi e sindacali degli anni Sessanta e Settanta, come fa in questi due passi, ad esempio:

It is not poverty and despair that cause revolutionary activity in modern times, but rather comfortable prosperity. Skipping school to hurl stones at the riot police and evade tear gas is a luxury indulged in only by young people who are not really worried about finding a job when they need one. Likewise, one can afford to experiment with drugs, free love, personal liberation, and self-discovery only in a prosperous economy. [p. 61]

[…] the left-right divide grew bitter in the 1970s. The liberation movements emerging from the individualism of the previous decade were increasingly angry, occasionally even violent. Revolutionary politics were fashionable—one of the best-selling posters of the era, adorning many student walls, was the iconic black and red image of Che Guevara. Academics dived down the long dead end of Marxist-inspired critical theory, only now fizzling out in university departments. Organized labor became far more militant. There were more and more strikes, even in the far less militant United States. In fifteen industrial countries other than the United States, the number of days per worker lost due to strikes was 1,641 in the 1960s, 2,586 in the 1970s, 1,632 in the 1980s, and a mere 658 in the 1990s. These helped bring about the Reagan and Thatcher victories, and the subsequent policy reaction, including tough restrictions on the right to strike. But that, again, uses hindsight. For a decade, it looked as though the capitalist system was the one that was broken. [p. 68]

Più avanti il libro si rimette in carreggiata e l’ultimo capitolo, quello sulla prospettive future del PIL, è una presentazione aggiornata e fedele dei problemi e del dibattito attuali.

* * *

Un errore e una curiosità.

Un brutto svarione a p. 41, dove l’autrice annovera la Spagna tra i paesi sconfitti nella II Guerra mondiale.

Bill Phillips, l’economista neozelandese padre della famigerata curva di Phillips, che postula una relazione inversa tra tasso di disoccupazione e tasso d’inflazione, è anche l’inventore del MONIAC, un modello idraulico del funzionamento del sistema economico. Ne esistono un prototipo (attualmente all’Università di Leeds) e una dozzina di copie. Qui sotto vedete quella della banca centrale neozelandese.


wikimedia.org/wikipedia/commons
* * *

Qualche altra citazione (per questo libro ho le pagine e vi do quelle):

[…] from the nineteenth century, people were starting to reconsider how to measure the economy precisely because it was starting to grow, thanks to the Industrial Revolution and the dawn of capitalism. [p. 12]

Even in those depressed times the report was a bestseller, at twenty cents a copy, and the first print run of forty-five hundred copies quickly sold out. [p. 13: si sta parlando del rapporto di Simon Kuznets]

[…] an evil necessary […] [p. 14: sempre Kuznets]

By 1950, it was in mass production and its price had fallen to four cents a dose, the same as one-sixteenth of a gallon of milk.3 It was not just that this flood of innovations existed but that so many people could afford them. As the economic historian David Landes observed, Nathan Meyer Rothschild, the richest man in the world of his time, died in 1836 for want of an antibiotic to cure an infection.
This is what GDP growth consists of. [p. 63: si sta parlando della penicillina]

(How real or durable that catch-up has been is an open question at the moment, in the aftermath of the financial crisis.) [p. 72: si sta parlando dei PIIGS]

Studies of businesses investing in computer and communications equipment in the United States in the 1990s and 2000s indicate that without restructuring the business, productivity gains are small. But those that do restructure experience very large improvements in productivity. [p. 82]

A better metric than the size of the economy might well be the variety of goods and services available. [p. 91: condivido questo punto di vista]

In principle, GDP avoids the need to distinguish productive from unproductive because it measures what people pay for, and their willingness to pay can be taken as an indicator of productive value (although of course there might be alternatives to money as a measure of value). [p. 104]

“This treatment, whereby commercial products are valued at market price, government services are valued at cost and unpaid household activities are simply ignored, is not a matter of principle but of practical convenience. It can be defended, therefore, only on practical grounds.” [p. 105: è una citazione di Richard Stone]

“[…] a single measure or unit of value.” [p. 110: secondo Michael Sandel il peccato originale del PIL; secondo me, il suo grande punto di forza] […]

Bhutan is one of the poorest and one of the more authoritarian countries in the world. [p. 112]

Simon Kuznets, working on measuring national income in the 1930s, wrote:
«It would be of great value to have national income estimates that would remove from the total the elements which, from the standpoint of a more enlightened social philosophy than that of an acquisitive society represent dis-service rather than service. Such estimates would subtract from the present national income totals all expenses on armament, most of the outlays on advertising, a great many of the expenses involved in financial and speculative activities, and what is perhaps most important, the outlays that have been made necessary in order to overcome difficulties that are, properly speaking, costs implicit in our economic civilization. All the gigantic outlays in our urban civilization, subways, expensive housing, etc., which in our usual estimates we include at the value of the net product they yield on the market, do not really represent net services to the individuals comprising the nation but are, from their viewpoint, an evil necessary in order to be able to make a living (i.e., they are largely business expenses rather than living expenses). Obviously the removal of such items from national income estimates, difficult as it would be, would make national income totals much better gauges of the volume of services produced, for comparison among years and among nations.» [p. 114: ben prima di Robert Kennedy e molto più lucido]

The economist Martin Weitzman proposed using Net National Product (NNP), which he showed was the yield generated by the economy’s stock of capital, and therefore indicated the maximum sustainable rate of consumption. If it is less than actual consumption, then society has been living beyond its means by using up capital. [p. 117]

To be poor is to have little choice available, and the increase in possibility is the most important aspect of escaping from poverty. On this view, economic development is a combination of increasing individual capacities or skills to be able to take advantage of opportunities, and increasing the range of opportunities and choices available. Economic development is an increase in freedom. One aspect of this is the variety of goods and services available in the economy, from the trivial to the profoundly important. [p. 123]

Price indexes do not, however, capture the large price declines when outsourcing occurs, so import prices have been greatly overstated and import volumes underrecorded. [p. 125]

Generally any task that can be measured by the metrics of productivity – output per hour – is a task we want automation to do. [p. 128: è una citazione di Kevin Kelly]

[Connor Stack · Rating 3 out of 5]

GDP is theoretically any of three equal values: total output, total expenditure, and total income. Why? Because anything produced (output) is bought and consumed (expenditure), which is revenue (income) for the seller. Net out intermediate values by doing "value added" computations: a business that buys wholesale and sells at a markup "produces" a value equal to the markup.

There are many modifications to this formula. To make values comparable, GDP is seasonally adjusted. Inflation adjusted. Currency adjusted. (Even though you wouldn't buy a Ghanan haircut in Britain). Purchasing Power Parity. Chain weighting. Hedonic pricing (because a single computer gets better and better, although does our enjoyment grow proportionally?) All the steps involved remind me of epicycles explaining planetary motion.

GDP is supposed to measure production. But what is "productive?"
War spending? Even though war is destructive and reduces human wellbeing?
Government spending? Does that mean a government can increase GDP at will?
Services? Adam Smith didn't think any services were productive.
Housework? A widower who marries his housekeeper reduces GDP.
Childcare? Two moms could charge each other for childcare and raise GDP.
Trash pickup? Is it a necessary expense that reduces income? Or is it a consumer good that raises the income of local governments?
Education? Is the output of a teacher equal to the number of students they teach?

GDP is a made-up concept, and sensitive to tweaks in the formula. Ghana's GDP went up 40% overnight because of re-weighting the consumer price index, disqualifying them for certain aid. Britain had to get an IMF loan in the 70s to keep deficit at a certain percentage of GDP. Later, revisions to statistics showed they didn't need the loan. There are various incentives for governments to present a higher or lower GDP, so how can you trust it?

Interestingly, I just read "The Moral Landscape" by Sam Harris, and it proposed a measure of "wellbeing". This book on GDP also talks about measures of human happiness and welfare, like the Human Development Index.

Random tidbit: you can think of the price of computation as infinite before computers were invented. What are the implications for the consumer price index?

At the end, she argues that GDP does not capture the value from increased variety in goods. I counter: is so much variety really valuable?

Overall, the book is boring and complicated. What else can you expect from a book on GDP? At least it's short. I currently feel like I never want to hear about GDP again, yet there were a lot of interesting points, and it's still true that GDP correlates with many things that are good.

[YHC · Rating 3 out of 5]

Definition of GDP:
GDP=C+I+G+(X-M)。
"C" means the money that consumers spend, "I" means what government spends, "X" means the export of the companies, "M" means import.

The first part already pointed out what GDP can not cover.

Debt: steady GDP could also mean the people in this country are actually in debt, mortgage of house, car loan, credit card debt. Whatever preused this year is covered in GDP. That is why the restriction of buying house will affect GDP.

Unemployment: ex. in Tunisia, 2011. rising GDP but 1/8 population unemployed, 1/3 of men under 25 years old unemployed.

Social inequality: the average of american family income in 2013 was close to end of 90', means the rise of GDP doesn't mean Americans become richer.

Protection of environment: deforestation to develop agriculture, industry, construction, it increases GDP, but more pollution in cities causes people hospitalization, increases public hygiene cost. This also increases GDP.

Therefore, with the rise of GDP, we don't necessary live better life, on the contrary we got more environmental problems, inequality. Developed countries consider environmental protection is the duty of developing countries, but the latter think it should be a shared duty.

HDI (人类发展指数) puts health, education, environment into account, but so far it's still on the paper, not real global index.

How about GNH ( 国民幸福指数）? Happiness, human relationship, environment, the balance of work and life ...etc into consideration. So far applied only just in Bhutan.

So if we keep using GDP to judge a country's development, we might fall into the delusion of fake development.

ps. Purchasing power parity (PPP) is an economic theory that states that the exchange rate between two currencies is equal to the ratio of the currencies' respective purchasing power. Theories that invoke purchasing power parity assume that in some circumstances (for example, as a long-run tendency) it would cost exactly the same number of, for example, US dollars to buy euros and then to use the difference in value to buy a market basket of goods as it would cost to directly purchase the market basket of goods with dollars. A fall in either currency's purchasing power would lead to a proportional decrease in that currency's valuation on the foreign exchange market.