The role of GDP in measuring economic performance broadly
GDP measures the nation’s total output of goods and services. For more than 60 years, it has served the nation well as a comprehensive measure of market activity that is useful for a wide variety of purposes such as measuring productivity, conducting monetary policy, and projecting tax revenues. However, GDP is not the only measure of economic progress; and the full set of national economic accounts produced by BEA provides substantial information that can be utilized to answer broader questions.
On September 14, a commission headed by Professors Joseph Sitglitz, Amartya Sen, and Jean-Paul Fitoussi issued a report discussing challenges to measuring economic performance and social progress.
BEA has work underway exploring new measures of the market economy using detailed components of GDP and the other national-economic-account statistics, Federal Reserve flow-of-funds statistics, and other data to provide a more complete picture of the distribution of economic growth and economic “sustainability.”
These measures should help to better relate individual household, regional, and business experiences to those measured by the major statistical aggregates, like GDP and personal income, through new measures such as per capita cash and discretionary measures of national and regional income. The new measures should also aid business-cycle analysis by better assessing the purchasing power of consumers.
In addition to those measures, new measures would include indicators of the sustainability of economic conditions. Among those would be indicators of saving, investment, and asset prices; integrated financial and real accounts that better relate asset prices to underlying income, profit, and GDP statistics; and integrated estimates of saving out of current income, capital gains, and changes in wealth. Further, already existing net measures would be featured: for example, net investment and net domestic product—defined as gross investment (or GDP) less the depreciation required to replace the capital used up in production.
In an interview shortly after the report was released, on the program Marketplace on National Public Radio, BEA Director, Steven Landefeld, explained the role of GDP statistics in the current broader discussion of economic performance. The interview can be found here: