Economic growth, or just growth, is today’s holy grail, on every politician’s lips .. Yet there are two glaringly obvious reasons why the whole concept of GDP is pure piffle.
Mathematical accuracy is impossible ..
But far more important is the nature of GDP itself. In particular, to what extent does it measure current consumer standards as opposed to prosperity in future? These two are entirely at odds with each other, because future prosperity is governed largely by the role of capital goods. But an increase of capital (i.e. savings and investment) means that current living standards are held back in the short term. So guess what: GDP statistics take little or no account of saving, the sine qua none for long term growth!
Ludwig von Mises, the great Austrian School economist, said that any macro-economic concept of national income is a mere political slogan devoid of any cognitive value. In fact it is worse than that because the GDP concept totally obliterates what is actually going on in a market economy.
Murray Rothbard, another king of the Austrian School, argued that all government spending should be subtracted from private spending as depredation on private production, and then we should subtract the resources drained from the private sector, to arrive at ‘Private Product Remaining in Private Hands’. Which brave economist will sign up to calculate this? Whatever, we must wean ourselves off GDP and all its works.