Further thoughts on GDP

May 4, 2009

Strange these days when everyone seems to have the same thing on their minds.  Seconds after publishing my post on the intersection of GDP and usury laws, I notice that Nancy Folbre at the Times has a new post up about unpaid work, one of the other big dilemmas posed by using the GDP as an indicator of our economic well-being:

We sometimes think of work as “that which we are paid to do” but some economists argue that work is anything that you could, in principle, pay someone else to do for you.

Applying this definition to results from the most recent American Time Use Survey shows that in 2007 the average amount of unpaid work time (housework, shopping, food preparation, care for others, and related travel time) per adult per day equaled the average devoted to paid employment — 3.8 hours per day. These averages reflect activities on weekends as well as weekdays, and stay-at-home moms and retirees boost the tally for unpaid work.

Average time devoted to home production in the United States is lower than in many other countries partly because female participation in paid employment is particularly high here. As a result, estimates of gross domestic product, based on market transactions, overstate our relative well-being. Research by economists Rick Freeman and Ronald Schettkatt, for instance, shows that the value of mothers’ unpaid work in Germany is even greater than it is here. Adding an estimate of the market value of this work to G.D.P. in both countries would increase measures of German living standards more than ours.

And that really is only the start of it. There are also enormous externalities to the home economy that aren’t captured by the price of having someone cleaning house for you, impacts which reshape the way we eat (fast food over home-made), the way communities function (bedroom communities over real neighborhoods), how safe we feel as a whole (gated communities over informal security nets), and so on. Yet these are ALSO left out of GDP, and indeed out of the pricing mechanism itself.  Clearly this is a problem, and anyone who takes family and community  seriously should take a long hard look at how we’ve literally cut them out of the equation.

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