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Real GDP: The Flawed Metric at the Heart of Macroeconomics

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  • Fix, Blair
  • Nitzan, Jonathan
  • Bichler, Shimshon

Abstract

The study of economic growth is central to macroeconomics. More than anything else, macroeconomists are concerned with finding policies that encourage growth. And by ‘growth’, they mean the growth of real GDP. This measure has become so central to macroeconomics that few economists question its validity. Our intention here is to do just that. We argue that real GDP is a deeply flawed metric. It is presented as an objective measure of economic scale. But when we look under the surface, we find crippling subjectivity. Moreover, few economists seem to realize that real GDP is based on a non-existent quantum – utility. In light of these problems, it seems to us that much of macroeconomics needs to be rethought.

Suggested Citation

  • Fix, Blair & Nitzan, Jonathan & Bichler, Shimshon, 2019. "Real GDP: The Flawed Metric at the Heart of Macroeconomics," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 88, pages 51-59.
    • Handle: RePEc:zbw:espost:200206
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    References listed on IDEAS

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    1. Nitzan, Jonathan & Bichler, Shimshon, 2009. "Capital as Power. A Study of Order and Creorder," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 157973.
    2. Keen, Steve & Ayres, Robert U. & Standish, Russell, 2019. "A Note on the Role of Energy in Production," Ecological Economics, Elsevier, vol. 157(C), pages 40-46.
    3. Fix, Blair, 2015. "Putting Power Back Into Growth Theory," Review of Capital as Power, Capital As Power - Toward a New Cosmology of Capitalism, vol. 1(2), pages 1-37.
    4. Fix, Blair, 2019. "The Aggregation Problem: Implications for Ecological and Biophysical Economics," SocArXiv tfwju, Center for Open Science.
    5. Bichler, Shimshon & Nitzan, Jonathan, 2015. "Capital Accumulation: Fiction and Reality," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 72, pages 47-68.
    6. Fix, Blair, 2019. "The Aggregation Problem: Implications for Ecological and Biophysical Economics," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 4(1), pages 1-15.
    7. Blair Fix, 2019. "The Aggregation Problem: Implications for Ecological and Biophysical Economics," Biophysical Economics and Resource Quality, Springer, vol. 4(1), pages 1-15, March.
    8. Fix, Blair, 2015. "Rethinking Economic Growth Theory From a Biophysical Perspective," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 157974.
    9. Nitzan, Jonathan, 1989. "Price and Quantity Measurements: Theoretical Biases in Empirical Procedures," EconStor Preprints 157849, ZBW - Leibniz Information Centre for Economics.
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    Citations

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    Cited by:

    1. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," Working Papers on Capital as Power 2020/01, Capital As Power - Toward a New Cosmology of Capitalism.
    2. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," SocArXiv g86am, Center for Open Science.
    3. Blair Fix, 2022. "Economic development and the death of the free market," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 1-46, April.
    4. Bichler, Shimshon & Nitzan, Jonathan, 2023. "Inflation as Redistribution. Creditors, Workers, Policymakers," Working Papers on Capital as Power 2023/01, Capital As Power - Toward a New Cosmology of Capitalism.
    5. Bichler, Shimshon & Nitzan, Jonathan, 2023. "The Capital As Power Approach. An Invited-then-Rejected Interview with Shimshon Bichler and Jonathan Nitzan," Review of Capital as Power, Capital As Power - Toward a New Cosmology of Capitalism, vol. 2(2), pages 96-174.
    6. Bichler, Shimshon & Nitzan, Jonathan, 2021. "Unbridgeable: Why Political Economists Cannot Accept Capital as Power," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 95, pages 109-117.
    7. Tilsted, Joachim Peter & Bjørn, Anders & Majeau-Bettez, Guillaume & Lund, Jens Friis, 2021. "Accounting matters: Revisiting claims of decoupling and genuine green growth in Nordic countries," Ecological Economics, Elsevier, vol. 187(C).
    8. Fix, Blair, 2020. "Can the World Get Along Without Natural Resources?," SocArXiv hp5w4, Center for Open Science.
    9. Bichler, Shimshon & Nitzan, Jonathan, 2020. "The Limits of Capitalized Power. A 2020 U.S. Update," Working Papers on Capital as Power 2020/06, Capital As Power - Toward a New Cosmology of Capitalism.
    10. Fix, Blair, 2020. "Can the world get along without natural resources?," Working Papers on Capital as Power 2020/05, Capital As Power - Toward a New Cosmology of Capitalism.

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    More about this item

    Keywords

    aggregation; national accounting; economic growth; neoclassical economics; quality change; utility;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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