Deduct environmental pollution, health hazards from GDP figure

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Blog visitor Phua Kai Lit points out that the way we calculate GDP is deeply flawed.

The way national wealth and economic growth are calculated needs to be changed e.g. “bads” such as environmental pollution and health hazards need to be deducted from GDP and GNP.

Then we won’t have witness the phenomenon of Mainland Chinese technocrats pursuing high rates of “economic growth” while ignoring environmental devastation and generation of health hazards.

Simon Kuznets (the father of these) originally wanted household production to be added to national wealth calculations. But this did not materialise. So, the wealth of the poorer countries is under-estimated to some degree (household production for own consumption and not for sale on the market).

As it is, GDP calculations in the dominant neoclassical economics tradition do not make complete sense e.g.

(1) If a woman (or househusband) stays home to take care of the baby and do the housework, this is not added to GDP. But if care of the baby is handed over to paid minders or housework/laundry is done by paid workers (part-time maids and laundrettes), then it is added to GDP.

(2) More illogically, if you build a factory to manufature cigarettes, you are adding to the GDP. If you provide medical treatment to the lung cancer victims who arise from smoking the cigarettes, you are also adding to GDP!

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6 COMMENTS

  1. http://www.alternet.org/environment/5-reasons-why-prioritizing-growth-bad-policy
    This is an excellent article on the subject by by Prof. James Speth. GPI is the US name for Index of Sustainable Economic Welfare. Other alternatives are Measure of Domestic Progress, Ecological Footprint and Happy Planet Index.

    A few years ago, US citizens carefully avoided criticising or even mentioning capitalism. Now, reality has hit them. One thing to admire is that though they are surrounded by serious nuts, many of them are working hard to face the new reality. As we see Malaysians order another lavish plate of food before waddling to the 4-wheel drives immersed in the smartphone, it seems most happy with what they hear under the under the coconut shell. They are blissfully unaware of what capitalism and climate change will bring in a few decades at most.

  2. Any update or truth in Singapore spying on Malaysia?
    I heard all internet traffic from Malaysia to US and Europe will have to go through Singapore because of the internet infrastructure, so our little hidden secrets can be easily captured?

    • The Fairfax report said that since the 1970s, Malaysia and Indonesia have been targeted by Australian and Singaporean intelligence, since most of its telecommunications and Internet traffic goes through the island city-state.

      It was reported last August that’s Singaporean intelligence partnered with the Defence Signals Directorate, Australia’s electronic espionage agency, to tap the SEA-ME-WE-3 cable that runs from Japan, passing through Singapore, Djibouti, Suez and the Straits of Gibraltar to Northern Germany.

      This was allegedly facilitated by Singapore Telecommunications Limited (SingTel), the city-state’s government-owned telecomummincation giant.

      http://www.themalaysianinsider.com/malaysia/article/singapore-behind-snooping-on-malaysia-powered-by-singtel-says-report

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