The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations Hardcover – January 30, 2018

An eminently readable book, Growth Delusion by David Pilling covers it all. With admirable British wit, David reveals who invented the term GDP, and how it became a boastful prime economic index for measuring a country’s progress, while ignoring the welfare of the individual, society, and nature’s environment. The author deserves high praise, and the book should be required reading for all college students and those concerned with the economy-environment nexus. –Mohan K. Wali, Professor Emeritus, The Ohio State University

The Growth Delusion is a fascinating short book on GDP and modern economics. While some may say this is a rant/screed, the author, David Pilling, is an editor at the FINANCIAL TIMES.The introduction of the book lays out what is covered in the book. At its essence is an examination of Gross Domestice Product (GDP), economics, and human satisfaction/happiness. (Now that I've read the book, I think the introduction is solid.)Chapter One looks at GDP, how it was developed and what it's creator--Simon Kuznets--really thought it should measure. This chapter clearly disabused of the idea that GDP was developed in the late 19th century; in reality it was a product of Roosevelt's ambitions and WW2. Kuznets interestingly enough thought that only the things that helped society/individuals should be counted, not the growth of banks, rising cost of health care, and certain areas of government spending. Unfortunately, that isn't the way GDP is measured.In the second chapter, Pilling discusses how GDP is calculated in the UK. Given the scale, one could criticize the methodlogy, but nobody said it was to be exact down to the pence. The third chapter discusses--across a variety of economies--what does and doesn't get counted in theGDP. The chapter opens with the biggest sinkhole (in my opinion at least) of US spending--the healthcare system. Pilling notes that while it is a substantial portion of our GDP, the results leave a lot to be desired particularly when compared to other countries. Lord knows, how he would update this chapter in the era of COVID. He then moves on to women's household labor and how most economies don't account for it in GDP, and poses some numbers on if they did. Housework it seems could be an even more substantial contribution to the GDP, but it is not counted.The banking crisis of 2008, Iceland and other countries response to it, are the subject of chapter four. The internet's effect on GDP is the subject of chapter five. As Pilling points out, while the internet has added to the bottom line of many companies, it actually reduces the GDP in some sectors since one doesn't need as many employees (whose labor is not counted as part of the GDP if they aren't working). Chapter 5 also touches on the complexities of multinational corporations on how they should be accounted for in GDP. A classic example is Apple-the company is headquartered in the USA, but a lot of the products it sells are assembled in China or SE Asia.The final chapter in Part One looks at the middle class. While not directly related to GDP, Pilling's final paragraph in the chapter sums it all up: "The fact that an economy is growing tells you nothing about what is happening to the distribution of wealth. [...] Increased productivity has been decoupled from wages and employment. And if most people are not feeling any benefit, what precisely--and who precisely--is all this growth for?"Chapter Seven-"Elephants and Rhubarb"-opens Part Two. This chapter looks at the issues of measuring GDP in some African economies. After discussing light-at-night intensity data, Pilling looks at informal economies, then moves to graft and corruption skewing GDP figures and the size of economies. A nice little thought-provoking chapter.Economic growth and its relationship with health and education is examined in Chapter 8. India is used as a case study. While the chapter highlights that economic growth can lead to better education and health outcomes, it notes it can exacerbate the growth of slums (by moving rural people to the city), create issues with wage and wealth gaps, and unintentionally create or worsen ethnic divisions.Part Two closes out by looking at China. He touches on air quality and GDP growth in China (perhaps a picture to come in the USA if a certain political party gets its regulatory roll back?); GDP growth under the Communist Party rule; the Chinese concept of a "green" GDP; and the growth of "green" energy in China. Spoiler warning: keep an eye out on the green GDP concept and rememeber what you read in Chapter One--it will be coming more to the forefront before the book ends.Part Three opens with a chapter on wealth. While the chapter notes that assets, such as cash or stocks, can be easily tracked, but there is a easily measured quantity, other aspects of "wealth" such as skills, happiness, etc., are much harder to measure but nonetheless important as financial assests. Pilling also spends time on the short term mentality Western economies have with wealth--we look towards themaximization of wealth at the given moment, but very little thought is given to future generations and the impact on them. (While he doesn't say it, that may be why climate change and responding to it is so difficult.)Chapter Eleven tackles a thorny topic--valuing nature/natural world. The chapter starts with reviewing Costanza's (Robert, not George :) ) 1997 NATURE paper on pricing ecosystem services. While focussing on the criticisms, it does note the value of the paper. The rest of the chapter looks at how the concept hasdeveloped since 1997--splitting between renewable and non-renewable; the quandry we can't create the natural environment per se, but can print money; the World bank's more pragmatic approach; and some others. It is a thought provoking chapter inasmuch as no matter what our GDP is,if we trash and destroy the natural environment beyond its ability to regenerate, we are going down a very slippery slope.Happiness and how it gets counted is the topic of Chapter Twelve. As Pilling points out, this one is highly subjective and some what culturally based. the chapter raises intersting questions on why don't the majority of governments try and facot in a hapiness factor.GPI=Genuine Progress Index, also known as GDP 2.0, is covered in Chapter 13. In it, this index tries to account for enviornmental factors, such as clean air and water, leisure, and the other standard GDP factors. What annoys some economists, GPI subtracts from the standard GDP measures when the are adverse things like serious air pollution, water issues, or excessive work hours. As noted by Pilling though, the GPI does get conversations going on the overall quality of life at the state and national level.The last chapter is sa summary. Re-iterating GDP is only concerned with dollars and cents, all thanks to Bentham's work on marginal utility. Pilling does suggest other numbers that are useful to look at: median income, inequality, CO2 emissions, and net domestic product. And while you maythink this is all some leftist vodoo, the issue with GDP as currently calculated has even become a topic of interest in NATURE.This book is referenced, though I much more of a bottom of the page for notes, than I am at the endof the book. The shortcoming I find is that most of the references are newspaper articles; I would've liked to see more of the economic whitepapers, academic studies, etc. referenced. Not that you cn't trust newspapers, it's more of an issue that the other sources go more in-depth, often have the raw data, etc.Overall an engaging and thought-provoking read!

Wow... where to begin. If you keep up with things economic/governmental/global, you'll appreciate the underlying details. If you need to start learning about things economic/governmental/global, this book will be inspiring and incredibly informing. Just be prepared for some truths... or, confirmations of what you already know or suspect.

Good introduction to the history of GDP and challenges of measuring this commonly used economics term. Interesting it often doesn't count alot of the services and intangible jobs, caretaking by a family member or volunteer, or anything that isn't sold or paid for, or in some instances, education, arts, gov't services. And it can be manipulated as a political tool. 3% GDP growth maybe sign of a healthy economy, but alot of us are not going to feel the benefits in health or quality of life. Especially if these are not part of the calculation.

Really a great book. We should constantly critically think about the world around us, and this book helps provide information needed to do so.

This is one of those books where if you're totally new to the subject you may enjoy it, but if you already know something about it you may be gritting your teeth from time to time (or often). With its breezy style it's something like a Jamie Oliver 30-minute meal rendition of an ethnic dish: cheerfully and briskly explained; full of shortcuts; a bit sloppy in the presentation; fundamentally British cuisine, no matter where the dish is supposed to be from; but kind of OK tasting, provided you've never eaten the real thing. For a reader with more background in economics, though, this book adds nothing new to the already huge literature on the defects of GDP and how it might be fixed or replaced. Its argument is weakened by a failure to deal properly with finance, among other issues. And there is a major inconsistency between one of the book's premises and its concluding recommendations.The title of this book doesn't really reflect its contents. You can tell from the word "delusion" that the book is a critique, but DP's target is GDP, not economic growth: "The aim of this book is not to declare war on growth. Some will fault it for that. Rather, it is to show what is wrong with our measurement of growth in the hope that we can knock it from pedestal" (@US11-12/UK13-14). At this point in the text, it's a little ambiguous as to what the pronoun "it" in the quoted sentence refers to: growth or the measurement, GDP. Compounding the confusion is DP's footnote on page 1, which states "GDP growth is synonymous with growth." But if I correctly understood the bulk of the book, the "pedestal" seems to be our reliance on GDP *alone* as a guide to policy. DP's bottom line seems to be:(1) Growth in production and consumption are fine for now, and(2) GDP remains a useful metric of the above, but(3) GDP doesn't mean what we think it means, for several reasons, including:-- It's more approximate than you think,-- It undercounts good stuff, like innovation and domestic work;-- It overcounts bad stuff like disease and disaster recovery;-- It reflects neither the value of the damage we do to natural assets (the environment, biodiversity, etc.), nor the value of what we do to rehabilitate them;-- Governments can mess around with what it counts and what it doesn't.(4) Consequently, we should be using additional metrics alongside GDP instead of GDP uniquelyAll in all, both the diagnosis and the prescription in this book are pretty similar to those published in the 2009 Stiglitz-Sen-Fitoussi report, which had been commissioned a year earlier by then-French President Nicolas Sarkozy. The report was issued in book form as  Mismeasuring Our Lives: Why GDP Doesn't Add Up . DP does cite this work, but only for the words of President Sarkozy. Most chapters of his own book cover the various facets of item (3) above. Some of DP's proposals for item (4) include GDP per capita (which actually already is commonly used), median income, the Gini coefficient for income inequality (also common in international comparisons), net domestic product (taking into account depreciation of assets), well-being, and "CO2 levels" (which DP seems to conflate with CO2 emissions, though they're not the same thing). These proposals occupy less than 10 pages in the last chapter of the book.DP does provide a more novel contribution in the middle section of the book, where he draws on his professional in-country experience to discuss GDP and development in Africa, India and China. Plus, since he's a Financial Times journalist of long standing, his treatment of the subject is much more lively and easy to read than a book by academic economists. I also appreciated his skepticism about the "Gross National Happiness" of Bhutan, and his criticism of some typical journalistic clichés about Japan's economy.This book seems to continue a trend for a short book about GDP to appear every couple of years, in each case written by a British author for the "general reader," meaning especially someone who reads The Economist or the FT. These include Diane Coyle's  GDP: A Brief but Affectionate History  (2014) and Ehsan Masood's  The Great Invention: The Story of GDP and the Making and Unmaking of the Modern World  (2016). Of these, the present book is the best of the lot, especially because DP adopts a more critical attitude than the others (even if his criticisms don't go as deep as I might have preferred).There's also plenty of sand in this salad -- or even a whole rubber tomato. I'll focus on the following aspects: the book's excessive selectivity in presenting certain topics; its inconsistent and hasty readings of its own sources; a crippling omission from the book's definition of the economy; and a more global inconsistency between the beginning and end of the book.(A) Overly selective:I understand well that a popularization can't go into the same depth of detail as a more academic book. But imagine a guidebook to Manhattan architecture that only had photos of the ground floor of the most famous buildings. Or imagine a guide to food in Japan that only talks about sushi (if you've ever visited Japan you'll know what a tiny piece of the food universe that is here). Some of this book's omissions are almost as radical. The following examples are illustrative, not exhaustive.Chapter 12 is about happiness and its relation to policy. DP mainly focuses on using peoples' subjective happiness as a guide for public policy. This is the approach favored by one scholar whom he's interviewed on the subject of happiness (Sir Richard Layard). You'd never know that there's an entirely different and more "objective" take on happiness in the policy arena. It's called the "capabilities approach," and is based on the ideas of Aristotle, Nobel economist Amartya Sen, and Chicago philosopher Martha Nussbaum. It has numerous fans in academia and government, one of its benefits being that it's more difficult for politicians to manipulate cynically. The French report mentioned above has a lot more about this than about subjective happiness (maybe not surprisingly, given Sen's role in writing it). But even though DP cites the report, the capabilities approach is ignored here.Next, sustainability: Chapter 11 outlines a couple of approaches to placing a monetary value on the world's natural resources, and in particular the "services" they render to us humans. As DP tells it, the World Bank uses a very strange approach where "natural capital," "produced capital, and "intangible capital" are all equivalent, and can be interchanged among each other -- so that it would be fine to exchange all the fish in the sea (slight exaggeration: DP just mentions salmon, @187/225) for courtrooms, for example. What DP doesn't tell you is that this isn't just the World Bank's kooky idiosyncrasy, but that it's the dominant view of sustainability in mainstream economics. This viewpoint is called "weak sustainability," and it's the brainchild of an MIT economist named Robert Solow who, in addition to being one of the most influential environmental economists ever, got a Nobel Prize for his 1956 theory of economic growth, which is still taught in every graduate economics program in the world. (Despite his relevance to the topic, Solow's never mentioned in this book.) Certainly, weak sustainability seems like a messed-up idea -- but wouldn't you be more worried about how messed-up it is if you knew that *most economists* think it's cool, not just the World Bank?Also relating to the environment, DP simply states as fact that "One of the patterns of industrial growth has been that in the early stages of development, countries pollute. Then, as they grow richer and more technologically advanced, they clean up" (@150/180). This is a dogma promoted by, among others, Partha Dasgupta, an economist DP interviews in a later chapter. (Dasgupta co-wrote an essay about it that's a standard reference in environmental econ textbooks.) To be fair, DP does also mention that often wealthier countries simply outsource their pollution to poorer countries when the latter take over as manufacturers. But what he omits to mention is that the "pattern" he cites, which is known in the trade as the "environmental Kuznets curve," seems to hold only for certain types of pollutants. Soil contamination, for example, doesn't follow that pattern. Neither do greenhouse gases, which rise, then decline, and then start rising again, as per capita GDP increases further. (I won't dwell on DP's recitation of Jared Diamond's oft-repeated fable about the demise of Easter Island's trees and culture (@164-165/197-199). In recent years that theory has been thoroughly discredited: contra Diamond, the islanders didn't need to cut down trees to move the statues, and the real precipitants of the decline seems to have been rats and diseases arriving with foreign visitors. See Hunt & Lipo's 2011  The Statues that Walked: Unraveling the Mystery of Easter Island .)Finally, an example from the history of GDP itself: DP relies on an unpublished 2011 doctoral thesis by Benjamin Mitra-Kahn that details how Simon Kuznets, popularly credited as the inventor of GNP (predecessor of GDP), actually had in mind to make GNP something very different from what we now use. According to Mitra-Kahn, it was Kuznets's colleagues at the Bureau of Economic Affairs, along with the great English economist John Maynard Keynes, who are responsible for crafting an indicator like what we use today. This narrative was new to me, so actually this book was helpful in bringing it to my attention (though no thanks to DP's endnote, which neglects to mention that the thesis can easily be downloaded from the Internet). In telling the story of how GNP got its current form in the UK and US during the early 1940s, Mitra-Kahn doesn't need to explain how GNP became such an important instrument of policy -- his story ends before then. Unfortunately, DP doesn't explain it either. He leaves the reader with the impression that once the form of GNP was settled, increasing it became every country's top priority.(B) Hasty reading of sourcesThe way GNP/GDP got onto its "pedestal" wasn't at all as simple as suggested in the previous paragraph. DP could have told you that himself if he'd made deeper use of a book that he cites elsewhere just for a clever remark: Lorenzo Fioramonti's  Gross Domestic Problem: The Politics Behind the World's Most Powerful Number (Economic Controversies) . Fioramonti details the role of the Soviet A-bomb, Chinese revolution, and Korean War in leading President Truman to turn the US toward full production, and GNP into a tool of competition. Other books describing the role of the Cold War in the rise of GNP include Robert Collins's  More: The Politics of Economic Growth in Postwar America  and H.W. Arndt's  The Rise and Fall of Economic Growth: A Study in Contemporary Thought . Not only does DP seem not to have read these, but he doesn't mention the Cold War anywhere in the book.The book also misreads Mitra-Kahn's text. According to DP, Simon Kuznets wanted "to squeeze all human activity into a single number" (@22/26); here DP alludes to, but does not properly cite, Kuznets's 1933 article "National Income" in the Encyclopedia of Social Sciences. But Mitra-Kahn's book explains how Kuznets actually was pushing a collection of *four* numbers (M-K @ 243), and Kuznets himself announces his intention to disaggregate national income into several metrics in the very article DP mentions.DP also asserts a couple of times that before the invention of GDP, the concept of "the economy" didn't really exist: "before then an economy was pretty much a cost saving," as illustrated in a Jane Austen quote (@8/10; see also @257/304). Yet the main point of Mitra-Kahn's dissertation is to show that such a concept of "the economy" arose already in the 17th Century (M-K @ 278-279). DP might also have tempered his assertion if he'd spent 2 minutes with Google's Ngram tool and run a search in French, rather than English. He'd have found several references to "l'économie nationale" in the 19th Century, as in the « Traité d'économie nationale » (Treatise on national economy, by C.H. Rau, 1839, translating from the German term 'Volkswirtschaft') and « Études sur l'économie nationale de la Russie » (Studies on the national economy of Russia, by W. Besobrasof, 1883).(C) What is the economyThe rubber tomato in the book pops up in a footnote on the very first page: "For purposes of this book, unless otherwise stated, 'the economy' and 'GDP' are interchangeable terms since we define the economy by the size of its GDP" (@1n.* in both US and UK versions). In theory one *could* define the economy that way -- but that's not really how we do it. If you've ever heard a report in the news about the NASDAQ or FTSE or Nikkei index, you'll have a hint why.GDP relates only to the value of goods and services traded in a given period. Stocks and other securities and instruments traded on financial markets -- including bonds, commodity futures, options, other derivatives, and foreign exchange -- don't count as goods or services, though. Certainly, the fees and commissions you pay to your stock broker, or that a company pays to its financial advisers, are included in GDP: they're fees for services. But the value of the financial market trades themselves is *excluded* from GDP. (They're considered capital gains -- so the profit you make when you sell your house doesn't affect GDP, either, except to the extent you spend it on goods and services afterwards.)Now, this might seem like a very technical point -- except for the fact that the value of these financial market trades is much bigger than GDP. For about a decade, the aggregate value of trading on the world's stock markets alone has equalled or exceeded global GDP; and the aggregate value of trading on the NYSE and NASDAQ has been a multiple of US GDP since the Clinton Administration. Also for about a decade, the amount raised for new capital has been 1% or less of equity trading value -- so 99+% of that value has simply been gambling, without necessarily entering the real economy of goods and services. But equities are hardly the most important financial market: in 2016, the value of foreign exchange trading was *six times* global GDP.Paul Krugman recently had a column (2018 Feb 05) where he repeated the mantra, "The stock market is not the economy." That's true in the sense of it's not so relevant to the daily lives of most people, who live in the real economy of goods and services. But if you're thinking about the larger forces that shape our world, including the power to make decisions that shape our lives -- and the horrendous errors that shape them too, like those that precipitated the 2008 crash and that will precipitate the crashes to come -- you can't pretend the financial economy doesn't exist.DP doesn't mention anything about this at all. His only discussion of finance is in the context of the contribution of financial services (the aforementioned fees and commissions, and interest) to GDP (Chapter 4). In these terms, financial services were contributing a bit more than 10% to Britain's GDP around the time of the Lehman crash. That's small potatoes compared to what's happening on financial markets.Another thing worth knowing about capital gains is that rich people get the vast majority of them. In the US, roughly 49% of capital gains income goes to the top 0.1% of income earners. That's not the top 1% -- it's the top one one-thousandth of the population. This is a much less equal distribution than of salary income. Moreover, as Thomas Piketty showed in his 2014 book "Capital in the 21st Century," the richer you are, the better your returns on investment in financial markets. Someone who can spend $100 million a year on financial advice will generally get much higher percentage returns than someone whose entire investment portfolio is worth $100 million. (Since DP writes for the Financial Times, he's perhaps allergic to Piketty -- in any case, Piketty isn't mentioned in this book, either.)The upshot of this tomato is that although the book attempts to link GDP into a narrative that includes finance and inequality, it can't possibly give a true picture of the linkage. If you're super-rich, there's much more money to be made in the financial economy than in the real economy. News about GDP may affect financial markets -- but more in the sense of rolling the dice in the casino than in any more fundamental way.(D) A larger inconsistencyA closing observation: In the book's introductory chapter, DP criticizes GDP as being something only experts can understand (@9ff/11ff). Yet in the concluding chapter, he advocates having several additional metrics alongside of GDP. How is that supposed to make the economy more intelligible to non-experts? Is it easier for people to understand a bunch of numbers, or just one? Wouldn't grounding public discourse about policy in more qualitative terms be a step more in the right direction?Especially in wealthy countries like Japan and Germany, where the population is aging and declining in number, there are better -- and more qualitative -- goals than growth that should be the guiding stars of policy. Of course, shifting to a more democratically intelligible discourse about policy obviously entails politics as well as economics -- and, alas, politics is yet another topic not discussed much in this book.***In sum, this isn't at all the worst book you could pick for learning something about GDP. But just as you can't really make a Mexican mole poblano as a 30-minute meal (nor even in the 1 hour 50 minutes Jamie gives it on his website), this book won't really give you an adequate understanding of the issues around future economic growth.

Pulling gets to the point with very little data. A simple read for a novice reader. Not academia quality.