Economics @ ITT

The Problem with Poor Countries’ GDP

Posted in economics by ittecon on May 6, 2013

On balance, GDP is a poor approximation of the size of productive capacity of any economy.

GDP understates growth even in rich countries, where its measurement is quite sophisticated, because it is very difficult to compare the value of baskets of goods across different time periods. In the United States, for example, a set of encyclopedias in 1960 was expensive but held great value for families with studious kids. (I can speak from experience, having spent many hours poring over the multi-volume World Book Encyclopedia that my parents bought for my sisters and me.) Now, thanks to the Internet, kids have access to far more information for free. How do you factor that into GDP?

via The Problem with Poor Countries’ GDP by Bill Gates – Project Syndicate.

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