The biggest blind spots of GDP are digitization, big data, and the role people play in both.
Across the globe communities are challenged to build attractive and energizing ecosystems that nurture residents, draw visitors, and inspire innovation. Brain belts, innovation zones, and ‘Valleys’ of all types are being branded, marketed, and benchmarked. Regional competitiveness reports fueled by data attempt to assess strengths and weaknesses to serve as frameworks for prosperity.
Today’s civic and corporate leaders know the importance that education, workforce development, and civic quality play in sustaining prosperous communities. Yet, despite holistic questions, robust datasets, and wise leadership there are few viable solutions for cultivating these basic societal building blocks. Digital literacy and kindergarten preparedness, skills training and higher education, and health and wellness at all levels are indispensable parts of a building a strong society. Foundational parts that cost a lot of money. Money that economic development agencies and professionals don’t have access to.
This acknowledgement of needs with no clear mechanism for funding is the biggest challenge faced by agencies looking to nurture growth. Policy makers oscillate between over and under regulation while business leaders sit mostly idle because both the public and private sector have been given only a partial picture. Gross Domestic Product (GDP) is the sole indicator provided by economists for measuring societal value. The global marketplace runs on immediate and deep analytics while the entire field of economics builds models on an 80 year old measurement that cannot see a majority of societal value.
The biggest blind spots of GDP are digitization, big data, and the role people play in both. The current limited economic paradigm of people existing as labor in competition with automation is setting the global economy up for catastrophe. People are being liberated by automation, not displaced. Wikipedia for example has provided billions of people with free knowledge while simultaneously eliminating the encyclopedia industry. However, with no professional writers or product to sell, Wikipedia is an industrial age economic failure.
This failing is not Wikipedia’s for not monetizing itself but rather a failure of economics for not identifying the natural value of Wikipedia within society. Whether contributing to articles or reading them as preliminary research, time spent on Wikipedia is simply categorized as leisure time. Time that has no economically quantifiable value. This complete disregard for the natural value in human activity as social capital is a fundamental flaw of economics.
Societal social trust between humans is the foundational yet unmeasured ‘dark matter’ of the economy. It relies on the cumulative social capital of all human beings. Until now, no quantitative metrics have been proposed. In a digitally complex 21st century society, 20th century economists’ lazy reliance on the easy over the accurate is criminal, and history will mark that fact.
From stay home parents and community volunteers, to the value of journalism and scientific research, GDP simply ignores it all. In 1968 Robert F. Kennedy succinctly noted that GDP “measures everything in short, except that which makes life worthwhile.”
Social capital today can and must be acknowledged, measured, and cultivated. Economists have access to social capital metrics where all human value creation is appropriately quantified. Where our employment and education crises are resolved by expanding our definition of compensable work. Where economic growth is guided by a Social Capital Index based on big data. An index to augment GDP and modernize economics; to first stabilize, then liberate the global economy.