Rob Wiblin interviewed economist Tyler Cowen on the 80,000 hours podcast (“the show about the world’s most pressing problems and how you can use your career to solve them”) and as I would expect, it was a consistently stimulating conversation. Cowen presented on his new book, Stubborn Attachments, which argues that we should place dramatic importance on economic growth because most of humanity’s expected value lies in the future, and economic growth is the most reliable help we can offer future generations. I think the thesis is largely correct, and I'm glad he's making such a strong case for creating an economically prosperous future. I want to contend, though, that growth as conventionally measured does not always do justice to the sort of growth that matters for the long-term future.
Cowen makes a good case for providing future generations with as many resources as possible, but economic growth is a systematically imperfect measure of resources. In particular, it's not possible to cleanly distinguish growth from equity, because the way we value resources in the first place depends on distribution.
This is a bit of a caricature, but as an example if private jets are worth $50 million, and a policy results in the creation of one fewer private jet per year but $30 million more in housing per year, that policy may very well be regarded as an increase in the number of resources in the economy even though it reduces the economic growth rate. This is because the dollars spent on the respective goods are spent by different people who place different values on a dollar. Specifically, it's reasonable to think a low or middle-income person values their last dollar considerably more than a high-income person, and so the $30 million in housing may actually represent more real value. This likely remains true if our goal is to build capital that benefits future generations.
Now as I said this is a caricature, since most transactions will not be as stark as private jets and housing. There are also counterarguments that can be mustered: for example, all else equal, the fact that one person has more money than another should indicate higher productivity, so growth in capital valued by higher-income people may indicate other positive trends.
Still, these arguments do not strike me as sufficient to erase the connection between distribution and how real growth is measured. Note that I am not talking about inflation here: I am talking about how, given the same average value of a dollar, different dollars may still mean different things.
There are of course other issues with measuring growth that Cowen alluded to in the interview, such as environmental externalities or growth in addictive industries like tobacco, where people presumably act against their better instincts.
The distribution issue, though, is subtle and complex. Happily, most well-designed policies to improve equity (such as basic income or education investments, though I now have doubts about this) do seem improve growth, although I may have motivated reasoning here. That said, the argument above suggests that these policies are likely undervalued from a growth perspective. Furthermore, even if a policy does not have a positive effect on growth, it may actually be growing the number of things available to future generations in a real way if the dollar price of its costs is overvalued and the dollar price of its benefits is undervalued.
One response to this issue is to say that conventional measures of growth are imperfect but are a good approximation. That's true, but if we are using a measure as an approximation, then that implies we should use it differently from if we treat it as a good measure in itself.
As a final note, an alternative measure to GDP is the inequality-adjusted human development index. This is somewhat clunky, and as with growth, there's no perfect measure of inequality. Perhaps the best approach is to look at multiple measures and to avoid being inflexibly (shall we say stubbornly?) attached to any particular one.