Rapid Growth of ‘Illth’

The editorial, “Growth Guesstimate” read with the article, “QuarterlyGDP Estimation” by R Nagaraj (EPW, 11 March 2017) reminded me of a famous comment by an eminent economist, “Some knowledge of economics is useful, if only to guard against being fooled by other economists.” Recent controversy over measurement of gross domestic product (GDP) firmly establishes that economics, being a body of inexact knowledge, has many fuzzy areas.

The primary way of measuringGDP is based on (absurd) calculations that exclude any consideration of distribution of income, the relentless depletion of essential resources, and ignore the existence of “externalities” of growth process—reckless spewing of pollutants into atmosphere, waterbodies, and biosphere—and the travails and trepidations faced by people. Though many experts believe thatGDP is the simplest and most accurate measure of whether economic policy is moving in the right direction, the Nobel laureate, Simon Smith Kuznets, who had first developed the modern concept ofGDP, himself warned, as far back as 1937 thatGDP was a potentially dangerous oversimplification. It could be misleading and is subject to “illusion and resulting abuse” because it did not account for “the personal distribution of incomes” or “a variety of costs that must be recognised.”