Thursday, May 15, 2008

Grossly Distorted Picture

Once you accept that growth in GDP per head is the best way to measure economic performance, the standard definition of a recession—a decline in real GDP over some period (eg, two consecutive quarters or year on year)—also seems flawed. For example, zero GDP growth in Japan, where the population is declining, would still leave the average citizen better off. But in America, the average person would be worse off. A better definition of recession, surely, is a fall in average income per person. On this basis, America has been in recession since the fourth quarter of last year when its GDP rose by an annualised 0.6%, implying that real income per head fell by 0.4%.
While I have issues with using GDP as a measurement of well-being, I agree that if you are going to use it, that GDP per capita is the better way to compare between countries. Interesting how Japan has actually been doing better than the US under this measurement.

Oh, and I am sure that loyal Fat Knowledge readers are wondering why I am so lazy as to be reusing this title. Don't blame me, it is The Economist's fault, as they are the ones that went the same title twice. :)

via The Economist

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