Why GDP/CAPITA and Purchasing Power are insufficient tools in a world of AI and fast technological progress?
Gross Domestic Product (GDP) is a metric refined by John Maynard Keynes in the 1940s to measure the economic output of a country. It is used as well as a proxy for “economic power”, while GDP/capita is widely construed as a measure of standard of living, and even sometimes welfare.
GDP has many flaws: the more non-renewable natural resources a country depletes, the more prisons it builds, the more drugs and paid sex it consumes, bigger and larger is its GDP. Add to this that the GDP does not take into account pollution generated in the process, nor activities that actually benefit the economy, like for instance a household mum patiently having her kids do their homework, or someone caring for an elderly relative.
GDP/capita does not say anything about income distribution, is imperfectly correlated with purchasing power, and does not speak of productivity variations between countries, nor how physically and mentally demanding any work actually is.
Are we not confusing the end with the means?