Money Is Not Wealth

Here’s a letter I sent recently to The New York Times:

To the Editor:

Eric Zencey’s article “G.D.P. R.I.P” (August 10) correctly points out that GDP has limited usefulness in measuring well-being. But his case is muddled by confusing money with wealth. Money is a unit of measure, like a mile or a ton. But it is not itself wealth.

He writes, “If you get into a fender-bender and have your car fixed, G.D.P. goes up.” It actually stays the same. If I don’t get into the accident, I’ll just spend the repair money on something else. While the accident may have no effect on GDP, it does have an effect on wealth; I am inarguably poorer. Instead of a working car plus a new tv, I can enjoy only the car.

Zencey’s confusion is itself an example of why GDP does a poor job of measuring well-being.

Fellow in Regulatory Studies
Competitive Enterprise Institute
Washington, Aug. 10, 2009