Figures of Merit

It would certainly save time and bother if economics were really the physics of money instead of a branch of sociology that deals with how certain cultures organize their material life. In particular, people are very reluctant to give up the dream that wealth has an unambiguous standard—gold, food, labor, energy, or whatever—so that whatever policy maximizes that value would be economically best. In fact, at times successive theories of value have provided more or less adequate indices of prosperity, but only for particular purposes and specific groups. Bullion really was crucial in the Age of Mercantilism, at least for governments whose effective power depended on ready money and credit, just as labor power was critical in the Industrial Revolution. For that matter, one could make a case in 1850 that the wealthiest nations were those that produced the most pollution. Where there’s muck, there’s brass. But reeking rivers and lakes of coal tar are at best signs of economic activity. In themselves, they are anything but wealth. Similarly, though per capita energy use correlated with other measures of wealth in the 20th Century, no company every increased its profits by using more energy to produce the same output. Measures of wealth are like the figures of merit that engineers use to rate refrigerators or electric motors. They sometimes help the designer to improve a product, but if the better freezer has the worse figure of merit, you junk the figure of merit, not the freezer. With this characteristically elaborate preface, may I suggest that it’s about time we recognize that statistical measures such as the GDP, which apparently show growth, are actually masking the gradual impoverishment of the United States?