Planet Money

Can we just change how we measure GDP?

Mar 21, 2025

Dive into the fascinating world of GDP, the ultimate economic scorekeeper! Discover the bold proposal to exclude government spending from its calculation and the potential implications this could have on economic understanding. Hear insights from a former head of the Bureau of Economic Analysis, who reveals the political pressures behind GDP measurement. Explore the controversies about including factors like illegal activities and environmental impacts, and how adapting GDP is essential in our evolving economy.

22:16

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Quick takeaways

GDP is a pivotal economic indicator reflecting the economy's health, but it is often influenced by political pressures for favorable reporting.

The absence of significant factors like unpaid labor and environmental impact in GDP highlights the need for more comprehensive economic measurements.

Deep dives

Understanding Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is a critical economic measure that sums up all final transactions in the economy over a year, including goods and services bought and sold. It was developed in the 1930s and has a consistent formula that includes consumption, investment, government spending, and net exports. The significance of GDP lies in its ability to indicate the health of the economy, helping to influence government spending allocations and business investments. For instance, a GDP of $29 trillion for the previous year suggested a healthy growth rate of 2.8 percent, crucial for decision-making by policymakers and economic stakeholders.

Intro

4min

The Complexities of GDP Measurement

8min

Navigating GDP Adjustments and Monetary Policy

4min

Rethinking GDP: Challenges and Alternatives

6min

The Integrity of National Statistics and New Perks for Supporters

3min

There's one statistic that rules them all when it comes to keeping track of the economy: gross domestic product (GDP). It's the sum of all final transactions, so all the goods or services bought and sold, in an economy. GDP tells us how hot the economy is running, or how cool — like if we might be heading into a recession. And it's an important tool to compare countries, policies, and politicians. It's used by the U.S. government to allocate money and by businesses to make decisions about the future.

For close to a century the building blocks of GDP have been the same. Now Commerce Secretary Howard Lutnick, has proposed a big change: taking government spending out of GDP.

On today's show, can the U.S. change how it measures GDP? We talk with a former head of the BEA — about what he thinks they're likely to do now, and about the pressure he faced while trying to compile GDP for nearly two decades. Turns out, people have always been trying to bend it to make whatever grand project they're working on look better.

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Planet Money

Can we just change how we measure GDP?

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Understanding Gross Domestic Product (GDP)

Political Pressure and the Integrity of GDP

Challenges in Measuring Economic Well-being

Remember Everything You Learn from Podcasts