Zachary Karabell opens his book “The Leading Indicators” with a simple but provocative challenge: “What if I told you that many of the assumptions we make about our economic life are wrong?” Karabell winds together the story of leading economists, Arthur Burns and Simon Kuznets among them, desirous of making economics scientific. By the 1950s the efforts had been tagged “physics envy.” GDP, CPI… these kicked off the alphabet soups of policy (and metrics) we’re stuck with today. Gallup has updated the conundrum.
Traditional income-based metrics that measure economic growth are necessary, but they do not tell us enough on their own. Metrics such as GDP do not explain, for example, why life expectancies in the U.S. are falling even as the stock market is booming and unemployment is dropping to new lows.