Problem with GDP BNP

GDP (gross domestic product, sometimes expressed as gross national product (GNP), a distinction without significance for our purposes) is an anachronism—about as useful for telling us important things about the health of the modern economy as simply looking at the number of calories consumed by a person to determine their health.

The problem with using GDP as a measure of the overall health of the economy is that it does not include any measurement of how much loss the economy experienced over the course of the year. Were there devastating hurricanes that ripped through the Gulf? All that shows up in the GDP statistic is increased spending in construction.

Another important error with GDP is that it values government expenditures in the same way as private-sector expenditures, yet the former is the result of coercion and thus not reflective of actual preferences voluntarily expressed among the population. As Rothbard suggested, at the very least we should deduct government expenditures from GDP.