Bobby Kennedy denounced GDP
But did he get his analysis right?
Mainstream economics has many detractors. They disagree on many things. But one thing that unites most of them is a disdain for GDP1, especially when used as a measure of quality of life or as a quantity whose increase is desirable (i.e. economic growth).
GDP’s critics are very fond of quoting a passage from a 1968 speech by Robert F. Kennedy, which speaks to their concerns.
Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product — if we judge the United States of America by that — that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.2
Stirring words indeed. The definition and measurement of GDP, however, is a technical matter. Did Bobby get his facts right? Might his speech mislead more than illuminate?
TL;DR version
This is a long posting, so I’ll preview my conclusion here.
Kennedy’s speech reflects a flawed and distorted understanding of how GDP is calculated. This undermines both its credibility and its implied conclusion — that the pursuit of increased GDP is counter-productive to “making life worthwhile”.
I can understand why Kennedy made the speech. What I fail to understand is why this passage is so popular amongst those who argue against mainstream economics. Their goal would be better served by a well-argued critique, grounded in fact.
Read on for my take on what Kennedy got right, what he got wrong, and why.
Detailed analysis
Gross National Product counts air pollution
Wrong. GDP counts the value of things produced, but ignores any air pollution by-products. This is a well-acknowledged problem with GDP, but Kennedy had it backwards.
GDP does count expenditure on air-pollution mitigation to the extent that mitigation — an intermediate input — is reflected in the price, and thus the total value-add, of the final product.3 This seems intuitively sensible to me. Producing the same stuff, but with less pollution, should improve the net societal value of that stuff and increase GDP.
[GDP counts] cigarette advertising
Correct. But Kennedy was being selective when he chose this example. GDP counts production and sale of both “goods” (of which more is socially desirable) and “bads” (of which less is socially desirable). It is blind to this moral distinction. However, it is not blind to the legal distinction between allowed and prohibited transactions — only the former count towards GDP. Cigarettes might be a bad, but when Kennedy made his speech it was legal to sell and advertise cigarettes in the US.
Countries have dealt with the advertising of legal bads by restricting advertising. The US started restricting cigarette advertising in 1971.4 By 2020, according to the World Health Organisation, 155 of 195 countries had full or partial bans on cigarette advertising.5
[GDP counts] ambulances to clear our highways of carnage
Mostly correct. GDP counts services provided by government at the cost of providing that service.6 So, the direct effect of more carnage on the highways is more ambulance services, and thus an increase in GDP.
There is an interesting counterfactual question here though. When people drive, they are judging its benefits to exceed its potential costs (including death or injury in a crash). Good ambulance services decrease those costs, by improving survivability in crashes. So, we might expect an additional GDP-positive effect through increased use of cars. That said, improvements in vehicle safety have the same effect, and likely at a lower human cost.
[GDP] counts special locks for our doors and the jails for the people who break them.
Arguable. Locks — and jails for that matter — make people feel more secure in their homes, and allow them to extract more benefits from their personal property. So, it is hard to say that expenditure on security, which gets counted in GDP, is a bad thing. That doesn’t rule out a better social equilibrium, with fewer locks and fewer burglars. But nor does it guarantee that such a social equilibrium is achievable.
[GDP] counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl
Wrong. Destruction and loss, in isolation, cannot be GDP positive.7 If people value redwoods and natural wonders in their original state, then it is likely those wonders are already directly contributing to GDP via tourism, and indirectly via shadow prices for ecosystem services. So destruction would lower, not raise, GDP.
“Chaotic sprawl” — to the extent that it provides something that people value like housing — might well increase GDP. If its achievement is tightly dependent on the destruction of something else that is valuable, then the GDP effects are ambiguous.
[GDP] counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities
Arguable. National and city security expenditure has parallels to personal security expenditure — see locks & jails above.
[GDP] counts Whitman's rifle and Speck's knife [Whitman and Speck were mass murderers]
Overreaching. Both rifles and knives can be put to socially positive as well as socially negative ends. The positive use cases do, and should, contribute to GDP. It would be possible, though laborious, to deduct the value of mis-applied rifles and knives. However, such corrections would likely get lost in the rounding.
Society has many products that could be applied to undesirable ends. Some are banned (e.g. cluster bombs) or highly regulated (e.g. explosives), while others are widely available (e.g. claw hammers). Such policy decisions are the sphere of micro-economic analysis, regulatory policy and politics. It is hard to see how tweaking GDP definitions would make any useful contribution to public safety.
[GDP counts] the television programs which glorify violence in order to sell toys to our children
Overreaching. Presumably only a subset of TV programs glorify violence, and only a subset of those do so with the intent of selling toys to children. Like the rifle and knife above, this subset is best dealt with through regulation rather than fiddling with GDP.
Yet the gross national product does not allow for the health of our children
Misleading. GDP does not measure stocks, such as “the health of our children”. GDP does measure spending to avoid degradation of that stock, including vaccines, medicines and operations. As long as the spending is effective, a larger “children’s health GDP” should contribute to an increase in “the health of our children”.
[GDP does not allow for] the quality of [our children’s] education
Mostly correct. Education provided by the public sector contributes to GDP at the cost of provision, irrespective of the quality of that provision. Or put another way, GDP reflects what people are collectively willing to spend on public education, not the quality of the education received.
Different considerations apply for private education. Employing a tutor for a child, for example, will contribute to GDP.
[GDP does not allow for] the joy of [children’s] play
Correct. One measure can’t do everything! (Though there might be an argument that if kids get more joy from play, their parents may be more willing to spend on toys, and society may be willing to spend more on playgrounds…)
[GDP] does not include the beauty of our poetry
Incorrect. Beautiful poetry should sell more poetry books, which are included in GDP. It should also increase support for public funding of poets, which also ends up in GDP.
[GDP does not include] the strength of our marriages
Ambiguous. Marriage-related expenditures do contribute to GDP, but it is unclear how these vary with the strength of marriages in general. Marriage might move some market transactions off-market, with the (apparent) effect of lowering GDP. But marriage makes people more financially stable, which might support a higher level of economic activity.
[GDP does not include] the intelligence of our public debate
Arguable. Unintelligent public debate can lead to poor public policy, which can have outsized negative effects on society, the economy, and GDP.
[GDP does not include] the integrity of our public officials
Probably incorrect. Bribes received by public officials contribute to the black economy, and so are not recorded in the official GDP. A large black economy competes with and likely depresses the “official” economy. So, the integrity of public officials contributes indirectly to GDP.
[GDP] measures neither our wit nor our courage, neither our wisdom nor our learning,
Incorrect. For wit, see poetry above. The effects of courage are ambiguous. It’s probably a useful attribute for soldiers (and thus reduces the cost of national defense), but a poor attribute for drivers (more ambulances?). For wisdom and learning, see unintelligent public debate above. Also see education.
[GDP does not measure] our compassion
Incomplete. Compassion turns up in GDP as publicly funded social services, and also as donor-funded social services. However, the time and effort of volunteers motivated by compassion is excluded from GDP.
[GDP does not measure] our devotion to our country
Correct.
[GDP] measures everything in short, except that which makes life worthwhile.
Just plain wrong. What about food, travel, books, skiing, hot showers, communications with family and friends, a rewarding job, and the many many other things that make life worthwhile? (Your list will vary.) Worthwhile things do find their way into GDP.
[GDP] can tell us everything about America except why we are proud that we are Americans
No comment. I’ll leave that for Americans.
Sins of omission
Reading or listening to Kennedy’s rhetoric, it is easy to focus on what he includes, rather than what he omits. But the omissions are telling.
Most importantly, a country with a higher GDP has more options, include spending more on healthcare, education, security and poetry. If, and how, it exercises those options is a matter for politics — but it is unambiguously better to have options than not to.
Empirically, a fall in GDP is closely associated with a drop in employment (stay tuned for my forthcoming post on this topic). Kennedy didn’t make this connection, even though other parts of his speech made clear his disdain for unemployment, e.g.
…I have seen proud men in the hills of Appalachia, who wish only to work in dignity, but they cannot, for the mines are closed and their jobs are gone…
Conclusion
Bobby Kennedy was a politician. A good political speech is a call to arms for the faithful and tugs at the heartstrings of the waverers. And indeed, his speech fulfils these criteria. Technical accuracy is much less important in politics, so I had low expectations when I started this analysis. In retrospect I should have set them even lower.
Kennedy’s speech reflects a flawed and distorted understanding of how GDP is calculated. This undermines both its credibility and its implied conclusion — that the pursuit of increased GDP is counter-productive to “making life worthwhile”.
I can understand why Kennedy made the speech. What I fail to understand is why this passage is so popular amongst those who argue against mainstream economics. Their goal might be better served by a well-argued critique, grounded in fact.
IMHO GDP is a measure that’s really useful for some purposes, and highly misleading for others. The challenge is to distinguish between those purposes. That in turn, relies on a solid understanding of what it does and doesn’t measure. Kennedy’s speech, unfortunately, misleads rather than illuminates.
Bobby Kennedy, reflecting common practice in 1968, spoke of Gross National Product (GNP). Gross Domestic Product (GDP) is more widely used today. GDP measures production within the geographical borders of the country. GNP extends it to include the net overseas economic activities performed by its nationals. As nothing that Kennedy said was specific to the definition of GNP, I treat the two synonymously here.
From the speech by Robert F. Kennedy at the University of Kansas, 18 March 1968. Source: JFK library.
There are many misconceptions about what contributes to GDP. I suspect the words “gross” and “product” mislead some people into thinking that GDP is the sum of the sale price of all products produced in a country. Such an approach would double-count intermediate products (e.g. the steel sold to a carmaker, that subsequently becomes part of the car). GDP calculations are careful designed to exclude such double counting.
Cigarette advertising on TV and Radio was prohibited in the US from 2 January 1971, under a law passed by Congress in 1970 and signed by President Richard Nixon. A similar prohibition applied in New Zealand from 1963. These bans were extended to other media over time.
World Health Organisation (2021). WHO Report on the Global Tobacco Epidemic, page 23.
Government-provided or subsidised services have to be paid for, and taxes have indirect effects on GDP as well. I don’t go into those here.
This is an example of the broken window fallacy.