Beyond GNP

Aug 28, 2026

I have repeatedly argued here that GDP does not measure the true strength of an economy or genuine economic development, and that we need an entirely different metric.

Creating such a measure would require a great deal of work. But its basic principle should be to exclude activities that are purely supportive in nature. After all, support services should be judged by how well the activities they support perform. They do not themselves produce anything that ought to be counted separately.

Consider consulting services. Either they result in increased production, or they are unnecessary. The same applies to financial services. The same is true of human resources. To a considerable extent, legal services and many others could be viewed in the same way.

This should not apply, for example, to food services. Employees do in fact need to be fed in order to work, but food also has value in its own right. The same is true of building houses and of healthcare.

Naturally, this would lead to disputes over individual categories, just as there are disputes over what should and should not be included when calculating inflation. The methodology would occasionally be revised. These are normal matters.

Incidentally, there would be no need to start entirely from scratch. The concept of value added—and, by extension, value-added tax—is based on distinguishing between activities that produce something useful and those that help someone else produce something useful.

Conversely, it would make sense to count what people build at home, cook at home, make for one another, and exchange outside the commercial market. No one can measure this precisely, but there are many methods for producing reasonably informed estimates. This matters because a hypothetical country in which nothing was traded commercially and everyone had everything they needed would have a GDP of zero, even though its inhabitants would be very wealthy.

Incidentally, if this loss of household production were factored into the rise in living standards in the Czech Republic since the fall of communism, the resulting picture would be radically different from the one officially presented—and considerably less optimistic.

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