By Dirk Philipsen
In one lifetime, GDP, or Gross Domestic Product, has ballooned from a narrow economic tool into a global article of faith. As The Little Big Number demonstrates, this spells trouble. While economies and cultures measure their performance by it, GDP only measures output. It ignores central facts such as quality, costs, or purpose. Sustainability and quality of life are overlooked. Losses don’t count. The world can no longer afford GDP rule—GDP ignores real development. Dirk Philipsen demonstrates how the history of GDP reveals unique opportunities to fashion smarter goals and measures. The Little Big Number explores a possible roadmap for a future that advances quality of life rather than indiscriminate growth.
Donald E. Frey on Economic History Association wrote:
"The global financial crisis, climate change, and the focus on inequality—all have contributed to a renewed interest in alternative ways of measuring how the economy is doing. Many readers will therefore like the polemical tone of The Little Big Number. It looks at the history of GDP, its inadequacies as a measure of social welfare, and the environmental consequences of seeking continuing economic growth. It covers some of the same ground as a number of other books, including [...] —from a more nuanced perspective—my own GDP: A Brief but Affectionate History [...]. Dirk Philipsen’s book has some additional historical detail but it is a rather emotional book. [...] The second half of the book looks at the 'beyond GDP' debate, oddly asserting that nobody paid much attention to the limitations of our conventional economic measurement between Robert Kennedy’s assassination and congressional hearings in 2001. This is U.S.-centric; the global environmental movement kept the candle burning for alternatives all through that period. Philipsen likes indicators such as the Global Progress Index. These show progress coming to a complete halt in the 1970s. This always seems absurd to me: even if the 1970s were a real turning point in terms of costs to the environment, which gets a heavy weight in such alternative indices, there has been a lot of welfare-enhancing innovation and straightforward growth since the 1970s. It’s not just the invention of the cancer-busting drug tamoxifen or of the Internet, but the fact that more westerners live in houses with phones, indoor toilets, and central heating. Of course there is a trade-off with the environment but is that really no progress? Nor is Philipsen interested in the issues about defining either market output or social welfare for the growing category of digital goods that are often free and have strong public good characteristics.The book advocates ditching GDP completely, and having a national dialogue about economic goals based on the principles of sustainability, equity, democratic accountability, and economic viability. It isn’t clear how this prescription fits with the several 'dash-board' initiatives under way now"
Leandro Prados de la Escosura on The Economic History Review wrote:
"Dirk Philipsen argues that growth of GDP has become the world’s overriding goal, with bad results; and, rather surprisingly, that the cause of this is national product accounting itself. That is, widespread knowledge of the magnitude of GDP (essentially single-handedly) has produced growth mania. This is a rather sweeping assertion, raising important questions, but inviting skepticism. [...] Counter examples to this sweeping assertion are abundant. [...] A part of Philipsen’s argument seems to be that GDP and true wellbeing may actually have a negative correlation. [...] However, only an incorrect comparison allows such a conclusion. [...] in a secular nation, founded on the moral individualism and relativism of the Enlightenment, what is an acceptable substitute? Philipsen’s answers are not impressive, and even contradict each other. [...] My judgment is that policymakers already wisely look at a variety of social indicators, not just GDP. [...] This book deserves one and a half cheers. Its cautionary story of the creation of GNP accounting is eye-opening, and well told. The list of ways that GDP could be improved, even as a measure of production, contains both good and questionable ideas — but all provoke thought. The book easily could be used as a directory of research criticizing GDP. But ultimately, the thesis that GDP statistics are all-important in leading us astray seems flawed."
Stephen Macekura on The American Historical Review wrote:
"The Little Big Number is certainly accessible and, for those who are prepared to stand a militant and emotional discourse through more than 400 pages, not badly written. However, it is far from a rigorous academic book. [...] prominent feature of the volume is its lack of historical sensitivity and economic analysis. No reference is made to the thorough work done by economic historians on national accounts over the last 60 years [...] The book is written in a patronizing way and with the moral superiority of the affluent inhabitant of a rich, post-industrial society, who, in the words of Antonio Machado, a distinguished Spanish poet, ‘despises what he does not know’. In my view, it transpires that the sensitivity to growth of the middle class in affluent countries quite different from that of their lower classes and, especially, of those living in developing countries. [...] If you have an urge to read something not dry and accessible to the non-specialist onGDP, do read Dianne Coyle’s GDP: A Brief but Affectionate History, but do not waste your time with Philipsen’s book."
"The book is split between a historical explanation of GDP’s rise to prominence and a wide-ranging denigration of the metric’s flaws and misuses in current policy-making [...] Philipsen’s book joins a growing chorus of critical voices that lament the widespread use of GDP. Scholars and writers such a sDiane Coyle,Lorenzo Fioramonti, and Zachary Karabell released very similar books over the past two years. Philipsen’s book does not diverge much from any of these accounts, though he is less sanguine than Coyle about trying to fix GDP. Philipsen also follows the work of historians, anthropologists, and political theorists who have historicized the rise of statistics in every-day life (Theodore Porter, Dan Bouk), the emergence of 'the economy' as a calculable entity (Timothy Mitchell) and the pursuit of economic growth and economic productivity in the post–World War II era (Charles Maier), though unfortunately Philipsen does not directly engage or cite any of these scholars.Though few of his criticisms are new, his volume nicely summarizes and articulates GDP’s flaws. Philipsen’s book, however, raises questions for historians. [...] While it would have benefited from greater historical analysis of the post-1945 world, it offers many insights that should encourage undergraduates to rethink many basic assumptions about contemporary economic life and better understand why reliance on the “big little number”should worry us all."
Interview with Philipsen about the Book
Table of Contents of The Little Big Number
- We Become What We Measure
- More, Better, Faster: The Beginnings
- The Origins of Bling: The Spirit of Economic Growth
- The Crucible Crisis: The Great Depression and the Need for Economic Indicators
- Born from Disaster: The Making of a Key Measure
- Forged in War
- Global Domination: The Age of GDP
- Today's ABC of GDP
- More Is Not Enough
- "The People of Plenty Are a People of Waste"
- From Alchemy to Reason: What If? A Thought Experiment
- Looking Forward
About Dirk Philipsen
Dirk Philipsen is a German- and American-trained professor of economic history at the Sanford School of Public Policy and a senior fellow at the Kenan Institute for Ethics, both at Duke University. His work and teaching is focused on sustainability and the history of capitalism and his most recent research has focused on GDP as the dominant measure of success in U.S. and international economic affairs. His work also includes historical explorations of alternative measures for wellbeing.