12 Mar 2014

Is GDP Growth Always Good?

Liqian Zeng writes:*

After taking Economics of Natural Resources with Dr. Zetland this semester, I started thinking of a question, “Is it always good to have a high GDP growth?”

I have been working at a restaurant which tends to heap huge portions of food on their plates to attract customers. This has created a lot of food waste! I have observed it constantly that people always have food remaining on the plates. The servers would then dispose of any unwanted leftovers directly into the garbage bin. As a result, there is a lot of well cooked food being wasted. We see it as a kind of wasted resources but the restaurant sees it as a way to increase sales. Someone might suggest that they could pack the leftovers home, however, it triggers another problem -- plastic pollution! To minimize cost, some restaurants still use relatively cheaper, non-degradable plastic containers for takeout food. Everyone knows that the non-degradable plastic is very dangerous to our environment. These non-degradable plastic have killed huge amount of sea species, which is a big lost to the environment! It is a negative externality.

On the economics perspective, sales in a restaurant, production and sales of those non-degradable plastic containers all contribute to GDP growth, but are they good growth? These contributions are all based on the wastes and environmental pollutions. They are not good for sustainable development.

Bottom Line: GDP growth is not always a good thing for human society. When we pursue high GDP growth, we should also be concerned about the negative externality that the growth will bring us.

* These guest posts are from students in my resource economics class at Simon Fraser University. Please leave feedback on their logic, ideas and style and suggestions of how to improve.


1236 said...

This is an idea I have been interested in for some time and you have presented an interesting example. I have a tendency to think of bad GDP growth in terms of events like oil spills (which, as you can imagine, are great for job creation and throughput in general), but those types of occurrences are much more rare than the routinely wasteful procedures of workaday activity. I expect when you consider your restaurant along side every other one in the city/country/world, this problem goes from being a shame to an allocative disaster!
Thanks for the interesting post!

Anonymous said...

Thank you for your comment. Yes I know that what I wrote is just a tinny part of the "waste GDP" There are way much more problems. And I just want to illustrate it by an example that we all can see and all have experienced. What more is I want more people to aware the problem and stop wasting our resource. --the post writer

Naor Deleanu said...

Very good points. GDP is a good measure of output, but not a measure of utility. To go even more extreme than your examples, the construction of a diamond statue of Kim Jong Un could yield billions in GDP growth and would increase employment.

8732 said...

Hello, Liqian.

It's very interesting of reading your blog post. You made the point that economic growth would lead to pollution and waste problems based on your own experience. I have to agree with you, the industrialization and GDP growth should be responsible for the environmental degradation. However, in my opinion, we cannot conclude that economic growth is not a good thing. As our economy keeps growing, more and more pollution reduction technology will be developed. Those heavily polluting facilities in the industrial firms will eventually be replaced by innovative, high-tech, and environment-friendly ones. Therefore, we should also consider economic growth as a solution to the pollution problems.

Jim said...

Naor said: "GDP is a good measure of output, but not a measure of utility." Do economists have a way of measuring utility that would also deduct for the externalities, a GDU? I imagine that a trade association would be more interested in a GDP since that would relate to profits, but the public, and their government, would have more of a stake in the GPU.

David Zetland said...

@Jim -- there are many proposed alternatives (gross national happiness, sustainable growth index, etc.). They are not popular with business types b/c output is not #1. For more, I suggest you read this caveat on GDP (#2) and #8 here (for sure)

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