Why Are GDP Figures Inaccurate?

Why Are GDP Figures Inaccurate?

GDP figures are not necessarily always inaccurate, but they can be inaccurate because of when they are taken and do not always keep track of extremely sharp upswings or drops in the calculated values: GDP stands for Gross Domestic Product, meaning that it measures the wealth of a certain country, based on their spending patterns throughout the country.

However, GDP is very often used to estimate many other various facts about a country, such as happiness, or social welfare, or productivity of that particular country. GDP is used to value a country on much more than just their money, but it shouldn’t be. There is of course correlation between GDP and population happiness, social welfare or productivity, but correlation does not mean causation. This is the very issue with assuming certain things based on GDP. Since what correlation means is that the two are most likely related to each other, people often believe that one causes the other: this is not true at all. Correlation only states that the two are somehow related, and when something effects one, it likely effects the other as well. Oftentimes correlation is actually because of an external factor, likely not the direct effect of one on the other.

Thus, using GDP to talk about other various characteristics of the country is a very inaccurate use of the value. GDP should only ever be used to discuss the GDP, and not used in a speculative way to compare countries in other areas: for example, people often believe that because the GDP of America is higher than that of European countries that we are necessarily, but GDP also includes purchases that don’t necessarily lead to a better life: as the U.S.’s climate is much more variable than Europe’s, so the U.S. spends much more on heating and cooling than Europe does, which would definitely increase the GDP.