Is GDP adequate as a thermometer for determining the health of a national economy?

Miscellaneous Newbies
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Hi,

My first post so try not to beat me down. I have been listening/watching Jim Rogers for long enough to want to know more about what he is saying. Rogers says the US is the largest debtor nation in the history of the world. I’d like to know how he comes to that conclusion. I don’t disagree with him because I don’t know enough to agree or disagree - hence this post.

It seems to me that since most developed countries… if not all of them… operate on the Keynesian premise that state intervention in the market place is the best system. I know enough to know that I disagree with this idea, but it seems to me we need a reliable, agreed-upon means to measure the health of a national economy. If we don’t have an agreed upon means of measuring the health of an economy, we’re stuffed.

The stats I have looked at compare countries on the basis of debt-to-GDP so I thought I’d start with GDP and go from there.

My question is, ‘Is GDP, as a concept, an adequate means with which to assess how well a national economy is doing?’

If not, what should I be looking at?

Jim

p.s. One thing which I’m puzzled at is that the debt-to-GDP stats I’ve seen show Japan, Germany, France, UK and Singapore(Rogers’ country of residence) as having higher debt-to-GDP ratio, as a percentage, than the USA. So I don’t understand how the US can be said to be the largest debtor nation.

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My question is, ‘Is GDP, as a concept, an adequate means with which to assess how well a national economy is doing?’

In a word: no. You can get some hazy indication of the ‘size’ of an economy, or some ideas from the relative size of the components, like the government, but as a whole it is a very dubious measure. (See an imperfect summary here, points to more links to read.)

What is the largest debtor nation depends on the measure used, for a start, debt-to-GDP usually only refers to the on-budget debt, not the off-budget items (Social Security liabilities, etc.)

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Thanks, Peter - will take a look.