It was because of the war. In the summer of 1940 the British government needed to understand many things, including their war costs and where the money would come from to finance a defence of England.
Simon Kuznets was tasked with working it out. The idea was to use accounting… the same bookkeeping developed 300 years before for the merchants of Venice… in a really big way to account for everything.
Kuznets called these national income statistics the Gross National Product (GNP or sometimes GDP for regional calculations). Variations of this idea have become the key measure of the success of nations, provinces and states. In the same way the quality of business decisions depend on good bookkeeping and accounting, national accounting is a critical component of institutional infrastructure that government and politicians need to face the challenges and opportunities of our economy.
But this singular economic tool used to analyze economic cycles and as the basis of budgeting, planning and forecasts – the single number used by government and media to underpin and justify all our foundational political decisions – was known to be wrong almost from the start.
Today the GNP or GDP has very few friends and many good alternatives.
Writing about life, citizenship, and Nova Scotia.