Gross domestic product (GDP) refers to the market value of all final goods and services produced in a country in a given period. GDP per capita is often considered an indicator of a country's standard of living.

Gross domestic product is related to national accounts, a subject in macroeconomics.

History

GDP was first developed by Simon Kuznets for a US Congress report in 1934, who immediately said not to use it as a measure for welfare (see below under ''limitations'').

Determining GDP

GDP can be determined in three ways, all of which should, in principle, give the same result. They are the product (or output) approach, the income approach, and the expenditure approach.

The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors ("producers," colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes.

Example: the expenditure method:

: ''GDP = private consumption + gross investment + government spending + (exports − imports)'', or

$\backslash mathrm\{GDP\}\; =\; C\; +\; I\; +\; G\; +\; \backslash left\; (\; \backslash mathrm\{eX\}\; -\; i\; \backslash right\; )$

Note: "Gross" means that GDP measures production regardless of the various uses to which that production can be put. Production can be used for immediate consumption, for investment in new fixed assets or inventories, or for replacing depreciated fixed assets.

"Domestic" means that GDP measures production that takes place within the country's borders. In the expenditure-method equation given above, the exports-minus-imports term is necessary in order to null out expenditures on things not produced in the country (imports) and add in things produced but not sold in the country (exports).

Economists (since Keynes) have preferred to split the general consumption term into two parts; private consumption, and public sector (or government) spending. Two advantages of dividing total consumption this way in theoretical macroeconomics are:

Private consumption is a central concern of welfare economics. The private investment and trade portions of the economy are ultimately directed (in mainstream economic models) to increases in long-term private consumption.

If separated from endogenous private consumption, government consumption can be treated as exogenous, so that different government spending levels can be considered within a meaningful macroeconomic framework.

Production approach

The production approach is also called as net Product or Value added method. This method consists of three stages: # Estimating the Gross Value of domestic Output in various economic activities # Determining the intermediate consumption i.e., the cost of material,supplies and services used to produce final goods or services; and finally # Deducting intermediate consumption form Gross Value to obtain the Net value of Domestic Output.

Symbolically,

Gross Value Added = Value of output- Value of Intermediate Consumption.

Value of Output= Value of the total sales of goods and services + Value of changes in the inventories.

The sum of gross value added in various economic activities is known as GDP at factor cost.

GDP at factor cost plus indirect taxes less subsidies on products is GDP at Producer Price.

For measuring gross output of domestic product, economic activities (i.e. industries) are classified into various sectors. After classifying economic activities, the gross output of each sector is computer by any of the following two methods:

# By multiplying the output of each sector by their respective market price and adding them together and # By collecting data on gross sales and inventories from the records of companies and adding them together.

Subtracting each sector's intermediate consumption from gross output, we get sectoral gross value added (GVA)at factor cost. We, then add gross value of all sectors to get GDP at factor cost. Adding indirect tax less subsidies in GDP at factor cost, we get GDP at Producer prices.

Income approach

Another way of measuring GDP is to measure total income. If GDP is calculated this way it is sometimes called Gross Domestic Income (GDI), or GDP(I). GDI should provide the same amount as the expenditure method described above. (By definition, GDI = GDP. In practice, however, measurement errors will make the two figures slightly off when reported by national statistical agencies.)

This method measures GDP by adding incomes that firms pay households for the factors of production they hire- wages for labour, interest for capital, rent for land and profits for entrepreneurship.

The US "National Income and Expenditure Accounts" divide incomes into five categories: # Wages, salaries, and supplementary labour income # Corporate profits # Interest and miscellaneous investment income # Farmers’ income # Income from non-farm unincorporated businesses These five income components sum to net domestic income at factor cost.

Two adjustments must be made to get GDP: # Indirect taxes minus subsidies are added to get from factor cost to market prices. # Depreciation (or capital consumption) is added to get from net domestic product to gross domestic product.

Total income can be subdivided according to various schemes, leading to various formulae for GDP measured by the income approach. A common one is:

: ''GDP = compensation of employees + gross operating surplus + gross mixed income + taxes less subsidies on production and imports'' : GDP = COE + GOS + GMI + T_{P & M} – S_{P & M}

Compensation of employees (COE) measures the total remuneration to employees for work done. It includes wages and salaries, as well as employer contributions to social security and other such programs.

Gross operating surplus (GOS) is the surplus due to owners of incorporated businesses. Often called profits, although only a subset of total costs are subtracted from gross output to calculate GOS.

Gross mixed income (GMI) is the same measure as GOS, but for unincorporated businesses. This often includes most small businesses.

The sum of COE, GOS and GMI is called total factor income; it is the income of all of the factors of production in society. It measures the value of GDP at factor (basic) prices. The difference between basic prices and final prices (those used in the expenditure calculation) is the total taxes and subsidies that the government has levied or paid on that production. So adding taxes less subsidies on production and imports converts GDP at factor cost to GDP(I).

Total factor income is also sometimes expressed as: :''Total factor income = Employee compensation + Corporate profits + Proprieter's income + Rental income + Net interest''

Yet another formula for GDP by the income method is:

:$GDP\; =\; R\; +\; I\; +\; P\; +\; SA\; +\; W$

where R : rents I : interests P : profits SA : statistical adjustments (corporate income taxes, dividends, undistributed corporate profits) W : wagesNote the mnemonic, "ripsaw".

Expenditure approach

In economics, most things produced are produced for sale, and sold. Therefore, measuring the total expenditure of money used to buy things is a way of measuring production. This is known as the expenditure method of calculating GDP. Note that if you knit yourself a sweater, it is production but does not get counted as GDP because it is never sold. Sweater-knitting is a small part of the economy, but if one counts some major activities such as child-rearing (generally unpaid) as production, GDP ceases to be an accurate indicator of production. Similarly, if there is a long term shift from non-market provision of services (for example cooking, cleaning, child rearing, do-it yourself repairs) to market provision of services, then this trend toward increased market provision of services may mask a dramatic decrease in actual domestic production, resulting in overly optimistic and inflated reported GDP. This is particularly a problem for economies which have shifted from production economies to service economies.

Components of GDP by expenditure

GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M). :Y = C + I + G + (X − M)

Here is a description of each GDP component:

C (consumption) is normally the largest GDP component in the economy, consisting of private (household final consumption expenditure) in the economy. These personal expenditures fall under one of the following categories: durable goods, non-durable goods, and services. Examples include food, rent, jewelry, gasoline, and medical expenses but does not include the purchase of new housing.

I (investment) includes business investment in equipments for example and does not include exchanges of existing assets. Examples include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial products. Buying financial products is classed as 'saving', as opposed to investment. This avoids double-counting: if one buys shares in a company, and the company uses the money received to buy plant, equipment, etc., the amount will be counted toward GDP when the company spends the money on those things; to also count it when one gives it to the company would be to count two times an amount that only corresponds to one group of products. Buying bonds or stocks is a swapping of deeds, a transfer of claims on future production, not directly an expenditure on products.

G (government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits.

X (exports) represents gross exports. GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added.

M (imports) represents gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic.

A fully equivalent definition is that GDP (Y) is the sum of final consumption expenditure (FCE), gross capital formation (GCF), and net exports (X – M). :Y = FCE + GCF+ (X − M) FCE can then be further broken down by three sectors (households, governments and non-profit institutions serving households) and GCF by five sectors (non-financial corporations, financial corporations, households, governments and non-profit institutions serving households). The advantage of this second definition is that expenditure is systematically broken down, firstly, by type of final use (final consumption or capital formation) and, secondly, by sectors making the expenditure, whereas the first definition partly follows a mixed delimitation concept by type of final use and sector.

Note that C, G, and I are expenditures on final goods and services; expenditures on intermediate goods and services do not count. (Intermediate goods and services are those used by businesses to produce other goods and services within the accounting year. )

According to the U.S. Bureau of Economic Analysis, which is responsible for calculating the national accounts in the United States, "In general, the source data for the expenditures components are considered more reliable than those for the income components [see income method, below]."

Examples of GDP component variables

C, I, G, and NX(net exports): If a person spends money to renovate a hotel to increase occupancy rates, the spending represents private investment, but if he buys shares in a consortium to execute the renovation, it is saving. The former is included when measuring GDP (in I), the latter is not. However, when the consortium conducted its own expenditure on renovation, that expenditure would be included in GDP.

If a hotel is a private home, spending for renovation would be measured as consumption, but if a government agency converts the hotel into an office for civil servants, the spending would be included in the public sector spending, or G.

If the renovation involves the purchase of a chandelier from abroad, that spending would be counted as C, G, or I (depending on whether a private individual, the government, or a business is doing the renovation), but then counted again as an import and subtracted from the GDP so that GDP counts only goods produced within the country.

If a domestic producer is paid to make the chandelier for a foreign hotel, the payment would not be counted as C, G, or I, but would be counted as an export.

A "production boundary" that delimits what will be counted as GDP.

"One of the fundamental questions that must be addressed in preparing the national economic accounts is how to define the production boundary–that is, what parts of the myriad human activities are to be included in or excluded from the measure of the economic production."

All output for market is at least in theory included within the boundary. Market output is defined as that which is sold for "economically significant" prices; economically significant prices are "prices which have a significant influence on the amounts producers are willing to supply and purchasers wish to buy." An exception is that illegal goods and services are often excluded even if they are sold at economically significant prices (Australia and the United States exclude them).

This leaves non-market output. It is partly excluded and partly included. First, "natural processes without human involvement or direction" are excluded. Also, there must be a person or institution that owns or is entitled to compensation for the product. An example of what is included and excluded by these criteria is given by the United States' national accounts agency: "the growth of trees in an uncultivated forest is not included in production, but the harvesting of the trees from that forest is included."

Within the limits so far described, the boundary is further constricted by "functional considerations." The Australian Bureau for Statistics explains this: "The national accounts are primarily constructed to assist governments and others to make market-based macroeconomic policy decisions, including analysis of markets and factors affecting market performance, such as inflation and unemployment." Consequently, production that is, according to them, "relatively independent and isolated from markets," or "difficult to value in an economically meaningful way" [i.e., difficult to put a price on] is excluded. Thus excluded are services provided by people to members of their own families free of charge, such as child rearing, meal preparation, cleaning, transportation, entertainment of family members, emotional support, care of the elderly. Most other production for own (or one's family's) use is also excluded, with two notable exceptions which are given in the list later in this section.

Nonmarket outputs that ''are'' included within the boundary are listed below. Since, by definition, they do not have a market price, the compilers of GDP must ''impute'' a value to them, usually either the cost of the goods and services used to produce them, or the value of a similar item that is sold on the market. Goods and services provided by governments and non-profit organisations free of charge or for economically insignificant prices are included. The value of these goods and services is estimated as equal to their cost of production. This ignores the consumer surplus generated by an efficient and effective government supplied infrastructure. For example, government-provided clean water confers substantial benefits above its cost. Ironically, lack of such infrastructure which would result in higher water prices (and probably higher hospital and medication expenditures) would be reflected as a higher GDP. This may also cause a bias that mistakenly favors inefficient privatizations since some of the consumer surplus from privatized entities' sale of goods and services are indeed reflected in GDP.

Goods and services produced for own-use by businesses are attempted to be included. An example of this kind of production would be a machine constructed by an engineering firm for use in its own plant.

Renovations and upkeep by an individual to a home that she owns and occupies are included. The value of the upkeep is estimated as the rent that she could charge for the home if she did not occupy it herself. This is the largest item of production for own use by an individual (as opposed to a business) that the compilers include in GDP. If the measure uses historical or book prices for real estate, this will grossly underestimate the value of the rent in real estate markets which have experienced significant price increases (or economies with general inflation). Furthermore, depreciation schedules for houses often accelerate the accounted depreciation relative to actual depreciation (a well built house can be lived in for several hundred years – a very long time after it has been fully depreciated). In summary, this is likely to grossly underestimate the value of existing housing stock on consumers' actual consumption or income.

Agricultural production for consumption by oneself or one's household is included.

Services (such as chequeing-account maintenance and services to borrowers) provided by banks and other financial institutions without charge or for a fee that does not reflect their full value have a value imputed to them by the compilers and are included. The financial institutions provide these services by giving the customer a less advantageous interest rate than they would if the services were absent; the value imputed to these services by the compilers is the difference between the interest rate of the account with the services and the interest rate of a similar account that does not have the services. According to the United States Bureau for Economic Analysis, this is one of the largest imputed items in the GDP.

GDP vs GNP

GDP can be contrasted with gross national product (GNP) or gross national income (GNI). The difference is that GDP defines its scope according to location, while GNP defines its scope according to ownership. In a global context, world GDP and world GNP are therefore equivalent terms.

GDP is product produced within a country's borders; GNP is product produced by enterprises owned by a country's citizens. The two would be the same if all of the productive enterprises in a country were owned by its own citizens, and those citizens did not own productive enterprises in any other countries. In practice, however, foreign ownership makes GDP and GNP non-identical. Production within a country's borders, but by an enterprise owned by somebody outside the country, counts as part of its GDP but not its GNP; on the other hand, production by an enterprise located outside the country, but owned by one of its citizens, counts as part of its GNP but not its GDP.

To take the United States as an example, the U.S.'s GNP is the value of output produced by American-owned firms, regardless of where the firms are located. Similarly, if a country becomes increasingly in debt, and spends large amounts of income servicing this debt this will be reflected in a decreased GNI but not a decreased GDP. Similarly, if a country sells off its resources to entities outside their country this will also be reflected over time in decreased GNI, but not decreased GDP. This would make the use of GDP more attractive for politicians in countries with increasing national debt and decreasing assets.

Gross national income (GNI) equals GDP plus income receipts from the rest of the world minus income payments to the rest of the world.

In 1991, the United States switched from using GNP to using GDP as its primary measure of production. The relationship between United States GDP and GNP is shown in table 1.7.5 of the ''National Income and Product Accounts''.

International standards

The international standard for measuring GDP is contained in the book ''System of National Accounts'' (1993), which was prepared by representatives of the International Monetary Fund, European Union, Organization for Economic Co-operation and Development, United Nations and World Bank. The publication is normally referred to as SNA93 to distinguish it from the previous edition published in 1968 (called SNA68)

SNA93 provides a set of rules and procedures for the measurement of national accounts. The standards are designed to be flexible, to allow for differences in local statistical needs and conditions.

National measurement

Within each country GDP is normally measured by a national government statistical agency, as private sector organizations normally do not have access to the information required (especially information on expenditure and production by governments).

Interest rates

Net interest expense is a transfer payment in all sectors except the financial sector. Net interest expenses in the financial sector are seen as production and value added and are added to GDP.

Adjustments to GDP

When comparing GDP figures from one year to another, it is desirable to compensate for changes in the value of money – i.e., for the effects of inflation or deflation. The raw GDP figure as given by the equations above is called the nominal, or historical, or current, GDP. To make it more meaningful for year-to-year comparisons, it may be multiplied by the ratio between the value of money in the year the GDP was measured and the value of money in some base year. For example, suppose a country's GDP in 1990 was $100 million and its GDP in 2000 was $300 million; but suppose that inflation had halved the value of its currency over that period. To meaningfully compare its 2000 GDP to its 1990 GDP we could multiply the 2000 GDP by one-half, to make it relative to 1990 as a base year. The result would be that the 2000 GDP equals $300 million × one-half = $150 million, ''in 1990 monetary terms.'' We would see that the country's GDP had, realistically, increased 50 percent over that period, not 200 percent, as it might appear from the raw GDP data. The GDP adjusted for changes in money-value in this way is called the real, or constant, GDP.

The factor used to convert GDP from current to constant values in this way is called the ''GDP deflator''. Unlike the Consumer price index, which measures inflation or deflation in the price of household consumer goods, the GDP deflator measures changes in the prices of all domestically produced goods and services in an economy–including investment goods and government services, as well as household consumption goods.

Constant-GDP figures allow us to calculate a GDP growth rate, which tells us how much a country's production has increased (or decreased, if the growth rate is negative) compared to the previous year. :Real GDP growth rate for year ''n'' = [(Real GDP in year ''n'') − (Real GDP in year ''n'' − 1)] / (Real GDP in year ''n'' − 1)

Another thing that it may be desirable to compensate for is population growth. If a country's GDP doubled over some period but its population tripled, the increase in GDP may not be deemed such a great accomplishment: the average person in the country is producing less than they were before. ''Per-capita GDP'' is the measure compensated for population growth.

Cross-border comparison

thumb|GDP (PPP) share of world / per capita per nation 1980–2015, Source: International Monetary Fund (WEO April 2011)The level of GDP in different countries may be compared by converting their value in national currency according to ''either'' the current currency exchange rate, or the purchase power parity exchange rate.

Current currency exchange rate is the exchange rate in the international currency market.

Purchasing power parity exchange rate is the exchange rate based on the purchasing power parity (PPP) of a currency relative to a selected standard (usually the United States dollar). This is a comparative (and theoretical) exchange rate, the only way to directly realize this rate is to sell an entire CPI basket in one country, convert the cash at the currency market rate & then rebuy that same basket of goods in the other country (with the converted cash). Going from country to country, the distribution of prices within the basket will vary; typically, non-tradable purchases will consume a greater proportion of the basket's total cost in the higher GDP country, per the Balassa-Samuelson effect.

The ranking of countries may differ significantly based on which method is used.

The ''current exchange rate method'' converts the value of goods and services using global currency exchange rates. The method can offer better indications of a country's international purchasing power and relative economic strength. For instance, if 10% of GDP is being spent on buying hi-tech foreign arms, the number of weapons purchased is entirely governed by ''current exchange rates'', since arms are a traded product bought on the international market. There is no meaningful 'local' price distinct from the international price for high technology goods.

The ''purchasing power parity method'' accounts for the relative effective domestic purchasing power of the average producer or consumer within an economy. The method can provide a better indicator of the living standards of less developed countries, because it compensates for the weakness of local currencies in the international markets. For example, India ranks 11th by nominal GDP, but fourth by PPP. The PPP method of GDP conversion is more relevant to non-traded goods and services.

There is a clear pattern of the ''purchasing power parity method'' decreasing the disparity in GDP between high and low income (GDP) countries, as compared to the ''current exchange rate method''. This finding is called the Penn effect.

For more information, see Measures of national income and output.

Per unit GDP

GDP is an aggregate figure which does not account for differing sizes of nations. Therefore, GDP can be stated as ''GDP per capita'' (per person) in which total GDP is divided by the resident population on a given date, ''GDP per citizen'' where total GDP is divided by the numbers of citizens residing in the country on a given date, and less commonly GDP per unit of a resource input, such as ''GDP per GJ of energy'' or Gross domestic product per barrel. ''GDP per citizen'' in the above case is pretty similar to ''GDP per capita'' in most nations, however, in nations with very high proportions of temporary foreign workers like in Persian Gulf nations, the two figures can be vastly different.

Standard of living and GDP

GDP per capita is not a measurement of the standard of living in an economy. However, it is often used as such an indicator, on the rationale that all citizens would benefit from their country's increased economic production. Similarly, GDP per capita is not a measure of personal income. GDP may increase while real incomes for the majority decline. The major advantage of GDP per capita as an indicator of standard of living is that it is measured frequently, widely, and consistently. It is measured frequently in that most countries provide information on GDP on a quarterly basis, allowing trends to be seen quickly. It is measured widely in that some measure of GDP is available for almost every country in the world, allowing inter-country comparisons. It is measured consistently in that the technical definition of GDP is relatively consistent among countries.

The major disadvantage is that it is not a measure of standard of living. GDP is intended to be a measure of total national economic activity— a separate concept.

The argument for using GDP as a standard-of-living proxy is not that it is a good indicator of the absolute level of standard of living, but that living standards tend to move with per-capita GDP, so that ''changes'' in living standards are readily detected through changes in GDP.

Proponents of GDP as a metric of social well being argue that it is a value neutral measure and expresses what we can do, not what we should do. This is compatible with the fact that different people have different preferences and different opinions on what well-being is. Competing measures like GPI define well-being to mean things that the definers ideologically support. Therefore, they cannot function as the goals of a plural society. Moreover, they are more vulnerable to political manipulation.

Externalities

GDP is widely used by economists to gauge economic recession and recovery and an economies general monetary ability address externalites. Its not meant to measure externalities. Its serves as a general metric for a nominal monetary standard of living and is not adjusted for costs of living within a region. GDP is a neutral measure which merely shows an economy's general ability to pay for externalities such as social and environmental concerns. Examples of externalities include:

Wealth distribution – GDP does not account for variances in incomes of various demographic groups. See income inequality metrics for discussion of a variety of inequality-based economic measures.

Non-market transactions–GDP excludes activities that are not provided through the market, such as household production and volunteer or unpaid services. As a result, GDP is understated. Unpaid work conducted on Free and Open Source Software (such as Linux) contribute nothing to GDP, but it was estimated that it would have cost more than a billion US dollars for a commercial company to develop. Also, if Free and Open Source Software became identical to its proprietary software counterparts, and the nation producing the propriety software stops buying proprietary software and switches to Free and Open Source Software, then the GDP of this nation would reduce, however there would be no reduction in economic production or standard of living. The work of New Zealand economist Marilyn Waring has highlighted that if a concerted attempt to factor in unpaid work were made, then it would in part undo the injustices of unpaid (and in some cases, slave) labour, and also provide the political transparency and accountability necessary for democracy. Shedding some doubt on this claim, however, is the theory that won economist Douglass North the Nobel Prize in 1993. North argued that the encouragement of private invention and enterprise due to the creation and strengthening of the patent system became the fundamental catalyst behind the Industrial Revolution in England.

Underground economy–Official GDP estimates may not take into account the underground economy, in which transactions contributing to production, such as illegal trade and tax-avoiding activities, are unreported, causing GDP to be underestimated.

Asset Value–GDP does not take into account the value of all assets in an economy. This is akin to ignoring a company's balance sheet, and judging it solely on the basis of its income statement.

Non-monetary economy–GDP omits economies where no money comes into play at all, resulting in inaccurate or abnormally low GDP figures. For example, in countries with major business transactions occurring informally, portions of local economy are not easily registered. Bartering may be more prominent than the use of money, even extending to services (I helped you build your house ten years ago, so now you help me).

GDP also ignores subsistence production.

Quality improvements and inclusion of new products–By not adjusting for quality improvements and new products, GDP understates true economic growth. For instance, although computers today are less expensive and more powerful than computers from the past, GDP treats them as the same products by only accounting for the monetary value. The introduction of new products is also difficult to measure accurately and is not reflected in GDP despite the fact that it may increase the standard of living. For example, even the richest person from 1900 could not purchase standard products, such as antibiotics and cell phones, that an average consumer can buy today, since such modern conveniences did not exist back then.

What is being produced–GDP counts work that produces no net change or that results from repairing harm. For example, rebuilding after a natural disaster or war may produce a considerable amount of economic activity and thus boost GDP. The economic value of health care is another classic example—it may raise GDP if many people are sick and they are receiving expensive treatment, but it is not a desirable situation. Alternative economic estimates, such as the standard of living or discretionary income per capita try to measure the human utility of economic activity. See uneconomic growth.

Sustainability of growth– GDP is a measurement of economic historic activity and is not a necessarily a projection. A country may achieve a temporarily high GDP from use of natural resources or by misallocating investment.

Nominal GDP doesn't measure variations in purchasing power or costs of living by area, so when the GDP figure is deflated over time, GDP growth can vary greatly depending on the basket of goods used and the relative proportions used to deflate the GDP figure.

Cross-border comparisons of GDP can be inaccurate as they do not take into account local differences in the quality of goods, even when adjusted for purchasing power parity. This type of adjustment to an exchange rate is controversial because of the difficulties of finding comparable baskets of goods to compare purchasing power across countries. For instance, people in country A may consume the same number of locally produced apples as in country B, but apples in country A are of a more tasty variety. This difference in material well being will not show up in GDP statistics. This is especially true for goods that are not traded globally, such as housing.

As a measure of actual sale prices, GDP does not capture the economic surplus between the price paid and subjective value received, and can therefore underestimate aggregate utility.

Simon Kuznets in his very first report to the US Congress in 1934 said:

...the welfare of a nation can, therefore, scarcely be inferred from a measure of national income...

In 1962, Kuznets stated:

Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what.

Lists of countries by their GDP

Lists of countries by GDP

List of countries by GDP (nominal), (per capita)

List of countries by GDP (PPP), (per capita), (per hour)

List of countries by GDP growth

List of countries by GDP (real) growth rate, (per capita)

List of countries by GDP sector composition

List of countries by future GDP estimates (PPP), (per capita), (nominal)

List of Newer Approaches to the Measurement of (Economic) Progress

Human development index (HDI) – up until 2009 report HDI used GDP as a part of its calculation and then factors in indicators of life expectancy and education levels. In 2010 the GDP component has been replaced with GNI.

Genuine progress indicator (GPI) or Index of Sustainable Economic Welfare (ISEW) – The GPI and the ISEW attempt to address many of the above criticisms by taking the same raw information supplied for GDP and then adjust for income distribution, add for the value of household and volunteer work, and subtract for crime and pollution.

Gross national happiness (GNH) – GNH measures quality of life or social progress in more holistic and psychological terms than GDP.

European Quality of Life Survey – The survey, first published in 2005, assessed quality of life across European countries through a series of questions on overall subjective life satisfaction, satisfaction with different aspects of life, and sets of questions used to calculate deficits of time, loving, being and having.

Gross national happiness – The Centre for Bhutanese Studies in Bhutan is working on a complex set of subjective and objective indicators to measure 'national happiness' in various domains (living standards, health, education, eco-system diversity and resilience, cultural vitality and diversity, time use and balance, good governance, community vitality and psychological well-being). This set of indicators would be used to assess progress towards gross national happiness, which they have already identified as being the nation's priority, above GDP.

Happy Planet Index – The happy planet index (HPI) is an index of human well-being and environmental impact, introduced by the New Economics Foundation (NEF) in 2006. It measures the environmental efficiency with which human well-being is achieved within a given country or group. Human well-being is defined in terms of subjective life satisfaction and life expectancy while environmental impact is defined by the Ecological Footprint.

OECD Better Lives Dashboard - The better lives compendium of indicators produced in 2011 reflects some 10 years by the organisation to develop a wider of set of indicators more closed attuned to the measurement of wellbeing or welfare outcomes. There is felt to be considerable convergence (in 2011) in high income countries about the kinds of dimensions that should be included in such multi-dimensional approaches to welfare measurement - see for instance the capabilities measurement research project capabilities approach.

See also

Annual average GDP growth

Chained volume series

Eco-sufficiency

Green gross domestic product

Gross domestic product per barrel

Gross output

Gross regional domestic product

Gross state product

Gross value added

Gross world product

Intermediate consumption

Inventory investment

List of countries by average wage

List of countries by household income

List of economic reports by U.S. government agencies

Misery index (economics)

National average salary

Potential output Natural gross domestic product

Real gross domestic product

China GDP

Bibliography

Australian Bureau for Statistics, ''Australian National Accounts: Concepts, Sources and Mathods'', 2000. Retrieved November 2009. In depth explanations of how GDP and other national accounts items are determined.

United States Department of Commerce, Bureau of Economic Analysis, . Retrieved November 2009. In depth explanations of how GDP and other national accounts items are determined.

References

External links

Global

World GDP Chart (since 1960)

Australian Bureau of Statistics Manual on GDP measurement

GDP-indexed bonds

GDP scaled maps

Euro area GDP growth rate (since 1996) as compared to the Bank Rate (since 2000)

World Development Indicators (WDI)

Economist Country Briefings

UN Statistical Databases

Is Life Getting Better : What is GDP? Pamphlet describing the basic idea of GDP, from OECD's Measuring Progress project.

Data

Thermal Maps of the World Nominal GDP in US$ purchasing power parity from the EIU 2007–2010

Bureau of Economic Analysis: Official United States GDP data

Graphs of Historical Real U.S. GDP

Historicalstatistics.org: Links to historical statistics on GDP for different countries and regions

Historical US GDP (yearly data), 1790–present

Historical US GDP (quarterly data), 1947–present

OECD Statistics

Google – public data: GDP and Personal Income of the U.S. (annual): Nominal Gross Domestic Product

Articles and books

What's wrong with the GDP?

Limitations of GDP Statistics by Schenk, Robert.

Nouriel Roubini and David Backus, in Lectures in Macroeconomics">whether output and CPI inflation are mismeasured, by Nouriel Roubini and David Backus, in Lectures in Macroeconomics

Fengbo Zhang – the founder of China GDP

Chapter 22 of Dr. Roger A. McCain's Essential Principles of Economics: A Hypermedia Text

Rodney Edvinsson,

Clifford Cobb, Ted Halstead and Jonathan Rowe. "If the GDP is up, why is America down?" The Atlantic Monthly, vol. 276, no. 4, October 1995, pages 59–78.

Jerorn C.J.M. van den Bergh, "Abolishing GDP"

Category:National accounts

af:Bruto binnelandse produk ar:ناتج محلي إجمالي an:Producto Interior Bruto az:Ümumi Daxili Məhsul bm:Bakrunba Sokɔnɔ Karajago bn:মোট অভ্যন্তরীণ উৎপাদন zh-min-nan:Kok-lāi chóng seng-sán be:Валавы ўнутраны прадукт be-x-old:Сукупны ўнутраны прадукт bar:Bruttoinlandsprodukt bs:Bruto domaći proizvod bg:Брутен вътрешен продукт ca:Producte interior brut cs:Hrubý domácí produkt cy:Cynnyrch mewnwladol crynswth da:BNI per indbygger de:Bruttoinlandsprodukt et:Sisemajanduse kogutoodang el:Ακαθάριστο Εγχώριο Προϊόν es:Producto interno bruto eo:Malneta enlanda produkto eu:Barne Produktu Gordin fa:تولید ناخالص داخلی fr:Produit intérieur brut ga:Olltáirgeacht intíre gv:Lane troar sthie gd:Làn-thoradh Dùthchail gl:Produto Interior Bruto ko:국내 총생산 hy:Համախառն ներքին արդյունք hi:सकल घरेलू उत्पाद hr:Bruto domaći proizvod io:Kuntara landala produkto id:Produk domestik bruto is:Landsframleiðsla it:Prodotto interno lordo he:תוצר מקומי גולמי jv:Prodhuk domèstik bruto kn:ರಾಷ್ಟ್ರೀಯ ಉತ್ಪನ್ನ krc:Бютеулюк ич продукт ka:მთლიანი შიდა პროდუქტი kk:Жалпы ішкі өнім ky:ИДП lo:ລວມຍອດຜະລິດຕະພັນພາຍໃນ la:Productus domesticus grossus lv:Iekšzemes kopprodukts lt:Bendrasis vidaus produktas hu:Bruttó hazai termék mk:Бруто домашен производ mr:वार्षिक सकल उत्पन्न arz:ناتج محلى اجمالى ms:Keluaran dalam negara kasar cdo:Guók-nô̤i sĕng-sāng cūng-dĭk mn:Дотоодын нийт бүтээгдэхүүн my:စုစုပေါင်း ပြည်တွင်းထုတ်လုပ်မှု nl:Bruto binnenlands product ja:国内総生産 oc:Produch interior brut nds:Bruttobinnenlandprodukt pl:Produkt krajowy brutto pt:Produto interno bruto ro:Produs intern brut ru:Валовой внутренний продукт sah:Брутто ис оҥоhук sq:Bruto prodhimi vendor scn:Prudottu Nternu Lordu simple:Gross domestic product sk:Hrubý domáci produkt sl:Bruto domači proizvod sr:Бруто домаћи производ fi:Bruttokansantuote tl:Pangkalahatang produktong domestiko ta:மொத்த உள்நாட்டு உற்பத்தி te:స్థూల దేశీయోత్పత్తి th:ผลิตภัณฑ์มวลรวมในประเทศ tr:Gayrısafî yurtiçi hâsıla udm:ВВП uk:Валовий внутрішній продукт ur:خام ملکی پیداوار ug:مىللى دارامەت vec:PIL vi:Tổng sản phẩm nội địa yi:ברוטא אינלענדישער פראדוקט yo:Gbogbo Ìpawó Orílẹ̀-èdè zh:国内生产总值

Coordinates	34°03′″N118°15′″N
!honorific-prefix	The Honorable
Name	Joseph Stiglitz
Honorific-suffix	ForMemRS FBA
Order	17th Chair of the Council of Economic Advisors
Term start	1995
Term end	1997
President	Bill Clinton
Predecessor	Laura Tyson
Successor	Janet Yellen
Office2	World Bank Chief Economist
Term start2	1997
Term end2	2000
Preceded2	Michael Bruno
Succeeded2	Nicholas Stern
Birth date	February 09, 1943
Birth place	Gary, Indiana
Party	Democratic
Spouse	Anya Schiffrin
Alma mater	Amherst CollegeMassachusetts Institute of Technology
Profession	Economist }}

{{infobox economist | school tradition	New Keynesian economics | color darkorange | field Macroeconomics, Public Economics, Information Economics | influences John Maynard Keynes, Robert Solow | opposed | influenced Paul Krugman, Jason Furman | contributions Screening, Taxation, Unemployment | repec_prefixe |repec_idpst33 }}

Joseph Eugene Stiglitz, ForMemRS, FBA, (born February 9, 1943) is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is also the former Senior Vice President and Chief Economist of the World Bank. He is known for his critical view of the management of globalization, free-market economists (whom he calls "free market fundamentalists") and some international institutions like the International Monetary Fund and the World Bank.

In 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. Since 2001, he has been a member of the Columbia faculty, and has been a University Professor since 2003. He also chairs the University of Manchester's Brooks World Poverty Institute and is a member of the Pontifical Academy of Social Sciences. Stiglitz is also an honorary professor at Tsinghua University School of Public Policy and Management and a member of the Executive and Supervisory Committee (ESC) of CERGE-EI. Stiglitz is one of the most frequently cited economists in the world.

Biography

Stiglitz was born in Gary, Indiana, to Jewish parents, Charlotte and Nathaniel Stiglitz. From 1960 to 1963, he studied at Amherst College, where he was a highly active member of the debate team and President of the Student Government. He went to the Massachusetts Institute of Technology (MIT) for his fourth year as an undergraduate, where he later pursued graduate work. His undergraduate degree was awarded from Amherst College. From 1965 to 1966, he moved to the University of Chicago to do research under Hirofumi Uzawa who had received an NSF grant. He studied for his PhD from MIT from 1966 to 1967, during which time he also held an MIT assistant professorship. The particular style of MIT economics suited him well - simple and concrete models, directed at answering important and relevant questions. From 1966 to 1970 he was a research fellow at the University of Cambridge: he arrived at Fitzwilliam House as a Fulbright Scholar in 1965 and then won a Tapp Junior Research Fellowship at Gonville and Caius College. In subsequent years, he held academic positions at Yale (1970–1974), Stanford (1974–1976, 1988–2001), Oxford (1976–1979), and Princeton (1979–1988). Stiglitz is now a Professor at Columbia University, with appointments at the Business School, the Department of Economics and the School of International and Public Affairs (SIPA), and is editor of ''The Economists' Voice'' journal with J. Bradford DeLong and Aaron Edlin. He also gives classes for a double-degree program between Sciences Po Paris and Ecole Polytechnique in 'Economics and Public Policy'. As of 2005 he chairs The Brooks World Poverty Institute at the University of Manchester. Stiglitz is a New-Keynesian economist.

In addition to making numerous influential contributions to microeconomics, Stiglitz has played a number of policy roles. He served in the Clinton Administration as the chair of the President's Council of Economic Advisors (1995 – 1997). At the World Bank, he served as Senior Vice President and Chief Economist (1997 – 2000), in the time when unprecedented protest against international economic organizations started, most prominently with the Seattle WTO meeting of 1999. He was fired by the World Bank for expressing dissent with its policies. He was a lead author for the Intergovernmental Panel on Climate Change.

He is a member of Collegium International, an organization of leaders with political, scientific, and ethical expertise whose goal is to provide new approaches in overcoming the obstacles in the way of a peaceful, socially just and an economically sustainable world. He is also a member of the scientific committee of the Fundacion IDEAS, a Spanish think tank.

Stiglitz has advised American President Barack Obama, but has also been sharply critical of the Obama Administration's financial-industry rescue plan. Stiglitz said that whoever designed the Obama administration's bank rescue plan is "either in the pocket of the banks or they’re incompetent."

In October 2008 he was asked by the President of UN's General Assembly to chair a commission entrusted with drafting a report on the reasons for and solutions to the financial crisis. In response, the commission produced the Stiglitz Report.

On July 25, 2011, Stiglitz participated to the "I Foro Social del 15M" organized in Madrid (Spain) expressing his support to the 2011 Spanish protests.

Contributions to economics

Information asymmetry

Stiglitz's most famous research was on screening, a technique used by one economic agent to extract otherwise private information from another. It was for this contribution to the theory of information asymmetry that he shared the Nobel Memorial Prize in Economics in 2001 "for laying the foundations for the theory of markets with asymmetric information" with George A. Akerlof and A. Michael Spence.

Before the advent of models of imperfect and asymmetric information, the traditional neoclassical economics literature had assumed that markets are efficient except for some limited and well defined market failures. More recent work by Stiglitz and others reversed that presumption, to assert that it is only under exceptional circumstances that markets are efficient. Stiglitz has shown (together with Bruce Greenwald) that "whenever markets are incomplete and/or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained Pareto efficient". In other words, they addressed "the problem of determining when tax interventions are Pareto-improving. The approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained Pareto optima." Although these conclusions and the pervasiveness of market failures do not necessarily warrant the state intervening broadly in the economy, it makes clear that the "optimal" range of government recommendable interventions is definitely much larger than the traditional "market failure" school recognizes. For Stiglitz, there is no such thing as an invisible hand. According to Stiglitz:

In the opening remarks for his prize acceptance "Aula Magna", Stiglitz said:

In an interview in 2007, Stiglitz explained further:

Efficiency wages: the Shapiro-Stiglitz model

Stiglitz also did research on efficiency wages, and helped create what became known as the ''"Shapiro-Stiglitz model"'' to explain why there is unemployment even in equilibrium, why wages are not bid down sufficiently by job seekers (in the absence of minimum wages) so that everyone who wants a job finds one, and to question whether the neoclassical paradigm could explain involuntary unemployment. The answer to these puzzles was proposed by Shapiro and Stiglitz in 1984: "Unemployment is driven by the information structure of employment". Two basic observations undergird their analysis:

# Unlike other forms of capital, humans can choose their level of effort. # It is costly for firms to determine how much effort workers are exerting.

A full description of this model can be found at the links provided. Some key implications of this model are:

# Wages do not fall enough during recessions to prevent unemployment from rising. If the demand for labour falls, this lowers wages. But because wages have fallen, the probability of 'shirking' (workers not exerting effort) has risen. If employment levels are to be maintained, through a sufficient lowering of wages, workers will be less productive than before through the shirking effect. As a consequence, in the model wages do not fall enough to maintain employment levels at the previous state, because firms want to avoid excessive shirking by their workers. So, unemployment must rise during recessions, because wages are kept 'too high'. # Possible corollary: Wage sluggishness. Moving from one private cost of hiring to another private cost of hiring will require each firm to repeatedly re-optimize wages in response to shifting unemployment rate. Firms cannot cut wages until unemployment rises sufficiently (a coordination problem).

The outcome is never Pareto efficient.

# Each firm employs too few workers because it faces private cost of hiring rather than the social cost — which is equal to and in all cases. This means that firms do not "internalize" the "external" cost of unemployment - they do not factor how large-scale unemployment harms society when assessing their own costs. This leads to a negative externality as marginal social cost exceeds the firm's marginal cost (MSC = Firm's Private Marginal Cost + Marginal External Cost of increased social unemployment) # There are also negative externalities. Each firm increases the asset value of unemployment for all other firms by hiring. But the first problem clearly dominates since the 'natural rate of unemployment' is always too high.

Some possible practical implications of Stiglitz theorems

While the mathematical validity of Stiglitz ''et al.'' theorems are not in question, their practical implications in political economy and their application in real life economic policies have been subject to considerable disagreement and debate. Stiglitz himself seems to be continuously adapting his own political-economic discourse, as we can see from the evolution in his positions as initially stated in ''Whither Socialism?'' (1994) to his own new positions held on his most recent publications.

::Once incomplete and imperfect information are introduced, Chicago-school defenders of the market system cannot sustain descriptive claims of the Pareto efficiency of the real world. Thus, Stiglitz's use of rational-expectations equilibrium assumptions to achieve a more realistic understanding of capitalism than is usual among rational-expectations theorists leads, paradoxically, to the conclusion that capitalism deviates from the model in a way that justifies state action—socialism—as a remedy.

::The effect of Stiglitz's influence is to make economics even more presumptively interventionist than Samuelson preferred. Samuelson treated market failure as the exception to the general rule of efficient markets. But the Greenwald-Stiglitz theorem posits market failure as the norm, establishing "that government could potentially almost always improve upon the market's resource allocation." And the Sappington-Stiglitz theorem "establishes that an ideal government could do better running an enterprise itself than it could through privatization" (Stiglitz 1994, 179).

The objections to the wide adoption of these positions suggested by Stiglitz's discoveries do not come from economics itself but mostly from political scientists and are in the fields of sociology. As David L. Prychitko discusses in his "critique" to ''Whither Socialism?'' (see below), although Stiglitz's main economic insight seems generally correct, it still leaves open great constitutional questions such as how the coercive institutions of the government should be constrained and what the relation is between the government and civil society.

Politics

Clinton administration, 1993 - 1997

Stiglitz joined the Clinton Administration in 1993, serving first as a member during 1993-1995, and then as Chairman of the Council of Economic Advisers during 1995-1997, in which capacity he also served as a member of the cabinet. He became deeply involved in environmental issues, which included serving on the Intergovernmental Panel on Climate Change, and helping draft a new law for toxic wastes (which was never passed).

Stiglitz's most important contribution in this period was helping define a new economic philosophy, a "third way", which postulated the important, but limited, role of government, that unfettered markets often did not work well, but that government was not always able to correct the limitations of markets. The academic research that he had been conducting over the preceding 25 years provided the intellectual foundations for this "third way".

When President Bill Clinton was re-elected, he asked Stiglitz to continue to serve as Chairman of the Council of Economic Advisers for another term. But he had already been approached by the World Bank, to be its senior vice president for development policy and its chief economist.

As the World Bank began its ten-year review of the transition of the former Communist countries to the market economy it unveiled failures of the countries that had followed the International Monetary Fund (IMF) shock therapy policies - both in terms of the declines in GDP and increases in poverty - that were even worse than the worst that most of its critics had envisioned at the onset of the transition. Clear links existed between the dismal performances and the policies that the IMF had advocated, such as the voucher privatization schemes and excessive monetary stringency. Meanwhile, the success of a few countries that had followed quite different strategies suggested that there were alternatives that could have been followed. The U.S. Treasury had put enormous pressure on the World Bank to silence his criticisms of the policies which they and the IMF had pursued.

Stiglitz always had a poor relationship with Treasury Secretary Lawrence Summers. In 2000, Summers successfully petitioned for Stiglitz's removal, supposedly in exchange for World Bank President James Wolfensohn's re-appointment – an exchange that Wolfensohn denies took place. Whether Summers ever made such a blunt demand is questionable – Wolfensohn claims he would "have told him to fuck himself".

Stiglitz resigned from the World Bank in January 2000, a month before his term expired. The Bank's president, James Wolfensohn, announced Stiglitz's resignation in November 1999 and also announced that Stiglitz would stay on as ''"special advisor to the president"'', and would chair the search committee for a successor.

:"Joseph E. Stiglitz said today [Nov. 24, 1999] that he would resign as the World Bank's chief economist after using the position for nearly three years to raise pointed questions about the effectiveness of conventional approaches to helping poor countries."

In this role, he continued criticism of the IMF, and, by implication, the US Treasury Department. In April 2000, in an article for ''The New Republic'', he wrote:

:"''They’ll say the IMF is arrogant. They’ll say the IMF doesn’t really listen to the developing countries it is supposed to help. They’ll say the IMF is secretive and insulated from democratic accountability. They’ll say the IMF’s economic ‘remedies’ often make things worse – turning slowdowns into recessions and recessions into depressions. And they’ll have a point. I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the U.S. Treasury Department, responded. And I was appalled''."

The article was published a week before the annual meetings of the World Bank and IMF and provoked a strong response. It proved too strong for Summers and, yet more lethally, Stiglitz's protector-of-sorts at the World Bank, Wolfensohn. Wolfensohn had privately empathised with Stiglitz's views, but this time was worried for his second term, which Summers had threatened to veto. Stanley Fisher, deputy managing director of the IMF, called a special staff meeting and informed at that gathering that Wolfensohn had agreed to fire Stiglitz. Meanwhile, the Bank's External Affairs department told the press that Stiglitz had not been fired, his post had merely been abolished.

In a September 19, 2008 radio interview with Aimee Allison and Philip Maldari on Pacifica Radio's KPFA 94.1 FM in Berkeley, California, Stiglitz implied that President Clinton and his economic advisors would not have backed the North American Free Trade Agreement (NAFTA) had they been aware of stealth provisions, inserted by lobbyists, that they overlooked.

Initiative for Policy Dialogue

In July 2000 Stiglitz founded the Initiative for Policy Dialogue (IPD), with support of the Ford, Rockefeller, McArthur, and Mott Foundations and the Canadian and Swedish governments, to enhance democratic processes for decision-making in developing countries and to ensure that a broader range of alternatives are on the table and more stakeholders are at the table.

Commission of Experts on Reforms of the International Monetary and Financial System

In 2009, Stiglitz chaired the Commission of Experts on Reforms of the International Monetary and Financial System, informally known as the Stiglitz Commission, which was convened by the President of the United Nations General Assembly "to review the workings of the global financial system, including major bodies such as the World Bank and the IMF, and to suggest steps to be taken by Member States to secure a more sustainable and just global economic order".

Support to the 2011 Spanish Protests

On July 25, 2011, Stiglitz participated to the "I Foro Social del 15M" organized in Madrid (Spain) expressing his support to the 2011 Spanish protests. During an informal speech, he made a brief review of some of the problems in Europe and in the United States, the serious unemployment rate and the situation in Greece. "This is an opportunity for economic contribution social measures," argued Stiglitz, who made a critical speech about the way authorities are handling the political exit to the crisis. He encouraged those present to respond to the "bad ideas", not with indifference, but with "good ideas". "This does not work, you have to change it," he said.

Books

Along with his technical economic publications (he has published over 300 technical articles), Stiglitz is the author of books on issues from patent law to abuses in international trade.

''Freefall: America, Free Markets, and the Sinking of the World Economy'' (2010)

In ''Freefall: America, Free Markets, and the Sinking of the World Economy'', Stiglitz discusses the causes of the 2008 recession/depression and goes on to propose reforms needed to avoid a repetition of a similar crisis, advocating government intervention and regulation in a number of areas. Among the policy-makers he criticises are George W. Bush, Larry Summers, and Barack Obama.

This book does not require an economics background in order to be of value to the reader. Rather it explains Stiglitz's views on the recent economic crisis in terms which make it relevant to the average homeowner, retirement investor, and voter in the United States. He explains how without fundamental changes in economic policy and regulation the position of the US in the world political and economic arena may deteriorate significantly.

''The Three Trillion Dollar War: The True Cost of the Iraq Conflict'' (2008)

''The Three Trillion Dollar War'' examines the full cost of the Iraq War, including many hidden costs. The book also discusses the extent to which these costs will be imposed for many years to come, paying special attention to the enormous expenditures that will be required to care for very large numbers of wounded veterans. Stiglitz was openly critical of George W. Bush at the time the book was released.

''Stability with Growth: Macroeconomics, Liberalization and Development'' (2006)

In ''Stability with Growth: Macroeconomics, Liberalization and Development'', Stiglitz, José Antonio Ocampo (United Nations Under-Secretary-General for Economic and Social Affairs, until 2007), Shari Spiegel (Managing Director, Initiative for Policy Dialogue - IPD), Ricardo Ffrench-Davis (Main Adviser, Economic Commission for Latin America and the Caribbean - ECLAC) and Deepak Nayyar (Vice Chancellor, University of Delhi) discuss the current debates on macroeconomics, capital market liberalization and development, and develop a new framework within which one can assess alternative policies. They explain their belief that the Washington Consensus has advocated narrow goals for development (with a focus on price stability) and prescribed too few policy instruments (emphasizing monetary and fiscal policies), and places unwarranted faith in the role of markets. The new framework focuses on real stability and long-term sustainable and equitable growth, offers a variety of non-standard ways to stabilize the economy and promote growth, and accepts that market imperfections necessitate government interventions. Policy-makers have pursued stabilization goals with little concern for growth consequences, while trying to increase growth through structural reforms focused on improving economic efficiency. Moreover, structural policies, such as capital market liberalization, have had major consequences for economic stability. This book challenges these policies by arguing that stabilization policy has important consequences for long-term growth and has often been implemented with adverse consequences. The first part of the book introduces the key questions and looks at the objectives of economic policy from different perspectives. The third part presents a similar analysis for capital market liberalization.

''Making Globalization Work'' (2006)

''Making Globalization Work'' surveys the inequities of the global economy, and the mechanisms by which developed countries exert an excessive influence over developing nations. Dr. Stiglitz argues that through tariffs, subsidies, an over-complex patent system and pollution, the world is being both economically and politically destabilised. Stiglitz argues that strong, transparent institutions are needed to address these problems. He shows how an examination of incomplete markets can make corrective government policies desirable.

Stiglitz is an exception to the general pro-globalization view of professional economists, according to economist Martin Wolf. Stiglitz argues that economic opportunities are not widely enough available, that financial crises are too costly and too frequent, and that the rich countries have done too little to address these problems. ''Making Globalization Work'' had sold more than two million copies.

''Fair Trade for All'' (2005)

''New Paradigm for Monetary Economics'' (2004)

''The Roaring Nineties: A New History of the World's Most Prosperous Decade'' (2003)

''The Roaring Nineties"'' is Stiglitz' analysis of the boom and bust of the 1990s. Presented from an insider's point of view, firstly as chair of President Clinton's Council of Economic Advisors, and later as chief economist of the World Bank, it continues his argument on how misplaced faith in free-market ideology led to the global economic issues of today, with a perceptive focus on US policies.

''Globalization and Its Discontents'' (2002)

In ''Globalization and Its Discontents'', Stiglitz argues that what are often called "developing economies" are, in fact, not developing at all, and puts much of the blame on the IMF.

Stiglitz bases his argument on the themes that his decades of theoretical work have emphasized: namely, what happens when people lack the key information that bears on the decisions they have to make, or when markets for important kinds of transactions are inadequate or don't exist, or when other institutions that standard economic thinking takes for granted are absent or flawed. Stiglitz stresses the point: "Recent advances in economic theory" (in part referring to his own work) "have shown that whenever information is imperfect and markets incomplete, which is to say always, and especially in developing countries, then the invisible hand works most imperfectly." As a result, Stiglitz continues, governments can improve the outcome by well-chosen interventions. Stiglitz argues that when families and firms seek to buy too little compared to what the economy can produce, governments can fight recessions and depressions by using expansionary monetary and fiscal policies to spur the demand for goods and services. At the microeconomic level, governments can regulate banks and other financial institutions to keep them sound. They can also use tax policy to steer investment into more productive industries and trade policies to allow new industries to mature to the point at which they can survive foreign competition. And governments can use a variety of devices, ranging from job creation to manpower training to welfare assistance, to put unemployed labor back to work and cushion human hardship.

Stiglitz complains bitterly that the IMF has done great damage through the economic policies it has prescribed that countries must follow in order to qualify for IMF loans, or for loans from banks and other private-sector lenders that look to the IMF to indicate whether a borrower is creditworthy. The organization and its officials, he argues, have ignored the implications of incomplete information, inadequate markets, and unworkable institutions—all of which are especially characteristic of newly developing countries. As a result, Stiglitz argues, the IMF has often called for policies that conform to textbook economics but do not make sense for the countries to which the IMF is recommending them. Stiglitz seeks to show that these policies have been disastrous for the countries that have followed them.

''Whither Socialism?''

''Whither Socialism?'' is based on Stiglitz's Wicksell Lectures, presented at the Stockholm School of Economics in 1990 and presents a summary of information economics and the theory of markets with imperfect information and imperfect competition, as well as being a critique of both free market and market socialist approaches (see Roemer critique, op. cit.). Stiglitz explains how the neoclassical, or Walrasian model (''"Walrasian economics"'' refers to the result of the process which has given birth to a formal representation of Adam Smith's notion of the "invisible hand", along the lines put forward by Leon Walras and encapsulated in the general equilibrium model of Arrow-Debreu), may have wrongly encouraged the belief that market socialism could work. Stiglitz proposes an alternative model, based on the information economics established by the Greenwald-Stiglitz theorems.

One of the reasons Stiglitz sees for the critical failing in the standard neoclassical model, on which market socialism was built, is its failure to consider the problems that arise from lack of perfect information and from the costs of acquiring information. He also identifies problems arising from its assumptions concerning completeness.

Papers and conferences

Stiglitz wrote a series of papers and held a series of conferences explaining how such information uncertainties may have influence on everything from unemployment to lending shortages. As the chairman of the Council of Economic Advisers during the Clinton Administration and former chief economist at the World Bank, Stiglitz was able to put some of his views into action. For example, he was an outspoken critic of quickly opening up financial markets in developing countries. These markets rely on access to good financial data and sound bankruptcy laws, but he argued that many of these countries didn't have the regulatory institutions needed to ensure that the markets would operate soundly.

He co-authored a paper titled "Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard" with Peter Orszag in 2002 in which they concluded "on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero."

Private life

Stiglitz married for the third time on October 28, 2004, to Anya Schiffrin, who works at the School of International and Public Affairs at Columbia University.

Publications

; Books:

2010, ''Freefall: America, Free Markets, and the Sinking of the World Economy'' ISBN 978-0393075960, W. W. Norton.

2010, ''Time for a Visible Hand: Lessons from the 2008 World Financial Crisis'' ISBN 978-0-19-957880-1, edited with Stephany Griffith-Jones and José Antonio Ocampo, Oxford University Press, 2010

2008, ''The Three Trillion Dollar War'' ISBN 978-0-39-306701-9; by Joseph Stiglitz and Linda Bilmes, W. W. Norton.

2006, ''Making Globalization Work'' ISBN 0-393-06122-1, Penguin Books, August 2006.

2006, ''Stability with Growth: Macroeconomics, Liberalization, and Development'' ISBN 0-19-928814-3 (Initiative for Policy Dialogue Series C); by Joseph E. Stiglitz, Jose Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar; Oxford University Press 2006

1996, ''Whither Socialism ?'' Stiglitz, Joseph E., (Wicksell Lectures), MIT Press, January 1996.

2000, ''Frontiers of Development Economics: The Future in Perspective'', edited with Gerald M. Meier, World Bank, May 2000.

2001, ''Rethinking the East Asian Miracle'', edited with Shahid Yusuf, World Bank and Oxford University Press.

2002, ''Principles of Macroeconomics'', third edition, with Carl E. Walsh, W.W. Norton & Company, March 2002.

2002, ''Economics'', Third Edition, with Carl E. Walsh, W.W. Norton & Company, April 2002.

2002, ''Peasants Versus City-Dwellers: Taxation and the Burden of Economic Development'', with Raaj K. Sah, Oxford University Press, April 2002.

2002, ''Globalization and Its Discontents'', W.W. Norton & Company, June 2002.

2003,''Towards a New Paradigm in Monetary Economics'', with Bruce Greenwald, Cambridge University Press. Cambridge. Description and chapter-preview links.

2003, ''The Roaring Nineties'', W.W. Norton & Company, forthcoming in October 2003.

''Fair Trade for All: How Trade Can Promote Development'' (Initiative for Policy Dialogue Series C)– by Joseph E. Stiglitz, Andrew Charlton; Hardcover

2000, 3rd ed. ''Economics of the Public Sector.''

2002, ''The Rebel Within: Joseph Stiglitz and the World Bank'' by Joseph E. Stiglitz (Editor), Ha-Joon Chang (Editor), ISBN 1-898855-91-9, Anthem Press, Wimbledon Publishing Company (Paperback - February 25, 2002)

2005, ''The Development Round Of Trade Negotiations In The Aftermath Of Cancun'' by Joseph E. Stiglitz, Andrew Charlton (Paperback - January 30, 2005)

2005, ''A Chance For The World Bank'' by Joseph P Stiglitz (Foreword), Jozef Ritzen, ISBN 1-84331-162-3, Anthem Press, Wimbledon Publishing Company (Paperback - May 30, 2005)

1986, 'Economics of the Public Sector' by J.E.Stiglitz ISBN 0-393-96651-8, W.W.Norton, New York. (Re-printed 1988, 2000)

1981, 'Theory of Commodity Price Stabilization' by David M.G. Newbery and Joseph E. Stiglitz ISBN 0198284179 ISBN 978-0198284178, Oxford University Press [Hardcover: 512 pages]

''Readings in the Modern Theory of Economic Growth'' by Joseph E. Stiglitz (Editor), Hirofumi Uzawa (Editor)

; Book chapters:

2009. "Regulation and Failure," in David Moss and John Cisternino (eds.), ''New Perspectives on Regulation'', ch. 1, pp. 11-23. Cambridge: The Tobin Project.

2001, New Ideas About Old Age Security: Toward Sustainable Pension Systems in the 21st Century , edited with Robert Holzmann, World Bank, January 2001.

; Selected scholarly articles

2007, "Prizes, Not Patents" post-autistic economics review, issue no. 42

1998, Distinguished lecture on economics in government: The private uses of public interests: Incentives and institutions. Journal of Economic Perspectives, 12, 3–22.

1998, ''Redefining the Role of the State - What should it do ? How should it do it ? And how should these decisions be made?'' Paper presented at the Tenth Anniversary of MITI Research Institute, Tokyo, March 1998.

1996, The World Bank Research Observer: No 2: August 1996 by Joseph Stiglitz

1993, “Post Walrasian and post Marxian economics,” ''Journal of Economic Perspectives'', vol. 7, pp. 109–14

1993, “Market socialism and neoclassical economics,” in Bardhan, P. K. and Roemer, J. E. (eds.), ''Market Socialism. The Current Debate'', New York: Oxford University Press

1989, “Principal and agent,” in J. Eatwell, M. Milgate and P. Newman (eds.), ''The New Palgrave. Allocation, Information and Markets''. New York: W. W. Norton

1987, “The causes and consequences of the dependence of quality on prices”, ''Journal of Economic Literature'', vol. 25, pp. 1–48

1981 (with A. Weiss), "Credit Rationing in Markets with Imperfect Information", ''American Economic Review'', vol. 71, pp. 393–410

1977 (with A.K. Dixit), “Monopolistic Competition and Optimum Product Diversity”, ''American Economic Review'', vol. 67, pp. 297–308

1976 (with M. Rothschild), “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information”, ''Quarterly Journal of Economics'', vol. 90, pp.  629–650.

1974, “Incentives and Risk Sharing in Sharecropping”, ''Review of Economic Studies'', Vol. 41, No. 2, 219-255.

1974, “Alternative Theories of Wage Determination and Unemployment in LDCs: The Labour Turnover Model”, ''Quarterly Journal of Economics'', vol. 81, pp. 194–227

1971 (with M. Rothschild), “Increasing Risk: II. Its Economic Consequences”, ''Journal of Economic Theory'', Vol. 3, pp. 66–84

1970 (with M. Rothschild), “Increasing Risk: I. A Definition”, ''Journal of Economic Theory'', Vol. 2, pp. 225–243

; Articles in popular press:

2011, "Of the 1%, by the 1%, for the 1%", Vanity Fair, May 2011

2010, Review of

2009, "Wall Street’s Toxic Message", Vanity Fair, July 2009

2009, "America's socialism for the rich", The Guardian, June 2009

2009, "Capitalist Fools", Vanity Fair, January 2009

2007, "The Economic Consequences of Mr. Bush", Vanity Fair, December 2007 Issue

2007, Where is the World Going To, Mr. Stiglitz? directed by Jacques Sarasin, First Run Features.

2002, "Implications of the New Fannie Mae and Freddie Mac Risk-based Capital Standard", for FannieMae Volume I, Issue 2 March 2002

; Video and online sources:

2010, Freefall: Joseph Stiglitz at the Commonwealth Club

2008, The Three Trillion Dollar War a panel discussion with Joseph Stiglitz and Linda Bilmes regarding their new book, `''The Three Trillion Dollar War: The True Cost of the Iraq Conflict''.` Feb 28, 2008 at Columbia University.

2007, Where is the World Going To, Mr. Stiglitz? directed by Jacques Sarasin, First Run Features.

World Bank Video presentation

Online access to Stiglitz published papers, at his own website

See also

List of economists

List of Jewish Nobel laureates

References

External links

Joseph E. Stiglitz at Columbia University

* Joseph Stiglitz committee chair profile at Committee on Global Thought at Columbia University

Information and the Change in the Paradigm in Economics 2001 lecture at NobelPrize.org

Profile and Papers at Research Papers in Economics/RePEc

Publications at the National Bureau of Economic Research

Column archives at Project Syndicate

Joseph Stiglitz with Matthew Bishop at the 92nd Street Y, January 2010

Interview at The Commonwealth Club, February 2010

Free Markets and the World Economy with the Australian Broadcasting Corporation, July 2010

Category:Academics of the University of Oxford Category:American anti-globalization writers Category:American economists Category:American Nobel laureates Category:Amherst College alumni Category:Ashkenazi Jews Category:Clinton Administration personnel Category:Columbia University faculty Category:Development economists Category:Development specialists Category:New Keynesian economists Category:Fellows of All Souls College, Oxford Category:Fellows of Fitzwilliam College, Cambridge Category:Fellows of Gonville and Caius College, Cambridge Category:Fellows of the British Academy Category:Fellows of the Econometric Society Category:Information economists Category:International development Category:International Panel on Climate Change lead authors Category:Jewish American writers Category:Massachusetts Institute of Technology alumni Category:Members of the United States National Academy of Sciences Category:Members of the Pontifical Academy of Social Sciences Category:Nobel laureates in Economics Category:People from Gary, Indiana Category:Princeton University faculty Category:People associated with the University of Manchester Category:Public economists Category:Stanford University faculty Category:United States Council of Economic Advisors Category:World Bank Chief Economists Category:Yale University faculty Category:Keio University faculty Category:1943 births Category:Living people Category:Foreign Members of the Royal Society Category:Faculty of Sciences Po Category:Gerald Loeb Award winners

ar:جوزيف ستيجلز bn:জোসেফ স্টিগ্‌লিট্‌স bg:Джоузеф Стиглиц ca:Joseph Eugene Stiglitz cs:Joseph Stiglitz cy:Joseph Stiglitz de:Joseph E. Stiglitz et:Joseph Stiglitz es:Joseph Stiglitz eo:Joseph E. Stiglitz fr:Joseph Eugene Stiglitz gd:Joseph Stiglitz ko:조지프 스티글리츠 io:Joseph E. Stiglitz id:Joseph E. Stiglitz it:Joseph Stiglitz he:ג'וזף שטיגליץ rw:Joseph Stiglitz la:Iosephus E. Stiglitz lt:Joseph Stiglitz mk:Џозеф Стиглиц mr:जोसेफ स्तिगलित्झ nl:Joseph Eugene Stiglitz ja:ジョセフ・E・スティグリッツ no:Joseph E. Stiglitz pnb:جازف سٹگلٹز pl:Joseph E. Stiglitz pt:Joseph Stiglitz ro:Joseph Stiglitz ru:Стиглиц, Джозеф Юджин sl:Joseph Stiglitz fi:Joseph Stiglitz sv:Joseph Stiglitz th:โจเซฟ สติกลิตส์ tr:Joseph E. Stiglitz uk:Джозеф Стігліц vi:Joseph Stiglitz yo:Joseph E. Stiglitz zh:约瑟夫·斯蒂格利茨