Gross Domestic Bunk

The Commerce Department, which costs $3 billion a year, is touting one of the most brainless economic ideas of our generation. What ought to be called the Anti-Commerce Department announced the concept on Earth Day, which appropriately enough is also Lenin's birthday.

In cahoots with the environmentalists, the bureaucrats have dreamed up a new formula to calculate the Gross Domestic Product, resulting in a Green GDP. The present GDP attempts (and fails) to calculate economic productivity. The new GDP would make a bad figure worse by subtracting the alleged "environmental cost" of productivity.

The Greens have a zero-sum attitude toward economic growth, and so we are supposed to deduct "resource depletion" from the productive employment of capital and time. Such a figure could come in handy on Sunday morning talk shows.

"The economy is growing at 3%," an economist might say. "But that drains our resources by 3%," responds the environmentalist. "And that comes out to zero," concludes the moderator.

Agriculture might seem like a useful activity, but not if we reduce productivity by supposed soil depletion. How is that to be measured? Not by a mere farmer, whose livelihood depends on preserving the soil, but by an official in Washington, D.C.

Did building a new house require the cutting down of some trees? Subtract them from the GDP. Is that juicy steak delicious? Too bad. Steak requires cows, which environmentalists hate. Reduce the GDP by that T-bone too. Enjoy driving? It harms Mother Earth, so take it away as well.

In fact, every human activity except dying offends some environmentalist. It's enough to make you glad to be alive. Artificial lighting, eating, driving, logging, plowing, building, heating, cooling, showerring, using paper bags, having children, and even breathing are all objectionable to the Greens. Taken to their logical end, in fact, environmentalism requires bringing the economy to a standstill, and then reversing it. As is clear from their own literature, only the subordination of man to plants and animals (except cattle, who should be killed but not eaten) will please them in the long run.

Using the regulatory state, the Greens have been moving us towards their totalitarian goal. All over the country, Americans have been forbidden to use their own land as they see fit. If it's a swamp or bog (i.e., a "wetland") or holds an "endangered" species, such as the recently sanctified Delhi Sand Fly, shut it down. Your name may be on the deed, and you may pay taxes on it, but the government is the real owner, since it decides how the land is to be used, if at all.

Environmental regulations are why it costs so much to get your air conditioner repaired, why wood prices are so high, why your car can't pass emissions inspection even though it's only a few years old, why you are forced to collect old newspapers so the city can recycle them at tremendous expense, and charge you for it. That trees are a crop, like asparagus, that can be grown, used, and grown again, is inadmissible.

There's no science or logic to the bulk of their claims, whether it's global warming, holes in the ozone layer, acid rain, or any of the other Mother Green fairy tales.

But just as the American people are catching on, the Greens are trying to trick us again. They tell us the GDP ought to be reduced – not by the cost of their fanatical controls – but by the costs of capitalism itself. They want us to believe that free markets, not the "Clean Air" Act and other crippling laws, are the problem.

With the Green GDP even the craziest regulation could be made to appear beneficial. The statistical construct is so perverse, in fact, that it will increase as our standard of living declines. The poorer the people, the richer the Earth.

Not that the present GDP is any great shakes. Constant Commerce Department revisions – we call them mistakes in the private sector – are enough to make the figure a laughing stock. George Bush lost the 1992 election in part because the Commerce Department said we were in a recession. After the election, the department said, whoops, we'd been in a recovery.

And floods and earthquakes account for a substantial rise in the GDP, because the figure does not and cannot account for wealth destruction. Los Angeles can be devastated by failing offices and burning homes, but once the repairs begin, the government records a building boom.

Henry Hazlitt tells the story of the boy who breaks a store window, as Keynesians stand around and convince themselves it's a productive act. But the story was intended to illustrate an economic fallacy, not provide the intellectual foundation for a Commerce Department model.

Before the government started trying to calculate productivity, it should have taken time to define it. The Austrian economist Herbert Davenport, in his 1913 book The Economics of Enterprise, is helpful. He suggests that: "Economic production is the bringing about of changes appropriate to command a price." A price suggests scarcity, utility, and profit. "Anything that meets this test is economic production," he adds. "And nothing else is."

What if a good or service seems useful, but it doesn't command a price in the market? If nobody wants it, it's not economic production. "Pianos could not be wealth in a society lacking musical tastes," says Davenport, "or books wealth to savages."

Davenport then asks: "Are thieves producers?" No, for the holdup man does not "give us anything for our money." He simply takes it by force. This is not productive behavior.

Davenport's discussion raises another question: what about the grandest larceny of all, $1.6 trillion taken from the private sector by the central government every year? If that property weren't seized, it could be put to private, productive use. Taxation, like theft, is a net loss to society, and should be subtracted from the GDP. Government spending is also a net loss, although it increases the GDP just like an earthquake.

In his book America's Great Depression, Murray N. Rothbard suggested an alternative figure: the Private Product Remaining. It subtracts government spending and taxing from overall productivity. Economist Robert Batemarco picked up the idea and prepared an alternative set of statistics that shows declines in living standards where the government wants us to believe we're richer.

Instead of subtracting the supposed costs of economic liberty from the GDP, as the Greens propose, we need to take away the costs of government, including environmental regulations, which interfere with private property and cost hundreds of billions of dollars a year.

As usual, then, the Commerce Department has it backwards. If we are going to attempt national income accounting, it should be an honest undertaking. It certainly should not be more dishonest than the present figure. And by Davenport's and Rothbard's definition, and Batemarco's calculation, our economy is getting less and less productive. Big government and its allies are responsible.