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Could the BP oil spill increase GDP?

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Annie Lowrey notes a J.P. Morgan Chase analysis suggesting the BP spill will actually raise the country's GDP, at least in the short term. "Cleaning up the spill will likely be enough to slightly offset the negative impact of all this on GDP, J.P. Morgan said," summarizes Luca Di Leo. "The bank cites estimates of 4,000 unemployed people hired for the cleanup efforts, which some reports have said could be worth between $3 and $6 billion."

This is a nice object lesson in the inadequacy of GDP as a measurement of societal well-being. I could blow up the biggest building in every city in the country and the resulting reconstruction effort could mean a big temporary increase in GDP. But blowing up buildings is not a sustainable way to grow your economy. GDP, of course, has its uses, and as Bruce Bartlett points out, it provides a rich source of historical data and we wouldn't want to abandon it completely. But there's no reason we couldn't also use more comprehensive measures, and this Urban Institute report (pdf) gives a nice overview of what they would look like.

Photo credit: Spencer Platt/Getty Images

By Ezra Klein  |  June 15, 2010; 11:35 AM ET
Categories:  Economics , Energy  
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Comments

Of course the oil spill will increase the GDP. Car crashes do, too. Please crash your car today. The brothers in the body shop need to eat just like everyone else.

Posted by: roblimo | June 15, 2010 11:54 AM | Report abuse

Thankfully we're all Keynesians now...

Posted by: BirdJaguarIV | June 15, 2010 12:08 PM | Report abuse

Bastiat, anyone?
http://en.wikipedia.org/wiki/Parable_of_the_broken_window

This is where Keynes and his useless pyramids.

Posted by: staticvars | June 15, 2010 12:11 PM | Report abuse

best place to start looking for a mover
http://moverscommunity.com /freequoyes3.php

Posted by: abanknsob1 | June 15, 2010 12:15 PM | Report abuse

Bush's Iraq War temporarily helped the economy after 2003. But then his other policies, and the negative effects of the war (increased energy prices, debt, distractions from domestic issues) overshadowed all else and, Voila!, the great recession.

Posted by: Lomillialor | June 15, 2010 12:21 PM | Report abuse

This is a very important point. I have long said not all ten trillion dollars in GDP are the same, or create the same total societal utils, or future growth. One of the biggest flaws of the GDP measure is that it includes crime and security costs as production, rather than a cost of production. The Economist's Voice (edited by Nobel Prize winning economist Joseph Stiglitz) had an excellent article on this and the great societal costs of crime and security; quoting:

The extent of guard labor depends on exactly what you count, of course. But by our preferred
estimates (which we explain shortly), roughly one in four in the United States economy is now engaged in guard labor—providing security for people and property and imposing work discipline. Since 1890 the guard labor fraction of the United States labor force has increased four-fold. And in Sweden today the guard labor fraction is less than half that of the United States.

Our measures of guard labor in the United States are necessarily incomplete and our definitions difficult to implement (Are lawyers guard labor? Lobbyists? Even some economists?)...We have
also ignored labor involved in the production of weapons for self protection, of locks and security cameras, and surveillance devices such as the trackers attached to long haul trucks to monitor their drivers’ speed and routes. We do not think we have overestimated the number of supervisors; we have certainly missed some types of work that could be termed guard labor.

at: http://www.bepress.com/ev/vol4/iss2/art3/

Ezra, I hope you eventually read this short article. It really shows one of the great costs of a generation of Republican dominance which has brought us to a level of income inequality beyond even that of the gilded age.

Posted by: RichardHSerlin | June 15, 2010 12:34 PM | Report abuse

Obama should use this as a foil to push through additional economic stimulus funding, which would be hard for all those Southern Republicans to argue against. Our economy is still in the toilet, the "Markets" have no clue about what to do outside of more executive bonuses, and our Gulf Coast is going to be devestated - again. If throwning money and resources lessens the decades of suffering they now have to endure, then I'll sign off... at least it's being spent on the relative betterment of middle/lower class Americans here in the US.

Ezra, your comparison is useless since it anticipates the destruction as a genesis for spending money... like with Lomillialor's Iraq comparison. No one, ever, will say we should create an environmental disaster to ruin people and the environment to initiate a destructive/creative cycle. On the other hand, the least we can do is try and make the best of this nightmare.

Posted by: Jaycal | June 15, 2010 1:38 PM | Report abuse

There are all sorts of ways to measure a country's health that ignore a lot of the human facts. I stacked the deficit hawkery against maternal mortality rates, and what I found was pretty sad: http://www.newdeal20.org/2010/06/15/the-measure-of-a-country-lives-not-debt-12476/

Posted by: BryceCovert | June 15, 2010 3:59 PM | Report abuse

Ezra's point is exactly the same one that stimulus opponents make when they argue that saving every last job at the DMV is not going to restart the economy. What's important is HOW money gets spent, and it's good to see that Ezra agrees at least in principle.

Posted by: tomtildrum | June 16, 2010 12:15 PM | Report abuse

Entire industries wiped out. forever, the primest commercial and residential real estate made totally devoid of any value.

Short term growth of a percentage point or two will not offset the loss of tens of percentage points in total US assests.

If the article weren't so absurd it would be obscene.

Posted by: icurhuman2 | June 16, 2010 6:24 PM | Report abuse

Might the fact that JP Morgan Chase is BP's largest shareholder have something to do with its claim that the spill will be good for the GDP?

Posted by: aoberry6 | June 17, 2010 1:06 PM | Report abuse

Ah yes, the Broken Window Fallacy again.
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
Do economic commentators even study economics anymore?

Posted by: fallout11 | June 17, 2010 2:49 PM | Report abuse

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