Why do we use GDP as measure of economic value?

Professor Wolff, I have a question about an Economic Update episode I heard on Sunday July 23 2017. The show started with a story about United Airlines and how their ability to post profits despite treating customers terribly contradicts the Efficient Market hypothesis. I agree, and also I suspect that United is making more from financial investments than from ticket sales (because r > g), so it can treat customers badly because it really doesn't need customers. Later in the show came a story about China's GDP growth. In that part of the episode, why did Professor Wolff treat GDP as an accurate measure of economic value? If markets are not efficient, what is GDP really measuring? I don't think GDP growth should be a public policy goal. If I consume less food, for example, get healthier, and consume less healthcare services, I am counted as a drain on GDP. But my health is better. Therefore I think we should abandon GDP as a measure of value. So my question, once again, is why use GDP as a measure of anything if the Efficient Market hypothesis is wrong?

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  • Robert Mitchell
    published this page in Ask Prof. Wolff 2017-07-29 16:14:43 -0400