| Things to think about
Jerseyans produce more than $260 billion in goods and services
a year. This is usually much more than many countries, including
Denmark, Thailand, Turkey, Argentina, South Africa, Greece,
Austria, and many others.
Gross State Product (GSP) measures the goods and services that
our economy produces. New Jersey’s GSP has increased sharply
since the mid-1970s, even after adjusting for inflation. GSP
has long been considered by many to be the most important measure
of the state’s well-being. However, GSP is flawed in that it
does not differentiate between the desirable and undesirable
things we spend our money on. For instance, Florida’s GSP for
1992 suggests a state in the middle of a wonderful spending
boom. In fact, this boom was caused by the high expense of rebuilding
after Hurricane Andrew. Some people have proposed alternative
measures of well-being that add the value of economic production,
as measured by the GSP, but subtract such costs as natural resource
depletion, crime, and accidents. These alternative measures
show less improvement than GSP and often suggest that we are
less well off now than we were in past years. In any consideration
of state production, it is important to ask careful questions.
How has such production been distributed among our population?
How much better off has it made us? What have we given up? And
most importantly, how long can we sustain it?
GSP is the traditional
measure of basic economic activity. When it grows rapidly, we
are considered to be in good times. When the growth slows, we
may be in a recession or depression. Although GSP tells us how
much is being produced by our economy, it does not tell us how
fairly it is distributed or what environmental or social costs
we pay for growth.
If we look only
at the GSP to find out how we are doing, then we miss much of
what is happening in New Jersey. We may see the GSP rise, but
we may not see the forests and farms that have vanished, the
pollution that has entered our rivers and coastal areas, or
the animals that have disappeared. Depending on the reason for
the change in GSP, the environmental impact could be positive
GSP shows that
our state has become richer, but it does not tell who among
us has received that wealth. It is possible for GSP to paint
a rosy picture of our state even during times when the crime
rate is rising, when poverty is spreading, and when many people
have no health insurance.
tells us how much has been produced, but it does not tell us
what has been produced. Recent research suggests that many people
find themselves paying for things that they wish they did not
have to pay for, such as security systems and divorce proceedings.
It is important to have a measure that distinguishes between
the positive and negative contents of the GSP.
Source: US Department of Commerce, Bureau of Economic Analysis