It is hard to believe that a book about the Gross Domestic Product could be interesting, important and occasionally amusing, but Diane Coyle has succeeded in all of this with GDP: A Brief but Affectionate History. It has two very salient takeaways for politics, one practical and one philosophical. First, GDP has become less and less good at capturing positive changes in human welfare. As a result, the lower growth in GDP in the last few decades is less troubling than it is often made out to be. Second, GDP is a measurement of the government that has inherent biases that one might expect from a metric devised by the government. Classical liberals should thus be careful to separate their respect for market freedom from any worship at the altar of GDP.
Coyle shows that GDP was designed for a time when most of the economy consisted of the production of materials, not intellectual property or services. Indeed, because it was formulated at the time that government came to seen as responsible for the economy, its underlying image is that of a machine. Put so much capital and labor into the economy and get out such much output of goods.
But of course today much of the economy does not lie in the production of material goods.