Why GDP/CAPITA and Purchasing Power are insufficient tools in a world of AI and fast technological progress?

Photo by Matteo Catanese on Unsplash

Gross Domestic Product (GDP) is a metric refined by John Maynard Keynes in the 1940s to measure the economic output of a country. It is used as well as a proxy for “economic power”, while GDP/capita is widely construed as a measure of standard of living, and even sometimes welfare.

GDP has many flaws: the more non-renewable natural resources a country depletes, the more prisons it builds, the more drugs and paid sex it consumes, bigger and larger is its GDP. Add to this that the GDP does not take into account pollution generated in the process, nor activities that actually benefit the economy, like for instance a household mum patiently having her kids do their homework, or someone caring for an elderly relative.

GDP/capita does not say anything about income distribution, is imperfectly correlated with purchasing power, and does not speak of productivity variations between countries, nor how physically and mentally demanding any work actually is.

Are we not confusing the end with the means?

Technological progress and AI make things worse.

Gains in performance, or in quality, are not well taken into account by GDP.

The recorded music industry, whose revenues have plummeted since the advent of Internet, contributes much less than before to GDP. And yet, technologies have made possible to access easily more music than ever anywhere, anytime. Many services that were cost prohibitive before are now free — like calling a relative on the other side of the world. That last activity has largely disappeared from our calculation of standard of living as measured by GDP/pax or purchasing power. Another confounding example regards our digital devices and computers. Even if the best ones don’t cost much less than before, they are tremendously more powerful in terms of memory, computing power, and resolution. The story is the same with cars: looking at the inflation-adjusted price of a car in the US for the past 50 years, it will be easy to notice it has remained the same! Nevertheless, in the meantime, the quality of cars has dramatically improved as they have become safer, more fuel-efficient, and more comfortable. Some advances in GDP measurements were made in the past couple of decades, like for instance with hedonic prices, but it’s still far from perfect.

The rise of AI heralds a world of abundance.

With only a touch of human help, smart and dexterous robots, fueled with the quasi unlimited energy and matter of our Solar System, will likely be able to make and maintain other robots and transportation systems, able to produce and distribute all the goods and services we might need. In such a world of abundance, we would have access to more than we can consume (or even spoil), as our ability and time to do so will likely be inferior to the ability of smart robots to build, produce, fix, repair and recycle. The pace of progress in robotics, 3D printing, AI, nanotechnologies, biotechnologies, vertical farms and aeroponics, energy and space technologies, among others, give credibility to this science fiction scenario. All the more so if we assume human population will stagnate (as seems likely by 2050 according to demographers) while the robotic population can scale to whatever extent is needed to maintain the abundance.

So we should not rule this scenario out for our century, that would be a total game changer for humankind. We, or our children, may live to see its advent!

Time to move away from GDP/capita and purchasing power?

In such a world, with nearly unlimited — not to say free — robot labor, matter, and energy, wouldn’t the very notions of price, purchasing power and GDP likely be disrupted?

In an ever more digitized and AI-enabled world, we must reconsider how to best keep track of the evolution of standard of living. As GDP/capita and even purchasing power accumulate flaws, why not use the new concept of “access power” to measure, for someone, the evolution over time of the quality and array of all goods and services available for a given income, including free services?

Day by day, we can access more and more things for less and less money, sometimes even for free. All things considered, for many of us, it feels like our “access power” keeps increasing, even if it’s unfortunately not globally shared yet. This concept definitely calls for more clarity and research, however, it should make for a more optimistic conversation about AI!

Thomas Jestin, Co-founder KRDS & Live Withe AI Board Member

About Live With AI:

Live with AI is a non-profit foundation based in Singapore. The foundation gathers thought leaders, decision-makers and French, Singaporean, and international researchers to lead working groups and research projects on the positive impacts of artificial intelligence to our society. The Live with AI community takes advantage of a presence at the heart of the South-East Asia region and an access to several research laboratories to issue recommendations which can be immediately applied and tested among very diverse communities looking for technology disruption. Live with AI is an independent initiative created at the occasion of the France Singapore year of Innovation 2018.