Simon Kuznets, an economist working in the US in the middle of the last century, is often described as the founding father of GDP and the science behind measuring the size of an economy.
The Soviet émigré who moved to the US in the 1920s developed methods for calculating a nation’s income and changes over time, and standardised the concept of gross national product (GNP), an early predecessor of GDP.
Diane Coyle, who chronicled the development of economic measurement in her book, GDP: a Brief But Affectionate History, says that Kuznets made clear from the outset that his work in wartime was not sufficient as a proxy for prosperity alone.
“He was actually very clear that it was not what he wanted to measure, he wanted to assess economic welfare. GDP was a measure devised in wartime to look at the demand capacity and supply capacity of the economy. For a long time we have known that there are flaws,” she says.
Kuznets tried to force the focus from economic output to national income and its distribution but ultimately lost, as the demands of the cold war required assessments of the productive capacity of the western powers.
He argued that “the welfare of a nation can scarcely be inferred from a measure of national income,” while economic growth measured only annual flow, rather than the stock of wealth and its distribution.
Kuznets was said to remark on sketchy economic data measuring inequality between nations in the 1970s: “Do you really think we can get good conclusions from bad data?”