alt Hacker NewsIt doesn't make sense. But that is exactly how policy makers justify how "the economy is doing good!" The GDP was never intended to be used as an indicator of national economic well being; only a simple statistic to measure how much money is exchanged between people.
But it only takes a few examples counter to what a public service should do to show that GDP reliance creates anti-patterns. e.g. rising healthcare costs is good for the GDP while universal healthcare is bad.
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First, you are correct. However, the reason GDP is used as a proxy metric for economic growth because it's convenient. Doing so does make a few assumptions though, foremost of which is that the structure of the economy will change very little from year to year. If that is so, than a rise in GDP should correspond to a rise in economic prosperity (and by extension wealth). Thus, using GDP change to measure changes in prosperity works (more or less) year by year. but the longer the periods you compare (5 years, 10 years, 20 years), the less meaningful the number becomes.
The GDP number is an example of "all models are wrong, some are useful". You'll inevitably oversimplify at least _something_ if you try to boil down the economy to a single number.
GDP is still useful. I don't think there are examples of countries that had drops in GDP without being in deep trouble. It exploits the fact that economies [almost] never change quickly, so when you're looking at just one country, the GDP is a reasonable indicator of the overall state.
Where the GDP sucks is when people try to compare the _rates_ of GDP growth between countries.
Yup. A substantial proportion of the difference in GDP between the EU and the US relates to how health care values are assigned. In the EU (for public healthcare), it's at cost while in the US it's the final transaction price. It would be interesting to deflate US GDP against the same metric used in the EU to get more accurate figures, but I've never seen such an analysis.