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Economy 4.0

Tsunami-Sized Shock to Japan’s Gross Domestic Product

David Brancaccio Mar 22, 2011

Just days after the triple calamity in Japan — from earthquake to tsunami to radiation — I found
myself at an awkward turn in a conversation. I was in London speaking with a renowned expert
on the limitations of Gross Domestic Product as the unchallenged measure of an economy.
GDP goes up with good economic activity (building a house); it also goes up with bad activity
(crime, car wrecks). Many experts regard this as a problem, among them, Nic Marks at the
New Economics Foundation. Perhaps we should reward growth that is good for us and subtract
the bad. Nic and I were deep in a discussion of alternative measures when the thought
started to form that the horrors being visited on Japan might be perversely recorded by GDP
as an economic stimulus. I stopped myself before fully articulating the notion, and Nic looked
uncomfortable hearing me start to go there. It struck me as inappropriate to discuss, in the midst
of such acute suffering, and I veered off.

A few more days have passed and this idea is now being explored openly and sensitively. Dan
Gross, economics editor and columnist at Yahoo Finance, has a nice [survey of links on this topic]( 536056.html), including an exploration of bad growth versus useful growth prompted by disaster.

Take Greensburg, Kansas, “95 percent of which,” Gross writes, “was destroyed in a tornado in
May 2007. The tornado could have been a fatal blow for a community whose population had
been shrinking since 1960. But Greensburg’s decision to rebuild as a showcase sustainable
community has attracted attention and capital. A new wind farm went into operation on March 5
and several new buildings, constructed to high environmental standards, have risen.”

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