The 2020s have been a tumultuous time for Ohio’s economy. The shock of quickly closing the economy to stave off the overcrowding of hospitals has been followed by two years of hesitancy for state residents to shop, eat out and engage in public life.
This tumult was captured in state Gross Domestic Product (GDP) numbers. According to the Bureau of Economic Analysis, state GDP dove in the first half of 2020, falling from $615 billion of annualized chained GDP at the end of 2019 to $549 billion in Q2 of 2020—an 11% decrease.
To conceptualize this, think of where you’d be if your last few paychecks came in 11% lower than the one before. And this is after you expected your pay to increase. That’s how bad things were in 2020.
Ohio’s state GDP bounced back in the second half of 2020, but didn’t recover to 2019 levels until the second half of 2021.
This is how we tend to talk about economics. GDP is useful because it totals up the sum value of the formal economy, summing personal consumption, business investment, government spending, and net exports.
The problem with GDP is that the measure gives us an incomplete picture of the economy. While it gives us an idea of how much people are paid to do things, it gives us little information of how people economize their time and resources more broadly.
For instance, according to GDP, when millions of Ohioans stopped eating out and started cooking at home, the value of food preparation completely dissipated. Suddenly, 4.7 million households were cooking at home instead of paying people to cook for them, but since dollars were no longer changing hands, GDP was blind to the new way people were creating value.
Similarly, with the onset of COVID-19, fewer people were driving to work and more people were working from home. According to GDP, this means fewer people were paying for gasoline and car maintenance, and the economy was shrinking. No accounting was done for the extra time people had on their hands due to cutting out their commutes and the value of reduced greenhouse gas emissions due to fewer cars being on the road.
In order to account for these sorts of problems, a new generation of economists have been calculating a new measure of the economy for the past twenty years called the Genuine Progress Indicator.
The Genuine Progress Indicator (GPI) starts with personal consumption expenditures then adjusts it by supplementing it with economic indicators such as underemployment. It then subtracts out environmental damage and adds the net benefits of social indicators such as the value of unpaid housework and childrearing, the spillover benefits of higher education, and the cost of lost leisure time.
In an ideal world, the research office of Ohio’s Department of Development would publish quarterly GPI numbers and release them to the media. The Department would also report them to the Governor’s Office of Budget and Management and key legislative committees such as the House and Senate Finance and Ways and Means committees.
With better data that captures the full picture of the state economy, we can craft better policy. Why would we want any less than that for our state?