Home Production versus GDP

There's an old saying that crisis and opportunity are synonymous. We are seeing this play out in the current shutdown as it's giving people the opportunity to sit at home and ponder what has real value and is essential to their well being. It could be time for this thought process to trickle-up and for us to re-evaluate the important aggregate measures of our overall economy. Many people are conflicted between restarting the business economy and weighing it against other outcomes such as health, safety, and sanity. Do these outcomes necessarily need to be in conflict with each other? Before the shutdown started Andrew Yang outlined this issue in his speeches during his US presidential campaign.

Over 100 years ago GDP was invented as a way to measure the aggregate value of a country's production. It provided a starting point for measuring standard of living but is rife with problems as it is difficult to determine if GDP growth comes from either real growth in the quantity and quality of goods and services, or simply inflationary growth through higher prices. The GDP Deflator and CPI methods were created to mathematically tease out these effects on average. But the big hidden problem with using GDP as a measure of well being is that it doesn't include non-market transactions such as hidden markets and home production. Home production includes cooking, cleaning, caring for children, shopping, and doing odd jobs around the house. As Andrew Yang points out in his speeches, the economic value assigned to his wife staying at home and caring for his children is zero.

So how can we measure home production to infer its economic value? According to an OECD report in 1992, there are three possible methods: Global Substitute(GL), Specialist Substitute(SP), and Opportunity Cost(OC). The GL method measures housework based on the average market wage of hiring an average person to do the work. The SP approach uses the specific market wage for that household task, whereas the OC method uses your own wage to represent the lost time. Housework as a percentage of private consumption in Canada in 1986 was measured using these methods. It was 82.7% with the OC method, 70.7% using SP, and 38.4% with the GL approach.

Whatever measure is used to account for home production, it is clearly a large part of the real economy. I believe that in this current economic shutdown the economy didn't fully shutdown, it merely shifted to the hidden parts of society. You can see this at a local level in Guelph. Local Boy Scouts are using 3D printers to make medical safety masks. Local seniors are dusting off their sewing machine to make cloth masks. Local car drivers are offering free grocery delivery for the house ridden. Local environmentalists are cleaning up garbage near highways and rivers. All of this hidden work is real and adds value to our community.

What do you think?
Is GDP per person an accurate measure of your personal well-being?
Should home production be counted as part of GDP?
Is Basic Income a way to give a flat economic value to home production?
Can you estimate the economic value of your housework through the OC, SP, or GL method?