One of the most difficult concepts for many policy makers to grasp is the notion that economic measurements can be probabilistic. There is a lot of argument about what constitutes a fair and accurate measurement of economic performance. One school of thought maintains that no measurements, no matter how careful they are, will ever be completely accurate because the fundamental definition of what counts as a measure is subjective. According to this school, any attempt to measure things in measurable quantities is subject to a host of difficulties.
Other people, though, would disagree. They maintain that the concept of measuring is simple enough. There are basic ways of measuring things and these ways exist independently of culture, time, and individuals. With the advent of computers, these measurements have gotten much easier to perform. The trouble comes, then, when people attempt to use a machine to perform an analytical task on these notions. In other words, measuring becomes a problem in many different guises.
When asked what are the difficulties of measuring economic growth, economists often point to the difficulties of interpreting statistics. It is not so much the interpretations themselves but the social meaning that are attached to them. For example, the concept of gross domestic product, or GDP, is used to evaluate the performance of an economy as a whole. Yet the meaning of this statistic can be very different depending on who is making the measurement. For example, some economists look at it in terms of Gross Domestic Product rather than Gross National Income. Still others focus on the productivity element of an economy as a whole.
The difficulties of measuring an idea like that arise precisely from the social meaning associated with the term. Unfortunately, there are concepts that cannot be measured. Such concepts include notions like justice, fairness, and equality.
When asked what are the difficulties of measuring economic performance, the most difficult concept to describe is “Income.” Economists have long struggled with the notion of income as a measurable concept independent of notions like equity and efficiency. Without a common reference point, such notions as wealth and equity become difficult to measure. Thus it becomes increasingly necessary to talk about concepts like production, saving, investment, consumption and income before discussing the meaning of those concepts.
In addition to measuring the concepts of wealth, production and saving, it is also necessary to talk about productivity, technology and information. All of these concepts are intertwined and are therefore difficult to discuss in a single essay. Yet all economic growth measures require some notion of measuring progress and progressiveness. This concept is particularly important in understanding the debates about increasing income standards, welfare programs and the distribution of wealth and opportunities . . . . . . in modern societies.