[thedevil]

Note that GDP is only a proxy for value to society. It's based on what's measurable, not on what's valuable.

Prisons and wars increase GDP but make us worse off. Likewise, many free apps (e.g. Google Maps) significantly improve our lives but don't significantly impact GDP.

This matters because the approach used to measure externalities may undervalue software engineers and teachers and overvalue defense contractors and lobbyists.

Edit: This is really important for software. Software has low marginal cost so the market price (and therefore measured GDP) trends towards 0 but the (mostly unmeasured) consumer surplus is huge.

Another Edit: Note that externalities for defense contractors and lobbyists actually weren't measured here and probably couldn't be reliably measured with this technique due to international differences, but they made great examples for my explanation.