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E U D A I M O N I A & C O
2024
GLOBAL
MACRO
ECONOMICS
INTRODUCING
GDP 2.0
(AND WHY IT
MATTERS)
Introduction
01.
Table of Contents
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 1
Discussion
05.
Key Findings
02.
Conclusion
06.
GDP and GDP 2.0
03.
Methodology
07.
Implications
04.
CONTENTS
It’s long past time to update GDP. A relic of the Industrial Age,
created in 1929, GDP isn’t computed by a mainframe. It’s a
statistic whose shortcomings are well known: it leaves out
“externalities,” or hidden costs. Today, the largest of those is
carbon, whose costs come due in the many forms of natural
disasters, catastrophes, health, mortality, crop failures,
droughts, and conflict.
Thanks to authoritative new research, the century-old
construct of GDP can now be updated for the 21st century. By
adjusting for carbon, a truer picture of our economies
emerges. What’s revealed when we subtract the costs of
carbon from the old calculus of growth?
This groundbreaking new figure—GDP 2.0—reveals a
dramatically different portrait of the global economy, and the
national ones which compose it. In real terms, including the
costs of carbon, no longer ignoring them, economies are
shrinking. This picture of negative growth is at the heart of the
what’s coming to be called an age of “polycrisis” or
“permacrisis.”
GDP 2.0 carries implications for decision-makers of all kinds.
For governments, it emphasizes the scale and scope of the
need to transform economies. Business leaders will want to
focus on its profound implications for consumer behavior and
value creation. Leaders of all kinds can use it to trace currents
of breakdown now beginning to flow through the world.
INTRODUCTION GDP is the linchpin of our economies. In
this report, we introduce the first
carbon-adjusted GDP. This figure, a new
foundation and lens, reveals a
dramatically different portrait of our
world and civilization.
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 2
Adjusting GDP for carbon for the first time, a
starkly different portrait of the global
macroeconomy is revealed. GDP shrinks
dramatically. Growth is stagnant or negative.
Output losses are significant. The
implications for business, politics, and society
are severe.
Global GDP shrinks by 8%, adjusting for carbon
01 Adjusting GDP for carbon emissions, the global economy shrinks from
$105 trillion, to $97 trillion. The output loss of carbon is an immense
7.5% of global GDP.
The global economy is shrinking, not growing
02 The growth rate of GDP in 2023 was 3%. But in real, carbon-adjusted
terms, global growth was stagnant or negative. Stagnation and
shrinking growth spells lost decades of opportunity and points to
long-term challenges for the world and civilization.
The paradigm of global prosperity is failing
03 Adjusting for carbon, global growth is stagnant or negative. The old
paradigm of growth is failing. Real global economic stagnation fails to
lift living standards, and produces a range of negative outcomes, from
social fracture, to downward mobility, to political destabilization, social
fragmentation, and risk cascades.
KEY FINDINGS
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 4
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 5
GDP GDP 2.0
In Dollars $105 trillion $97.5 trillion
Growth, 2023
(averaged)
4% 0 to -4%
Growth, 2024
(estimated)
3% 0 to -5%
GDP is how we measure economic performance, at global
and national levels. Here, we adjust it for carbon for the first
time, by subtracting the social cost of carbon, developing a
new indicator: GDP 2.0. Below, we report GDP, versus our
new estimate and indicator of GDP 2.0. Clear, concrete, and
highly significant differences emerge. The global economy
is on the order of 10% smaller, and growth is wiped out.
GDP AND GDP 2.0
Zero-sum strategies and mindsets emerge
01 Stagnant growth means that zero-sum strategies—for
me to win, you must lose—become pervasive. It should
be intuitive why: stagnation rules out “all of us winning.”
Adjusting GDP for carbon for the first time
reveals a starkly different, truer portrait of the
economy.
IMPLICATIONS
A portrait of a stagnant global economy, dramatically smaller in size, is revealed,
when we adjust GDP for carbon—and one that’s shrinking dramatically, not
growing. While the differences in size and magnitude may initially seem marginal,
the implications for business, politics, and society are severe. A threshold of
diminished possibility is being crossed, and a turning point is being hit.
Tensions and conflict rise
02 Zero-sum strategies and mindsets produce conflict, and
rule out cooperation. Seen everywhere from politics to
governance to class to identity
A vicious cycle of destabilization emerges
03 Just as growth is a virtuous circle, so stagnation is a vicious
cycle. Conflict and tension reduce investment,
productivity, trade, governance, and spark malinvestment,
anxiety, and pessimism instead.
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 7
GDP 2.0 is still an underestimate
01 This new estimate of GDP is still incomplete. It leaves out
many forms of externalities, or hidden costs, from human
to planetary ones, which we’ll continue to update and
include.
What direction does GDP 2.0 point us in, and
what does it tell us about the future?
DISCUSSION
In this report, we provided a new estimate of GDP, updated for the 21st century. We
adjusted GDP for the biggest “externality,” or uncounted cost, in the economy,
carbon emissions, to arrive at GDP 2.0. GDP 2.0 is shrinking dramatically, not
growing, pointing to paradigmatic, long-run failures in our civilization’s model of
prosperity.
Negative growth is an underestimate, also.
02 As we gain a truer picture of how costly mega-scale
climate impacts are, the social cost of carbon will rise, and
even these estimates will rise in magnitude.
These are preliminary estimates of
magnitudes
03 This is a new field of research, and our estimates are
preliminary. They’re about magnitudes, not precise
decimal places, which is why we’ve given ranges.
Damage functions from a range of future climate
catastrophes are evolving quickly, and we’ll provide finer
estimates of GDP 2.0 in future reports.
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 7
Paradigmatic change is now existential
01 The old model of growth no longer works. This is
empirically demonstrated for the first time. Human
civilization has reached a paradigmatic turning point.
What does a starkly different portrait of a
smaller global economy that’s stagnant or
negative, mean? The paradigm is failing.
CONCLUSIONS
Every age and civilization has a paradigm of prosperity. Ours is now obsolete.
Having crossed the point of sharply diminishing returns, it produces only
stagnation or negative growth now. That macroeconomic trend will continue,
social, political, and economic destabilization following in its wake, until there’s
deep transformation towards creating a true long-term civilizational surplus.
Each aspect of the paradigm must change
02 The old paradigm now only produces stagnation. None of
its aspects will continue working as business as usual:
consumption, marketing, finance, risk, management.
The civilizational challenge is real
03 We provide empirical proof of a civilizational challenge.
Stagnant or negative growth means our civilization’s
surplus is shrinking. Zero-sum destabilization will
accelerate, until we cross the threshold back into true
surplus.. Businesses, societies, and institutions that don’t
make this transition will stagnate and die.
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 7
How did we arrive at our estimate of GDP
2.0? We utilize a generally accepted
method, and new estimates of social costs,
to update Green National Accounting.
National
Accounting
The Weitzman Method of National
Accounting subtracts externalities
from growth, to arrive at a truer
picture. This is a generally accepted
method amongst economists.
Links & Bibliography:
Comprehensive evidence implies a higher social cost of CO2
Green National Accounting
METHOD
Calculation We utilize an authoritative new peer-
reviewed estimate of the social cost per
ton of carbon, published in Science,
detailed below, and adjust GDP, using
the method above.
Validation This method has been validated widely,
utilized by figures like Nobel Laureate
William Nordhaus, as a way of
adjusting National Accounts to arrive
at more accurate estimates.
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 8
ACKNOWLEDGEMENTS This report builds on the groundbreaking work of figures like Simon
Kuznets, the inventor of GDP, John Maynard Keynes, whose insights built
the modern economy, Amartya Sen, whose critique of utilitarianism
provoked a new direction in social science, William Nordhaus, climate
scientists, earth scientists, and many, many more.
We deeply appreciate your continued
support and involvement.
Thank you for reading!
CONTACT
Eudaimonia & Co
New York / Paris
http://www.eand.co
info@eand.co
E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 9
Umair’s diary
http://www.theissue.io
umairhaque@gmail.com

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Global Macroeconomics: Introducing GDP 2.0.pdf

  • 1. E U D A I M O N I A & C O 2024 GLOBAL MACRO ECONOMICS INTRODUCING GDP 2.0 (AND WHY IT MATTERS)
  • 2. Introduction 01. Table of Contents E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 1 Discussion 05. Key Findings 02. Conclusion 06. GDP and GDP 2.0 03. Methodology 07. Implications 04. CONTENTS
  • 3. It’s long past time to update GDP. A relic of the Industrial Age, created in 1929, GDP isn’t computed by a mainframe. It’s a statistic whose shortcomings are well known: it leaves out “externalities,” or hidden costs. Today, the largest of those is carbon, whose costs come due in the many forms of natural disasters, catastrophes, health, mortality, crop failures, droughts, and conflict. Thanks to authoritative new research, the century-old construct of GDP can now be updated for the 21st century. By adjusting for carbon, a truer picture of our economies emerges. What’s revealed when we subtract the costs of carbon from the old calculus of growth? This groundbreaking new figure—GDP 2.0—reveals a dramatically different portrait of the global economy, and the national ones which compose it. In real terms, including the costs of carbon, no longer ignoring them, economies are shrinking. This picture of negative growth is at the heart of the what’s coming to be called an age of “polycrisis” or “permacrisis.” GDP 2.0 carries implications for decision-makers of all kinds. For governments, it emphasizes the scale and scope of the need to transform economies. Business leaders will want to focus on its profound implications for consumer behavior and value creation. Leaders of all kinds can use it to trace currents of breakdown now beginning to flow through the world. INTRODUCTION GDP is the linchpin of our economies. In this report, we introduce the first carbon-adjusted GDP. This figure, a new foundation and lens, reveals a dramatically different portrait of our world and civilization. E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 2
  • 4. Adjusting GDP for carbon for the first time, a starkly different portrait of the global macroeconomy is revealed. GDP shrinks dramatically. Growth is stagnant or negative. Output losses are significant. The implications for business, politics, and society are severe. Global GDP shrinks by 8%, adjusting for carbon 01 Adjusting GDP for carbon emissions, the global economy shrinks from $105 trillion, to $97 trillion. The output loss of carbon is an immense 7.5% of global GDP. The global economy is shrinking, not growing 02 The growth rate of GDP in 2023 was 3%. But in real, carbon-adjusted terms, global growth was stagnant or negative. Stagnation and shrinking growth spells lost decades of opportunity and points to long-term challenges for the world and civilization. The paradigm of global prosperity is failing 03 Adjusting for carbon, global growth is stagnant or negative. The old paradigm of growth is failing. Real global economic stagnation fails to lift living standards, and produces a range of negative outcomes, from social fracture, to downward mobility, to political destabilization, social fragmentation, and risk cascades. KEY FINDINGS E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 4
  • 5. E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 5 GDP GDP 2.0 In Dollars $105 trillion $97.5 trillion Growth, 2023 (averaged) 4% 0 to -4% Growth, 2024 (estimated) 3% 0 to -5% GDP is how we measure economic performance, at global and national levels. Here, we adjust it for carbon for the first time, by subtracting the social cost of carbon, developing a new indicator: GDP 2.0. Below, we report GDP, versus our new estimate and indicator of GDP 2.0. Clear, concrete, and highly significant differences emerge. The global economy is on the order of 10% smaller, and growth is wiped out. GDP AND GDP 2.0
  • 6. Zero-sum strategies and mindsets emerge 01 Stagnant growth means that zero-sum strategies—for me to win, you must lose—become pervasive. It should be intuitive why: stagnation rules out “all of us winning.” Adjusting GDP for carbon for the first time reveals a starkly different, truer portrait of the economy. IMPLICATIONS A portrait of a stagnant global economy, dramatically smaller in size, is revealed, when we adjust GDP for carbon—and one that’s shrinking dramatically, not growing. While the differences in size and magnitude may initially seem marginal, the implications for business, politics, and society are severe. A threshold of diminished possibility is being crossed, and a turning point is being hit. Tensions and conflict rise 02 Zero-sum strategies and mindsets produce conflict, and rule out cooperation. Seen everywhere from politics to governance to class to identity A vicious cycle of destabilization emerges 03 Just as growth is a virtuous circle, so stagnation is a vicious cycle. Conflict and tension reduce investment, productivity, trade, governance, and spark malinvestment, anxiety, and pessimism instead. E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 7
  • 7. GDP 2.0 is still an underestimate 01 This new estimate of GDP is still incomplete. It leaves out many forms of externalities, or hidden costs, from human to planetary ones, which we’ll continue to update and include. What direction does GDP 2.0 point us in, and what does it tell us about the future? DISCUSSION In this report, we provided a new estimate of GDP, updated for the 21st century. We adjusted GDP for the biggest “externality,” or uncounted cost, in the economy, carbon emissions, to arrive at GDP 2.0. GDP 2.0 is shrinking dramatically, not growing, pointing to paradigmatic, long-run failures in our civilization’s model of prosperity. Negative growth is an underestimate, also. 02 As we gain a truer picture of how costly mega-scale climate impacts are, the social cost of carbon will rise, and even these estimates will rise in magnitude. These are preliminary estimates of magnitudes 03 This is a new field of research, and our estimates are preliminary. They’re about magnitudes, not precise decimal places, which is why we’ve given ranges. Damage functions from a range of future climate catastrophes are evolving quickly, and we’ll provide finer estimates of GDP 2.0 in future reports. E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 7
  • 8. Paradigmatic change is now existential 01 The old model of growth no longer works. This is empirically demonstrated for the first time. Human civilization has reached a paradigmatic turning point. What does a starkly different portrait of a smaller global economy that’s stagnant or negative, mean? The paradigm is failing. CONCLUSIONS Every age and civilization has a paradigm of prosperity. Ours is now obsolete. Having crossed the point of sharply diminishing returns, it produces only stagnation or negative growth now. That macroeconomic trend will continue, social, political, and economic destabilization following in its wake, until there’s deep transformation towards creating a true long-term civilizational surplus. Each aspect of the paradigm must change 02 The old paradigm now only produces stagnation. None of its aspects will continue working as business as usual: consumption, marketing, finance, risk, management. The civilizational challenge is real 03 We provide empirical proof of a civilizational challenge. Stagnant or negative growth means our civilization’s surplus is shrinking. Zero-sum destabilization will accelerate, until we cross the threshold back into true surplus.. Businesses, societies, and institutions that don’t make this transition will stagnate and die. E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 7
  • 9. How did we arrive at our estimate of GDP 2.0? We utilize a generally accepted method, and new estimates of social costs, to update Green National Accounting. National Accounting The Weitzman Method of National Accounting subtracts externalities from growth, to arrive at a truer picture. This is a generally accepted method amongst economists. Links & Bibliography: Comprehensive evidence implies a higher social cost of CO2 Green National Accounting METHOD Calculation We utilize an authoritative new peer- reviewed estimate of the social cost per ton of carbon, published in Science, detailed below, and adjust GDP, using the method above. Validation This method has been validated widely, utilized by figures like Nobel Laureate William Nordhaus, as a way of adjusting National Accounts to arrive at more accurate estimates. E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 8
  • 10. ACKNOWLEDGEMENTS This report builds on the groundbreaking work of figures like Simon Kuznets, the inventor of GDP, John Maynard Keynes, whose insights built the modern economy, Amartya Sen, whose critique of utilitarianism provoked a new direction in social science, William Nordhaus, climate scientists, earth scientists, and many, many more. We deeply appreciate your continued support and involvement. Thank you for reading! CONTACT Eudaimonia & Co New York / Paris http://www.eand.co info@eand.co E U D A I M O N I A & C O | I N T R O D U C I N G G D P 2 . 0 0 9 Umair’s diary http://www.theissue.io umairhaque@gmail.com