An Alternative to GDP

The concept of True Economic Output or TEO is borne out of observing inadequacy and misleading nature of the oft-used economic indicator, Gross Domestic Product or GDP. 

By definition, the GDP provides a product of all the goods and services transacted within an economy. With this method, it contains exchange of money not necessarily leading to production of any tangible goods or service. TEO tries to overcome this issue, by considering only those activities which have a tangible value addition as an output of the economy. 

A careful re-categorization of industry activities which are used in compilation of GDP by Production Activities provides a clearer picture of the real economic activity conducted by individual economies, while ignoring non-productive or circulatory nature of transactions accounted for in the GDP. 

As the level of financialization and the amount of circulatory transactions increase, the level of TEO provides a more honest indication of economic strength. As is normal, all the analysis, observations and decisions made based on GDP would need a rework considering TEO as a better and truthful indicator of economic output.

A total of fifty economies form part of this study to provide information on their TEOs and its growth rates. The calculation of TEO reveals the share of true economic activities within the GDP and provides multiple opportunities to compare these economies with each other, with their GDP in addition to comparison of various growth rates. 

The TEO is also stated in terms of tons of Gold, as an inflation-proof unit of measure, to provide a reference against the norm of stating the numbers in US Dollars.

As the study reveals that the actual TEO is significantly smaller than the GDP and its growth rates have significant variation compared to the GDP growth rates, a new reference point emerges to measure economic output and its growth instead of conventional measure of GDP.

As a concept, the TEO is an attempt to understand the real economic activities conducted in an economy to measure its strengths and weaknesses, as an alternative to GDP.