The Minister of Education of Singapore recently shared a story to explain the limits of GDP (Gross Domestic Product).
“If you and I eat the dinner we cook for ourselves, there is no GDP.”
“If you exchange (trade) our dinners, suddenly there is GDP because it becomes tradable. And chances are welfare may actually drop because I may not like your cooking and you may not like mine. GDP has its limits.”
I’d like to offer a 3rd variation. If I give you the dinner I cook as a gift, and you return the favor by giving me the dinner you cook as a gift, there is no GDP but we build goodwill.
Even if I don’t like your cooking and you don’t like mine, chances are we become better friends as a result.
The market may be a great thing, but there are some things the market cannot provide.