It is certainly true that GDP-based measures are useful, clearly defined on one hand and unreliable, “narrow-minded” on the other hand. /James Sweeney, FT, 13 January 2021/
Nominal GDP is real GDP plus inflation, where both parts have a missing element. Nominal GDP fails to incorporate the real value of knowledge, at-home production, at-home services, free goods taken via the internet, all sorts of value-creation in family life from emotional intelligence to social behaviour.
Inflation is also dubious due to the sweeping mega-trends behind economic and social changes. Digitalisation means that all the former knowledge of humankind becomes available for several billion people on earth – a huge value for free. It also means that all kinds of targeted knowledge are available for education, hardly calculable in terms of a lifetime income.
GDP fails to measure the new fusion economy, where data is the most important resource for production. When consumption becomes the most valuable factor of production, all the others /capital, manpower, fossils and many more traditional factors/ lose their value.
We are still not good at measuring the transition from the old world to the world of fusions, so practically we can’t measure inflation.
Governor Matolcsy, MNB, the Central Bank of Hungary