To think that the total measured value of goods and services produced each year in the United States is approximately $14 trillion is astounding. What is more astounding than that?
That if we take the vast amount of empirical evidence on what a statistical life is worth here in the United States seriously – that the average value of a life is about $7 million – you can draw some pretty startling inferences from it. For example, there are about 305 million people in the U.S. Therefore, the total value of the lives in the U.S. is about $2.14 quadrillion. That’s a thousand trillion! Note that this is a stock while GDP is a flow. More on this below.
- If you look to the US flow of funds data and a few other sources, you would come up with an estimate of the total value of physical and financial wealth in the United States to be somewhere between $50 and $100 trillion (I am guessing here). In other words, even estimating on the high end for the value of phyiscal wealth … the value of the lives and minds of human beings in America, as measured, is over twenty times greater than the value of physical objects.
- If we take an extremely conservative estimate on what the typical rate of return that should be produced by an asset in the long run as five percent, then an asset worth $2.14 quadrillion should be able to generate annual output of around $100 trillion. But as measured, we see that US GDP is only around 1/7th of this amount!
- Where does all this lost potential go? Well, not every person in America is capable of producing at full capacity – in fact, roughly half are – so this might explain much of the difference. An additional chunk of the difference is likely due to measured GDP not fully capturing the extent and value of all activity generated by these 305 million people. As cynical as I tend to me, this seems to be the most likely reason for the difference … the dead weight losses and outright costs imposed by government policies probably matter … but how much I cannot say.
When one pauses to reflect on this, it becomes even clearer what Julian Simon meant when he argued that the Ultimate Resource was human beings and their capability for reason, ingenuity, discovery and innovation. These numbers surely would have impressed even him.