10% of GDP is fiction

Everyone is told that economic growth is the key to prosperity.

But what if a significant part of GDP, the number politicians obsess about, is based on a transaction that never actually happens?

Around 10% of UK GDP is made up of something called “imputed rent.” This is the imaginary rent homeowners are assumed to pay themselves for living in their own homes.

No money changes hands.

No market transaction takes place.

But the figure still appears in national income statistics.

In this video, I explain:

• why imputed rent exists in national accounts
• why around £275 billion of UK GDP is based on this assumption
• why GDP ignores huge amounts of real value creation such as childcare, care work and volunteering, and
• why building economic policy around GDP growth is deeply misleading.

If GDP counts invented transactions but ignores real work that keeps society functioning, we need to ask a serious question:

Why do we treat GDP growth as the ultimate measure of economic success?

Let me know your thoughts in the comments.