# How Does GDP Differ From NNW as an economic measure?

When people talk about the size of an economy, they often refer to the GDP or changes to it, but seldom refer to the Net National Wealth. Obviously there are some superficial differences:

1. GDP is Gross not Net
2. GDP is Domestic not National (Within borders vs. owned by citizens)
3. GDP is $\Delta$Capital whereas NNW is theoretically all the capital stock owned by a country's citizens.

It appears the US switched from publishing GNP to GDP relatively recently (~1970), which seems like a less direct measure of its citizens economic welfare, but even that seems like an already abstracted measure from NNW.

So again, what are the differences between the two measures as economic indices that makes one more desirable (or at least discussed) than the other.

• Maybe you could provide a reference to the definition of "Net National Wealth." I think that would help improve the question. – jmbejara Oct 21 '15 at 1:57
• NNW sounds like a stock while GDP is a flow. – BKay Dec 19 '15 at 22:54
• @BKay and how that makes GDP a better measure of the size of an economy, as OP asked? I think I just asked the very same question here: economics.stackexchange.com/questions/12919/… (my question contains some more references to definitions and a very simple example so maybe it can be better discussed there?). – jj_ Aug 3 '16 at 13:23

I cannot find any reference to a specific "Net National Wealth". But I assume that you refer to the National Wealth, in general (also called Net National Worth).

The GDP has been explained in another question, so I will not come back to it.

The National Wealth is a measure of the total wealth of a country: assets, liability, etc.

To my understanding, the main difference resides on the fact that the NW is a rather static measure, whereas the GDP focuses on the dynamic part. Some examples

• the value of a house will appear in NW, but not in the GDP;
• if you buy a product from your neighbour, the NW will stay constant, but the GDP will increase.

If a country has a high GDP, its citizens/companies should accumulate wealth, and thus the NW should increase. But as the GDP also contains movement within the country those are not reflected in the NW. A diamond is in NW, the operations to cut it is in the GDP.