Does GDP Matter?

Stanford economist Bob Hall says "not really":

When I raised this question with Bob Hall, a top-notch economist at Stanford University (who also serves as chairman of the NBER Business Cycle Dating Committee), he wrote back in an email:

Our command over resources in the world is measured by our real income, not real GDP. Improved terms of trade--cheaper imports--raises our real income even if it does not affect productivity or output. This is the difference between the GDP deflator, which does not respond to import prices, and the consumption deflator, which falls when imports cheapen. Real income is national income divided by the consumption deflator.

And what I asked him what the goal of economic policy should be, his response:

We should maximize the present value of real income

...

Now, I understand the logic, and I intend to write a piece exploring this perspective for BW (which certainly puts a different spin on the cover). But boy, after 18 years at BW writing about real GDP growth and domestic productivity growth as the appropriate benchmarks for economic policy, I'm left scratching my head a bit.

Comments?

Update: Bob's comment on reading the item: "It's just as important to give US consumers access to cheap foreign goods as it is to make real GDP bigger."

Tyler Cowen says that we should forget this sentiment; I'm not exactly sure why, and he doesn't expound. (Maybe it's because when we try to forget something, we actually reinforce it, and Dr. Cowen wants us all to learn a lesson.)