Have You

Wondered What
GDP Means?
An introduction to diagrams of the UK economy
using Arups 7see model

Foresight + Research + Innovation

This booklet is a product of Arup Foresight + Research + Innovation (FRI).

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driversofchange.com

Have You
Wondered What
GDP Means?
An introduction to diagrams of the UK economy
using Arups 7see model

Simon Roberts

Author: Simon Roberts

Design: Elisa Magnini
Picture editors: Felicitas zu Dohna, Daniel Imade

This publication is made available under a Creative Commons Attribution No Derivatives 4.0 International license (CC-BY-ND 4.0). The license covers
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Contents

Introduction

Jobs, energy and economic volume flows

11

Transport

21

Population and jobs

27

Balance of payments

33

A digital copy can be downloaded for free at www.arup.com/gdp.

Insights

39

This booklet should be cited as:

S.H. Roberts (2014). Have you ever wondered what GDP means?, Arup,
London, ISBN 978-0-9562121-8-4

Further information

42

For the photos listed on page 35, either their authors have given permission
only to include their work here and not to share it under a Creative Commons
license, or the individual license differs from the one used in the overall
publication. If you are interested in using their photos, please contact these
authors directly.
While this publication intends to provide accurate and authoritative
information in regard to the subject matter covered, neither the publisher
nor the author makes any representation, express or implied, with regard
to the accuracy of information contained in this booklet, nor do they accept
legal responsibility or liability for any errors or omissions that may be made.

Published by Ove Arup & Partners Ltd,

13 Fitzroy Street, London W1T 4BQ, UK
Copyright July 2014 Arup
ISBN 978-0-9562121-8-4 (pbk)
ISBN 978-0-9929501-0-1 (ebk)

Introduction

Few understand
how GDP is defined
and what exactly
it describes

GDP (gross domestic product) is probably the most

well-known economic statistic. It is a highly effective
measure of economic activity giving insight into a
countrys economy and enabling comparison with
other countries. On the other hand, GDP is also
viewed by many as a poor measure of the standard
of living or welfare. Yet few understand how GDP is
defined and what exactly it describes.
Starting from a tangible perspective, consider a
birds eye view of a country. Much of what is visible
has economic relevance. A sea border delineates
part of an economys limit, with the import and
export trade of goods focused at ports. Next to
these docklands might be manufacturing, large and
small. Progressing into the town where many people
work will be offices, retail outlets and other types of
services. Around the urban centre will be the suburbs
of housing. Beyond this, stretching across the
country will be rural areas for agriculture, resources,
recreation and transport networks.
Just as maps effectively capture the physical
geography, this booklet introduces a set of maps to
unpick the components of GDP. The tool for this is
Arups 7see framework - a methodology for handling
data about a country. It provides maps for reading
many aspects of how an economy works. It marries
resources, the built environment, goods, services,
international money transactions and people. This
framework is innovative in both its format and the
way it provides insights.

Foresight + Research + Innovation

While a birds eye view is good for appreciating the

overall capacity and constraints of an economy,
we also need to capture the detail. After all, a
people perspective is what we each experience. A
microcosm of an economy might be a farmer, first
growing produce then becoming a retailer as he
works at his own market stall, interfacing directly
with the consumer, his customers. The challenge is
to capture this spectrum.

7see Sankey
diagrams provide
both an overall
picture and
close-up views

The maps introduced in this booklet are actually

Sankey diagrams in which line widths are
proportional to the volume of flows. These 7see
Sankey diagrams provide both an overall picture and
close-up views in detail of any particular flow. They
also map relationships. While energy flows are often
represented by Sankey methods, extending this
approach to the economy and balance of payments
is novel.
Four 7see Sankey diagrams are introduced in this
booklet with data from the UK economy for 2011.
Jobs, energy and economic volume flows
Transport
Population and jobs
Balance of payments
Each diagram has an explanation on a fold-out flap
that can be read alongside the graphic. The booklet
can also be used as a learning resource by folding
closed the explanation to reveal a list of questions.

Have You Wondered What GDP Means?

Foresight + Research + Innovation

Jobs, energy and

economic volume flows

Fixed capital
within the economy
is where inputs
are converted
to outputs
electricity
from
combustion
manufacturing

nuclear &
renewables

construction

The 7see approach to representing the economy

begins by considering the built environment and
other physical assets. Formally known as fixed
capital, they are an important starting point because
they are constrained in some way: they take time to
create, they are expensive to build and they are tied
to a location or are long lived. Along with buildings
and structures, fixed capital also consists of plant,
machinery and transport equipment.
The main role of fixed capital within the economy
is that it is where inputs are converted to outputs;
in other words, the process of production. The
photos opposite are examples of fixed capital.
Power generation consists of power stations which
convert fuel inputs to electricity. Manufacturing
industry produces goods. Construction industry
consists of construction equipment. Service industry
is a broad grouping, including distribution, hotels,
communications, finance, public administration,
defence, education, health and social work.
In the 7see Sankey diagrams on the following pages,
all fixed capital is represented by yellow boxes
with Sankey lines entering and leaving. Also shown
opposite is an excerpt from the Sankey diagrams of
how these examples of fixed capital appear. (There is
no significance to the dimensions of the boxes.)

service
industry

The next pages introduce Sankey line concepts for

economic volume flows, energy and jobs.
p. 14

10

Foresight + Research + Innovation

11

IMPORTS

EXPORTS
UK trading border

The Sankey diagram opposite shows all the fixed

capital (the yellow boxes) of an economy divided into
six industry groupings and dwellings. Sankey lines
represent what are called economic volume flows,
a good way to quantify goods and services. Their
source, called gross value added (GVA), is always
from fixed capital. GVA is represented by lines
emerging from the fixed capital boxes. Their total is
the output form of GDP.

agriculture

agriculture

extraction

utilities

intermediate

goods

Economic volume
flows are a good
way to quantify
goods and services

consumption
tax

distribution
& retail

manufacturing

manufacturing

tax

construction

service
industry

tax

Industries supply each other through intermediate

consumption. Timber is GVA of agriculture
and its input for goods is part of the line linking
agriculture to manufacturing. Iron ore and other
extracted resources are the line linking extraction
to manufacturing for processing. Intermediate
consumption is significant between the three larger
industries, so they each have a pair of boxes: GVA
emanates from the left boxes; inputs from other
industries enter the right boxes. They are enclosed
within a dashed box to emphasise that they dont
represent the actual sequence of production
processes at this point. The usual format elsewhere
for intermediate consumption data is as an inputoutput matrix, so the diagrammatic Sankey form here
makes the relative sizes of flows more evident.

final
supply

goods

service
industry

construction
services

services

GDP & imports

construction

rental

dwellings

inputs

The outer rectangle is the system boundary of

the countrys trading border. Imports enter on the
left and merge with domestically-produced GVA.
All flows are measured in money units, inflation
corrected to a reference year for comparison
between years. Imports and GVA are at basic
prices.

Products on the right are in their finished form and

measured at purchasers prices. The Sankey
lines make clear the upstream inclusion of tax on
products and contributions from other industries.
For goods at the point of final demand, a significant
contribution is distribution & retail.

finished products

KEY economic volume flows (100b[1990]/y)

imports at basic prices

gross value added (GVA) at basic prices

The expenditure form of GDP augmented by imports

is the total at the point marked final supply.

final supply at purchasers prices

agriculture

agriculture

goods

goods

goods

extraction

construction

construction

services

utilities

services

services
rental (actual + imputed)

12

Foresight + Research + Innovation

13

IMPORTS

EXPORTS
UK trading border

UK trading border

The more common application of Sankey lines for

flows from left to right are a countrys use of energy.
These are shown opposite as inputs to the fixed
capital yellow boxes introduced earlier for industry
groupings and dwellings.

agriculture

agriculture
crude
oil
refining

extraction

extraction

utilities

utilities

petroleum
products transport

other

Just as energy is
an input, so labour
can be considered
as an input

other
electricity
from
combustion
coal

nuclear &
renewables

manufacturing

manufacturing

other

construction

service
industry

other

All the energy Sankey lines are in energy units. The

key at the bottom details a different unit name for
electricity but it is equivalent in size so that the
energy loss as heat at electricity from combustion
is evident.

service
industry

Just as energy is an input, so labour can be

considered as an input to the fixed capital of
production. This is shown opposite in units of
millions of the economically active population, as
defined in the later section, Population and jobs.

jobs

dwellings

dwellings

As with economic volume flows in the diagram

introduced earlier, the outer rectangle represents the
extent of the whole economy. Flows crossing this are
imports of fuels and export of petroleum products.
Whereas the GVA source of economic volume flows
is shown earlier as emerging from fixed capital
boxes, the fixed capital for domestic extraction of
fossil fuels is simply shown here by square brackets.

gas
construction

Important points for energy transformation are

refining for crude oil to petroleum products
and electricity from combustion. The types of
fixed capital for these are oil refineries (part of
manufacturing) and power generation (part
of utilities).

The Sankey formats shown here could be extended

to other inputs, such as water, steel and cement.

products

products

inputs
KEY

energy (500 PJ/y)

crude oil

inputs
energy (200 TWh/y)
electricity

KEY

people (10 million)

jobs

petroleum products
coal
natural gas

14

Foresight + Research + Innovation

15

IMPORTS

EXPORTS
UK trading border
petroleum
products
(net)

agriculture

agriculture

extraction
crude
oil

refining

crude oil
(net)

petroleum products

transport

The Sankey lines introduced earlier of jobs, energy and

economic volume flows all relate to the same set of fixed
capital. Therefore they are combined here into one diagram.
Products and jobs start as inputs on the left and progress
via production at fixed capital to finished forms on the right.

utilities

other

investment
intermediate

goods

For the three larger industries, inputs for production into

their left-hand boxes are imports, energy and jobs, and into
their right-hand boxes are their intermediate consumption of
other industries products, which include raw materials.

consumption
tax

other
coal (net)
coal

electricity
from
combustion

distribution
& retail

manufacturing

nuclear &
renewables

Introduced here are extensions of the Sankey lines at final

supply further to the right as lines of final demand. One
final destination for products is by households. Their own
purchase is called household consumption. Households
also benefit from NPISH (non-profit institutions serving
households) and government services, so these are
also components of final demand. Another destination
for products is as exports, which are shown on the right
crossing the system boundary of the economy.

manufacturing

tax

gas
construction

other

final
supply

construction

final
demand

household
consumption

service
industry

tax

goods

service
industry

construction

jobs

services

services

GDP & imports

gas (net)
other

Jobs, energy and economic volume flows

NPISH

rental
government
dwellings
agriculture
goods
services

The remaining component of final demand is investment,

the only flow going back to the left. Fixed capital has to
be maintained, replaced and increased. While referred
to here as investment, its formal name is gross fixed
capital formation (GFCF). It consists of Sankey lines from
manufacturing, construction and service industries that
evolve into a single blue line, simply for clarity, before blue
lines enter each of the fixed capital boxes for the industries
and dwellings.
This Sankey diagram provides a high-level view of the
significant relationships from inputs through to final demand
with investment doubling back to fixed capital. It is an
integration of different flows involving a mixture of units
which are fully detailed in the key.

products
inputs

KEY

finished products

energy (500 PJ/y)

crude oil

economic volume flows at

basic prices (100b[1990]/y)
electricity (200 TWh/y)

petroleum products
coal
natural gas

16

jobs (10 million)

economic volume flows at purchasers prices (100b[1990]/y)

extraction

goods

agriculture

goods

construction

utilities

construction

services

investment

services

rental (actual + imputed)

17

IMPORTS

EXPORTS
UK trading border
petroleum
products
(net)

Jobs, energy and

economic volume
flows

agriculture

agriculture

extraction
crude
oil

refining

crude oil
(net)

petroleum products

transport

utilities

other

Which industry is the largest

employer?

investment
intermediate

goods

consumption

What proportion of total

coal used in the country is
imported?

tax
other
coal (net)
coal

electricity
from
combustion
manufacturing

nuclear &
renewables

What is (crude) oil used for?

distribution
& retail

manufacturing

Is the UK self-sufficient in
petroleum products?

tax

gas
construction

other

final
supply

construction

final
demand

household
consumption

gas (net)
tax

goods

service
industry

construction

jobs

services

services

Which is highest volume

export out of agriculture,
goods and services?

GDP & imports

service
industry

other

What is the ratio of goods

manufactured to imports?

NPISH

rental
government

Which industry requires

the most infrastructure
investment?
What proportion of the final
supply
of services is tax on
agriculture
products?
goods

dwellings

services

If consumers (households)
buy fewer goods, how is
employment affected?
products
inputs

KEY

finished products

energy (500 PJ/y)

crude oil

economic volume flows at

basic prices (100b[1990]/y)
electricity (200 TWh/y)

petroleum products
coal
natural gas

18

jobs (10 million)

economic volume flows at purchasers prices (100b[1990]/y)

extraction

goods

agriculture

goods

construction

utilities

construction

services

investment

services

rental (actual + imputed)

19

Transport
Transport is a key function within any economy.
Major modes are illustrated opposite. For passenger
transport they range from private cars through public
transport by bus and rail to air. For freight they range
from light vans through heavy goods vehicles and rail
to marine.

Fixed capital
of transport
equipment
converts energy
into travel

Some economic volume flows in the first 7see

Sankey diagram include transport services, such
as distribution and vehicle leasing by the service
industry. Transport equipment is also one of the
types of the fixed capital that make up industries.
However the full role of transport in an economy is
difficult to extract from economic volume flow data
alone. Also private vehicles are not normally included
in the measure of fixed capital of an economy.
Since transport is important, it is represented by its
own 7see Sankey diagram on the following page. This
takes a physical perspective. As with the earlier 7see
Sankey diagram, the starting point is fixed capital
of transport equipment which converts energy into
travel. While transport equipment is long-lived and
expensive to create, it clearly differs from buildings,
structures, plant and machinery introduced earlier in
not being fixed in position.

Foresight + Research + Innovation

21

PASSENGER

vehicle-km/y

car & taxi

refining

petroleum products

transport

bus & coach

passenger-km/y

rail

passenger-km/y

domestic
air

passenger-km/y

other

p. 16

international
air

petroleum
products

passenger-km/y

Transport
This 7see Sankey diagram maps the major transportation
types that need fuel inputs (thus excluding walking and
cycling). The Sankey diagram begins on the left with volume
flows of energy use and can be thought of as progressing
to the right via means of transportation to the delivery
of mobility.
The fuels shown here for the UK economy are mainly
petroleum products with a little electricity. Their sources
are shown earlier in the Sankey diagram of jobs, energy
and economic volume flows. LPG (liquefied petroleum gas)
and biofuels are too small in UK use to include here. Some
economies also use CNG (compressed natural gas).

FREIGHT
vehicle-km/y

van (LGV)

vehicle-km/y
electricity
truck (HGV)

tonne-km/y

tonne-km/y

rail
military air
domestic
marine

tonne-km/y

The yellow boxes represent all the fixed capital of vehicles.

(There is no significance to their dimensions.) They are
grouped according to whether they serve passengers
or freight.
The formats for quantifying mobility (on the right side) are
varied having been selected according to relevance and
the availability of robust data. For travel by car & taxi,
the annual motor test ensures an accurate record of total
travel of the entire car fleet. Thus the output mobility of this
mode is vehicle-km/y. passenger-km/y is not used since
actual occupancy data is more difficult to assess and is less
reliable than purely vehicle travel.
For freight carried on the roads, data of tonne-km/y is
collected for trucks (heavy goods vehicles, HGV) but not
for vans (light goods vehicles, LGV). Data for international
marine freight specifically associated with the UK has not
yet been sourced.

international
marine

transport
energy

KEY

22

petroleum
products (500 PJ/y)

mobility

electricity
(200 TWh/y)

vehicle travel
(50 G vehicle-km/y)

passenger travel
(50 G passenger-km/y)

freight travel
(50 G tonne-km/y)

23

PASSENGER

vehicle-km/y

car & taxi

refining

petroleum products

transport

bus & coach

passenger-km/y

rail

passenger-km/y

domestic
air

passenger-km/y

other

p. 16

international
air

petroleum
products

passenger-km/y

FREIGHT
vehicle-km/y

van (LGV)

vehicle-km/y

Transport
Which form of transport uses
electricity?
Which form of transport is
the largest user of petroleum
products?
For public transport on land,
which type carries the most
passenger-km?
Between the two types of road
freight vehicles, which covers
the most vehicle-km?
How is most freight carried?

electricity
truck (HGV)

tonne-km/y

tonne-km/y

rail
military air
domestic
marine

tonne-km/y

international
marine

transport
energy

KEY

24

petroleum
products (500 PJ/y)

mobility

electricity
(200 TWh/y)

vehicle travel
(50 G vehicle-km/y)

passenger travel
(50 G passenger-km/y)

freight travel
(50 G tonne-km/y)

25

Population and jobs

This section covers the population of the economy
and how its activities are categorised.

Households are
defined as the
consuming unit

In the diagrams earlier, the starting point is fixed

capital. Here the relevant fixed capital is dwellings.
Shown opposite are examples, from a detached and
terraced houses to an apartment block.
Dwellings are occupied by households which are
defined as the consuming unit under the international
System of National Accounts (SNA). Examples of
households are shown opposite. According to the
ONS (Office for National Statistics) in the UK, a
household is one person living alone or a group of
people (not necessarily related) living at the same
address who share cooking facilities and share
a living room or sitting room or dining area. The
number of households varies over time. For instance,
it goes down when more young people tend to stay
living in their parents home, and increases when
more couples split up.
The third quantity represented opposite (in the right
column) is simply the whole population of a country.
Population has features in common with fixed capital:
it is a comparatively fixed resource and changes only
slowly over time.

Foresight + Research + Innovation

27

other industries

manufacturing

manufacturing
population

labour force
(economically active)

construction

jobs

employed

construction

service industry
dwellings

households

service
industryy

Population and jobs

This 7see Sankey diagram relates dwellings on the left
through population in the middle to jobs and other
activities on the right. Excerpts of the first Sankey diagram
in this booklet, of jobs, energy and economic volume flows,
show several points of linkage of quantities between the two
diagrams. In contrast to the other three Sankey diagrams
in this booklet, all the quantities here are stocks or status
measures; none are flows with a direction or have per-year
types of units.

unemployed

p. 16
household
consumption

economically inactive

men over 65
women over 60
under 65 retired
sick
looking after
family or home

p. 17

student

under 16
under 16

p. 17

KEY (10 million)

consuming unit

dwellings

population

rural
urban

28

households

employment or status

rural
urban

population

rural

employment

Progressing from population to the left, population can

be grouped into households. This applies to household
consumption on the far right of the first Sankey diagram.
Households reside in dwellings, which are the fixed
capital at the bottom of the first Sankey diagram. Dwellings
consume fuel and require investment for improvements as
well as to increase in number. Rental paid by households
for accommodation is one component of GDP. Note that
this rental component is the sum of actual payments made
together with imputed rental. The imputed part corresponds
to the rental value of all owner-occupier dwellings (what
they would have paid if they werent owners). This enables
comparison of GDP between countries, independent of the
proportion of owner-occupiers.

dwellings

residence

If starting at population in the Sankey diagram,

progressing to the right first meets division by age. The
next division is by whether economically active or not
for the labour force. There is then a change of unit from
employment in light green for labour force (economically
active), as sourced from household survey data, to jobs
in dark green, as reported by industries, the employers. The
industry groupings at the top right correspond to those in
the first Sankey diagram.

The rural proportion is included in some parts of the

diagram because rural areas in the UK are sometimes
disadvantaged for affordable housing, access to services
and economic opportunities.

jobs

urban

29

Population and jobs

other industries

manufacturing

manufacturing
population

labour force
(economically active)

Why are there more jobs

than employed?

construction

jobs

employed

construction

service industry
dwellings

Why is the number of

dwellings greater than
service
households?
industryy

households

What is the average

household size?

unemployed

p. 16
household
consumption

economically inactive

men over 65
women over 60
under 65 retired

Which is the largest activity/

group of the population?
Which is the larger comparing
children under 16 to older
people of men over 65,
women over 60?

sick
looking after
family or home

p. 17

Which category would

housewives come under?

student

How do the numbers

of unemployed and
economically inactive
compare in size?

dwellings
under 16
under 16

p. 17

residence

KEY (10 million)

consuming unit

dwellings

population

rural
urban

30

households

employment or status

rural
urban

population

rural

employment

jobs

urban

31

UK-owned shares in
a foreign company
(UK assets)

foreign-owned shares in
a UK-located company
(UK liabilities)

Balance of payments
This section on balance of payments is about money,
which is an important distinction from volume
measures introduced earlier.

Balance of
payments
concerns all
transactions at the
system boundary

call centre abroad

KEY

32

In contrast to volume measures, the balance of

payments concerns all transactions at the system
boundary. Examples of trade are shown opposite.
Each trade has an arrow to the right of volume
movement, the stuff itself. Its monetary transaction
is to the left. Though they are numerically equal in
size for economic volume flows, they are different
ways of viewing the trading process. This is made
clear in the case of energy where the arrow to the
right could be in energy units.

new vehicles for export

coal imports

Balance of payments can be considered as being

about ownership. While the trade part of balance
of payments covers all goods and services which
move, what is owned in non-trade doesnt move.
The examples opposite at the top are ownership
of equities (shares). At top right, a business within
the economy has a foreign buyer (a nonresident) so
funds flow into the country while the fixed capital
(the physical assets) of the business does not move.
In later years, funds flow out as dividends to the
foreign owner. At top left, funds leave the economy to
buy shares in a company abroad.

foreign tourists in the UK

funds leaving
country

coal

funds received
by country

services

goods

Economic volume flows feature in the first 7see

Sankey diagram in this booklet. Volume flows are
inflation-corrected spending on goods, services and
other outputs. Just as energy units are a good metric
for energy flows, volume metrics are a good proxy
measure for the amount of these products (goods,
services, etc.) as they progress through all the stages
of production.

Non-trade ownership also covers borrowing

and debt.

border of country
border of domestic
ownership
Foresight + Research + Innovation

33

Balance of payments
This Sankey diagram shows the monetary flows of all
transactions that make up the balance of payments (BoP).
reserve assets (net)
NON-TRADE
TRANSACTIONS
foreign located
UK owned
assets

transfers
(net)
IMPORTS

located within UK

income
receivable

foreign located
debt
securities

investment
abroad

capital
account (net)

income
receivable

lending
abroad

income
payable

petroleum
products (net)

income
payable

crude oil (net)

agriculture
& goods

EXPORTS

foreign owned

debt
securities
inward
investment

coal (net)

agriculture
& goods

balance of
payments

services

All non-trade transactions are along the top. The yellow

and grey boxes for equities represent those items of fixed
capital relevant to the BoP, with white boxes for debt
securities (mostly bonds). The focus here is on the location
and ownership of these assets. foreign owned means
the assets are physically located in the UK but the dashed
line around them designates ownership by nonresidents;
monetary transactions in red crossing the dashed lines
leave the economy. The boxes foreign located mean the
assets are abroad but under home ownership (the UK in this
example); monetary transactions in red crossing the solid
line to reach them also leave the economy. Transactions at
the bottom of these boxes correspond to their purchase or
sale (change of liability), while transactions on their sides
are income (dividends or interest) to their owners.

UK
liabilities

inward
lending

gas (net)

Compared to the first 7see Sankey diagram of jobs,

energy and economic volume flows, both diagrams have
the same outer rectangle, corresponding to the countrys
geographical border. The monetary flows here go in the
opposite direction to the volume flows (of energy, goods and
services) in the first diagram: import volumes entering from
the left in the first diagram have corresponding expenditure,
here all in red, which exit to the left; export volumes leaving
on the right in the first diagram have corresponding income,
here all in green, which enter from the right.

other
investments
(net)

services

agriculture

services
e

goods
services

trade transactions

p. 16

payable

KEY

34

(100b[1990]/y)

receivable

non-trade transactions

payable

receivable

trade transactions

imports

exports

p. 17

other investments (net) from the BoP financial account

are mainly intra-bank transactions across national borders.
reserve assets (net) vary between inward and outward
from year to year.
The remaining components of non-trade transactions
are one way. They include foreign aid and remittances by
foreign workers back to their own countries.

35

Balance of payments
What are the three largest
receivable transactions
(incoming funds) for the
economy?

reserve assets (net)

NON-TRADE
TRANSACTIONS
foreign located
UK owned
assets

transfers
(net)
IMPORTS

located within UK

other
investments
(net)

income
receivable

foreign located
debt
securities

investment
abroad

capital
account (net)

income
receivable

lending
abroad

income
payable

petroleum
products (net)

income
payable

crude oil (net)

agriculture
& goods

UK
liabilities

How does the total trade in

energy (in monetary terms)
compare to the overall
balance of payments?

debt
securities

The UK earns from assets

abroad while income from
domestic assets in foreign
ownership must be paid to
their nonresident owners.
Which income stream
is larger?

inward
investment

coal (net)

agriculture
& goods

balance of
payments

services

Ignoring all the non-trade

transactions, is the balance of
trade positive (more in credit)
or negative?

EXPORTS

foreign owned

inward
lending

gas (net)

What are the three largest

payable transactions
(outgoing funds) for the
economy?

services

agriculture

services
e

goods
services

trade transactions

p. 16

payable

receivable

p. 17

For lending (debt securities),

has the net amount lent to
foreigners (nonresidents) and
the net amount borrowed
from foreigners gone up or
down over the year 2011?
Can you suggest why the UK
might both lend to and borrow
from foreigners?

KEY

36

(100b[1990]/y)

non-trade transactions

payable

receivable

trade transactions

imports

exports

37

(assets
included
within
industries)

utilities
investment
intermediate

consumption

Insights

tax
x

p. 17
UK trading
agriculture
PASSENGER
extraction

transport
(assets
included
within
industries)

car & taxi

There are many benefits to using the Sankey format

for country-wide data. Widths of lines show what is
important. Lines linking boxes enable dependencies
to be traced back upstream to inputs. System
richness is emphasised by the array of colours
representing different entities.

vehicle-km/y

utilities

p. 23

coach
bus & coa
ch
h

passenger-km/y
passen
pas
senger
ger-km
-km//y

GDP appears in
two forms: output
and expenditure

intermediate
intermed
dia
a

labour force
(economically active)

Extracts from the set of 7see Sankey diagrams

introduced in this booklet are shown opposite.
Investment is the part of final demand essential
for maintenance and growth of all fixed capital.

em

dist
final
supply

goods
construction
service
industry

construction
t ti
services

GDP appears in two forms: output and expenditure.

final
demand
d

Energy is represented in two ways. As a small

economic volume flow it is production from the
extraction and utilities industries. The other way is
in actual energy units.

GDP & imports

manufacturing

rental

Transport appears in two ways, as for energy. Part

of transport is included in economic volume flows
of the first 7see Sankey. The other way is a more
physical perspective focusing on its fixed capital of
transport equipment which converts energy inputs
into the output product of mobility.

economically inactive

p. 17
p. 28

Jobs are inputs for each industrys production,

alongside energy and other inputs.

p. 16

balance of
payments

A key aspect for population is the way it divides

between economically active and inactive parts.
The definition of unemployed is only those of the
economically active who dont have jobs.
Balance of payments is about monetary flows
themselves, and is required to balance.

p. 34

38

Foresight + Research + Innovation

39

The purpose of the 7see framework isnt just to

produce Sankey diagrams of one year. A 7see model
has data from 1990 to the present that calibrate timevarying relationships between the built environment
(fixed capital) and all the flows. Using a Systems
Dynamic approach, a 7see model can be run forward
to, say, 2030 to generate a business-as-usual basecase scenario.

The 7see
framework
provides a firm
foundation for
discussion of
sustainability

A 7see model enables the testing of alternative

investment options, such as for a low-carbon
development strategy. These future scenarios are
physically and economically feasible because the
7see method is firmly grounded in physical constraints
of energy thermodynamics and material flows for
infrastructure. Since any model can only be as good
as the data put into it, a 7see model has complete
data integrity and audit trails to all its data sources.
Insights into GDP:
GDP should be unpicked into its principal
component flows (goods, construction, services
and rental).
The component flows are not substitutable in
the short term, but need time and investment to
substitute over the longer term.
The drive for growth in developed economies can
be interpreted as maintaining employment given
an ongoing trend of fewer jobs needed per unit of
output.
The coverage of economic aspects within 7see is
firmly grounded in the international System of National
Accounts 2008. Combining this rigorous coverage
with jobs, energy and travel means that the 7see
approach provides a lingua franca across government
departments and their policy overlaps. It also aids
international comparisons.
The 7see framework provides a foundation for
discussion of sustainability. The triple bottom line
measures of financial, social and environmental
performance translate into the economy, jobs and
carbon emissions, as covered by the Sankey diagrams
in this booklet.

40

Have You Wondered What GDP Means?

Foresight + Research + Innovation

41

Further information

Photo credits

Follow-up resources:
20-minute TEDx talk by Simon Roberts describing how the 7see project started:
bit.ly/TEDxNWS-SimonRoberts
3-minute animations exploring the Sankey map of jobs, energy and economic volume
flows with sub-titles in English, vimeo.com/66060261, or in Chinese,
vimeo.com/68367291
Technical paper on characterizing an economy by its socio-economic and energy
activities: research.insead.edu/2013/07/RobertsAxonForanGoddardWarr.html
In addition to the UK 7see model shown here, work is in progress on models for the
economies of Australia, Bangladesh, Colombia and the Republic of China (Taiwan).
For more information and answers to the questions, please contact:
simon.roberts@arup.com

Acknowledgements
This booklet is based on an academic research paper written in collaboration with
Colin Axon (Brunel University), Barney Foran (Charles Sturt University), Nigel Goddard
(University of Edinburgh) and Benjamin Warr (INSEAD Social Innovation Center).
Feedback for this booklet was gratefully received from Eike Sindlinger, Felicity Davies,
James Thonger, Jennifer Greitschus, Kim West, Mark Pearsall, Martin Shouler, Ricky
Tsui and Tooraj Arvajeh.
Sources of data: ONS (UK Office for National Statistics), DECC (UK Government
Department for Energy and Climate Change) and DFT (UK Government Department
for Transport).

Also available
This publication is also available in electronic format.
ISBN 978-0-9929501-0-1
www.arup.com/gdp

42

Have You Wondered What GDP Means?

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43

The measure GDP (gross domestic product) receives a mixed

press. Politicians, the business community and economic
commentators hang on each quarterly release. With emotive
descriptors, all yearn to get out of a depression and into growth.
Contrast this with GDPs critics who vilify its focus only on
monetarised transactions, saying it ignores unpaid work, activities
in the home and natures contributions. Worse still, an increase in
GDP extracts more of the earths generous bounty and pollution
clean-up counts as production.
This booklet takes neither position but simply sets out to explain
what GDP means. Behind the single metric is a firmly established
methodology of data collection. Whether you are interested in
economics or not, the definitions in this methodology provide a
useful language to access a rich data resource and discuss its
implications. This booklet complements the GDP components with
energy, jobs, travel and balance of payments.
Have You Wondered What GDP Means? is a door to understanding
data so they can be used the right way, appreciating both their
qualities and limitations. It is only from such a position that we can
progress with the big questions, such as cutting carbon dioxide
emissions while maintaining economic viability.

ISBN 978-0-9562121-8-4

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Have You Wondered What GDP Means?