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If it costs $900 to make a gadget you sell for $1000 and you replace the staff with robots which cost $500 per gadget then there is no effect on GDP as it only
by rm_-rf_slash 10y ago
If it costs $900 to make a gadget you sell for $1000 and you replace the staff with robots which cost $500 per gadget then there is no effect on GDP as it only tracks value produced.
The only way to reduce GDP is by lowering the price of your goods (assuming demand stays constant), or implicitly by letting your excess profits sit as cash instead of consuming or reinvesting (which both create and increase value).
- dragonwriter 10y ago> If it costs $900 to make a gadget you sell for $1000 and you replace the staff with robots which cost $500 per gadget then there is no effect on GDP as it only tracks value produced. If you are selling in a competitive market, the price for per gadget will drop with the price of production, reducing GDP before considering other effects (while the purchasers will probably spend their additional cash on some other good, there is no guarantee that good will come from your country, so while world product may not decrease, your domestic product may.) If that's not the case and you have pure monopoly pricing power, then the effect on GDP depends on how you spend the excess profit: if you spend it in ways that have the same velocity in your domestic economy as your old employees would have (and if the maintenance expenditures for the robots likewise are spent in such a way), the effect is neutral -- if the net of these two things is spending that has less domestic velocity, then GDP could still drop as a fairly direct result of the decision to bring in the robots.
- reality_hacker 10y agoUnless they sell gadget oversea, like Samsung.