3 ms·

GDP does not have to be accurate to be useful, it just needs to be consistent for comparison.

brownbat 9y ago
Agreed, I don't think these thought experiments are coming from nihilistic economists who want to toss it out completely, but just trying to safeguard against ways it might be systematically biased, or identify ways we could improve its utility. I think the theoretical critiques get refined down several layers and end up leading to to practical shifts, like the reweighting of intellectual property in 2013. That must have been a hard trade off between consistency with earlier GDP measures and accuracy (read: more enduring consistency for coming decades, facing shifts in the economy).
simonh 9y ago
This is what’s missed in most of these criticisms. Arguably you could use movies, or video games, or TV shows or any entertainment instead of stupid examples like ‘eating poop’. The point is the money is (generally) taxed and the people receiving it spend the money to support their livelihood, it flows onwards into government spending, goods and services. Even if I paid someone a salary as my personal poop eater they would pay income tax and rates, pay rent, buy food, pay bills, etc. That’s all valuable economic activity that wouldn’t occur if I kept the money in a mattress. Contrived examples where people just hand money back and forth aren’t a significant factor in reality and even if they were, they’d have to happen as a significant part of measured economic activity much more in some countries rather than others to be relevant.
FabHK 9y ago
Question is how strong the argument is that it isn't. To pick up on the examples provided above, you could live in a friendly caring community where you occasionally babysit family B's babies and they occasionally babysit yours, for free. Or you could live in a materialistic community where you won't babysit family B's babies unless they pay you, and they won't either. Community 2 will have a higher GDP.
- KaoruAoiShiho 9y ago
  Couple of thoughts on this. 1. GDP would still be useful to show growth in the same community over time. 2. It sounds like an edge-case, and when talking on national scales across most of the big economies very few countries actually operates like that to a significant degree. GDP is of not too precise but still pretty alright on a big picture level. 3. If there is a demand for it an adjuster can be made. Well I'm not an economist so there might already be one. I'm sure someone thought of this at some point. 4. GDP values are not cumulative, so even if there's an error in one year it does not stack and fixes itself in future years.
  - fjsolwmv 9y ago
    A recent trend here on HN is complaining about the loss of free-range childhood. Quality of life is dropping in this dimension, but it isn't seen in GDP.
    - KaoruAoiShiho 9y ago
      It'll be in GDP eventually when the child ends up less productive.

Agreed, I don't think these thought experiments are coming from nihilistic economists who want to toss it out completely, but just trying to safeguard against ways it might be systematically biased, or identify ways we could improve its utility. I think the theoretical critiques get refined down several layers and end up leading to to practical shifts, like the reweighting of intellectual property in 2013. That must have been a hard trade off between consistency with earlier GDP measures and accuracy (read: more enduring consistency for coming decades, facing shifts in the economy).

simonh 9y ago

This is what’s missed in most of these criticisms. Arguably you could use movies, or video games, or TV shows or any entertainment instead of stupid examples like ‘eating poop’. The point is the money is (generally) taxed and the people receiving it spend the money to support their livelihood, it flows onwards into government spending, goods and services. Even if I paid someone a salary as my personal poop eater they would pay income tax and rates, pay rent, buy food, pay bills, etc. That’s all valuable economic activity that wouldn’t occur if I kept the money in a mattress. Contrived examples where people just hand money back and forth aren’t a significant factor in reality and even if they were, they’d have to happen as a significant part of measured economic activity much more in some countries rather than others to be relevant.

FabHK 9y ago

Question is how strong the argument is that it isn't. To pick up on the examples provided above, you could live in a friendly caring community where you occasionally babysit family B's babies and they occasionally babysit yours, for free. Or you could live in a materialistic community where you won't babysit family B's babies unless they pay you, and they won't either. Community 2 will have a higher GDP.

KaoruAoiShiho 9y ago
Couple of thoughts on this. 1. GDP would still be useful to show growth in the same community over time. 2. It sounds like an edge-case, and when talking on national scales across most of the big economies very few countries actually operates like that to a significant degree. GDP is of not too precise but still pretty alright on a big picture level. 3. If there is a demand for it an adjuster can be made. Well I'm not an economist so there might already be one. I'm sure someone thought of this at some point. 4. GDP values are not cumulative, so even if there's an error in one year it does not stack and fixes itself in future years.
- fjsolwmv 9y ago
  A recent trend here on HN is complaining about the loss of free-range childhood. Quality of life is dropping in this dimension, but it isn't seen in GDP.
  - KaoruAoiShiho 9y ago
    It'll be in GDP eventually when the child ends up less productive.