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GDP measures of the value of the total economic output. Take two countries with similar population in 2016 [1] - Mexico (127,540,423) and Japan(127,748,513) and

GDP measures of the value of the total economic output. Take two countries with similar population in 2016 [1] - Mexico (127,540,423) and Japan(127,748,513) and compare it with the GDP of the two countries[2] - Mexico(1 Trillion USD), Japan (4.9 Trillion USD). This says nothing about the wealth of Japan or Mexico. It does say that the Japanese economy is producing 4x more than the Mexican economy. This metric is interesting in itself. When taken alongside the resources consumed by Japan and Mexico, or the population of Japan and Mexico, one can determine which country is using it's resources more efficiently and which population is more efficient at producing things of value. When historical GDP numbers are taken into account along with a history of government policies, it provides insight into how efficient the government bureaucracy is, how efficient the financial markets are, how education and computerized tools are impacting the economy and so on. The author appears to have completely missed the point behind GDP. [1] https://en.wikipedia.org/wiki/List_of_countries_by_population_(United_Nations) https://en.wikipedia.org/wiki/List_of_countries_by_populatio... [2] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

imtringued 9y ago
Use GDP (PPP) please. Differences in GDP are heavily influenced in differences in exchange rate but the vast majority of economic activity is domestic and doesnt involve trade with other countries. Japan 5,405,072 Mexico 2,406,087 https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)
dragonwriter 9y ago
> This metric is interesting in itself. When taken alongside the resources consumed by Japan and Mexico, or the population of Japan and Mexico, one can determine which country is using it's resources more efficiently and which population is more efficient at producing things of value. Except you can't, reliably. If I mow my lawn and cook my dinner, and my neighbor does the same, it has no contribution to GDP. If I mow my neighbors lawn for $5 and mow mine as well, and my neighbor cooks my dinner for $5 and cooks his own as well, well, look, $10 of GDP. GDP measured value of traded output, not total output, and so doesn't measure how effectively resources are used. You can make assumptions about the relations between the two values being constant, but that's probably not true across societies with different cultural patterns, or even in the same country over time given cultural change. GDP is, for many purposes, apparently the best measure we have. But we shouldn't delude ourselves into thinking it tells us more than it does.
ksec 9y ago
That is an interesting comparison, because, I thought Japan would be a lot higher then Mexico, given the numbers of Multi National corporation in Japan.

imtringued 9y ago

Use GDP (PPP) please. Differences in GDP are heavily influenced in differences in exchange rate but the vast majority of economic activity is domestic and doesnt involve trade with other countries. Japan 5,405,072 Mexico 2,406,087 https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

dragonwriter 9y ago

> This metric is interesting in itself. When taken alongside the resources consumed by Japan and Mexico, or the population of Japan and Mexico, one can determine which country is using it's resources more efficiently and which population is more efficient at producing things of value. Except you can't, reliably. If I mow my lawn and cook my dinner, and my neighbor does the same, it has no contribution to GDP. If I mow my neighbors lawn for $5 and mow mine as well, and my neighbor cooks my dinner for $5 and cooks his own as well, well, look, $10 of GDP. GDP measured value of traded output, not total output, and so doesn't measure how effectively resources are used. You can make assumptions about the relations between the two values being constant, but that's probably not true across societies with different cultural patterns, or even in the same country over time given cultural change. GDP is, for many purposes, apparently the best measure we have. But we shouldn't delude ourselves into thinking it tells us more than it does.

ksec 9y ago

That is an interesting comparison, because, I thought Japan would be a lot higher then Mexico, given the numbers of Multi National corporation in Japan.