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We think the economy is booming because these costs are increasing (inflation). Stupid. Same with GDP. A 50 car pileup will increase GDP!
by cylinder 8y ago
We think the economy is booming because these costs are increasing (inflation). Stupid.
Same with GDP. A 50 car pileup will increase GDP!
- ibeckermayer 8y agoCan you please explain this to me in more detail? Costs inflating causes economists to think the economy is booming, how? Is it based on how they measure “economic boom”? Why would a 50 car pile up “increase GDP”? I’ve heard similar criticism of how we measure GDP, but don’t understand precisely what the problem is.
- daxorid 8y ago1. Most central bank economists have abandoned the standard of price stability, and now target a specific CPI number. The Fed targets 2%, for example. 2. A 50 car pileup will employ EMS personnel, hospital staff, tow truck drivers, road cleanup crews, etc. Then later, new car assembly, transportation, DMV workers, and car salesmen. https://en.wikipedia.org/wiki/Parable_of_the_broken_window https://en.wikipedia.org/wiki/Parable_of_the_broken_window
- repolfx 8y agoIt's worse than that. Central bankers define 2% inflation as price stability. 2% isn't even stable, it's compounding, prices go up more every year than in the previous year, and CBs say they achieved "stability". Odd use of the word!