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It comes up commonly in discussions about how poor GDP is as a measure of societal wealth. For example, if we would strike a bargain to do each others' laundry
by WJW 5y ago
It comes up commonly in discussions about how poor GDP is as a measure of societal wealth. For example, if we would strike a bargain to do each others' laundry for a trillion USD per year each, the GDP would "magically" go up by two trillion compared to if we would just do our own laundry. However, no additional value is created compared to the current situation.
- rmah 5y agoGDP is not a measure of economic wealth (much less "social wealth", whatever that is) and never has been. GDP is a measure of economic activity. I.e. transactions, spending. But since one year to the next, the structure of a nation's economy doesn't change dramatically, it can be used as a proxy for changes in wealth. However, the longer time period you look look at between two GDP figures, the less comparable they are. And finally, since different nations have different economic structures, a direct currency translation may be misleading, hence PPP (which is misleading in a different way, but <shrug>).