5 ms·

The silliness of GDP is one of the worst-kept secrets in politics and economics. It's like measuring the quality of a car by how fast it's going.

hansvm 4y ago
Is that the reason GDP is silly though? Under the assumption that the car will attempt to go as fast as capable (not usually true for cars, plausibly true for an economy) and that the capability is a measure of quality (true for both), GDP serves as a nice proxy for something we do care about.
JohnJamesRambo 4y ago
Or how good your wine is by the alcohol percentage.
SantalBlush 4y ago
GDP means income. That's it. There is no secret, no grand conspiracy.
refurb 4y ago
That’s a terrible analogy. GDP is like measuring how useful the car is.
- lmm 4y ago
  Measuring how useful the car is would be perfect. GDP is like measuring how useful the car is by its market value.
  - refurb 4y ago
    Right, and usefulness (however defined - hauls cargo, go fast, fuel efficient, looks sexy) determined demand which influences market prices (assuming supply isn’t overly restricted). So market price tends to be a pretty good proxy for usefulness. People who complain about GDP as a measure are usually just complaining about things they don’t like that go into GDP like pointless (to them) consumer goods.
    - lmm 4y ago
      > Right, and usefulness (however defined - hauls cargo, go fast, fuel efficient, looks sexy) determined demand which influences market prices (assuming supply isn’t overly restricted). > So market price tends to be a pretty good proxy for usefulness. That's quite a jump; market price can reflect usefulness, but it can reflect a lot of other things too. "This car must be useful to someone because it's expensive" is already questionable logic (at least without stretching "useful" to the point of meaninglessness), and "this car is more expensive than my current car, therefore it would be a good upgrade for me" is blatantly absurd.
      - refurb 4y ago
        It’s not absurd. Usefulness is purely the decision of the buyer. You may think buying an expensive car to impress others is stupid, but so? All car sales don’t have to fit within your definition of usefulness. Unless you want the government to step in and define appropriate “usefulness” it’s always going to be up to the Buyer.
        lmm 4y ago
        > Usefulness is purely the decision of the buyer. You may think buying an expensive car to impress others is stupid, but so? All car sales don’t have to fit within your definition of usefulness. Exactly. So saying that a more expensive car is always more useful is crazy. Maybe the more expensive car is too big for the roads where I live, or has worse fuel economy, or has less interior space.... Price and usefulness are not completely unrelated, but assuming they're equivalent is absurd.
        refurb 4y ago
        Of course they are equivalent, in aggregate across all purchasers. You aren’t the only buyer, but if they are selling cars someone thinks it’s worth the price. That’s the beauty of free markets - multiple products for different tastes and different perceptions of value. I can go out and choose from a small or large, basic or luxury, fuel efficient or not, large capacity or small. If I don’t think the price is worth the offering, I don’t buy and that impacts the price in some small infinitesimal way. In aggregate across all car buyers manufacturers price for certain segments. Each product has a subset of buyers who buy the car based on their own interpretation of value.
stopdropnhotpot 4y ago

hansvm 4y ago

Is that the reason GDP is silly though? Under the assumption that the car will attempt to go as fast as capable (not usually true for cars, plausibly true for an economy) and that the capability is a measure of quality (true for both), GDP serves as a nice proxy for something we do care about.

JohnJamesRambo 4y ago

Or how good your wine is by the alcohol percentage.

SantalBlush 4y ago

GDP means income. That's it. There is no secret, no grand conspiracy.

refurb 4y ago

That’s a terrible analogy. GDP is like measuring how useful the car is.

lmm 4y ago
Measuring how useful the car is would be perfect. GDP is like measuring how useful the car is by its market value.
- refurb 4y ago
  Right, and usefulness (however defined - hauls cargo, go fast, fuel efficient, looks sexy) determined demand which influences market prices (assuming supply isn’t overly restricted). So market price tends to be a pretty good proxy for usefulness. People who complain about GDP as a measure are usually just complaining about things they don’t like that go into GDP like pointless (to them) consumer goods.
  - lmm 4y ago
    > Right, and usefulness (however defined - hauls cargo, go fast, fuel efficient, looks sexy) determined demand which influences market prices (assuming supply isn’t overly restricted). > So market price tends to be a pretty good proxy for usefulness. That's quite a jump; market price can reflect usefulness, but it can reflect a lot of other things too. "This car must be useful to someone because it's expensive" is already questionable logic (at least without stretching "useful" to the point of meaninglessness), and "this car is more expensive than my current car, therefore it would be a good upgrade for me" is blatantly absurd.
    - refurb 4y ago
      It’s not absurd. Usefulness is purely the decision of the buyer. You may think buying an expensive car to impress others is stupid, but so? All car sales don’t have to fit within your definition of usefulness. Unless you want the government to step in and define appropriate “usefulness” it’s always going to be up to the Buyer.
      - lmm 4y ago
        > Usefulness is purely the decision of the buyer. You may think buying an expensive car to impress others is stupid, but so? All car sales don’t have to fit within your definition of usefulness. Exactly. So saying that a more expensive car is always more useful is crazy. Maybe the more expensive car is too big for the roads where I live, or has worse fuel economy, or has less interior space.... Price and usefulness are not completely unrelated, but assuming they're equivalent is absurd.
        refurb 4y ago
        Of course they are equivalent, in aggregate across all purchasers. You aren’t the only buyer, but if they are selling cars someone thinks it’s worth the price. That’s the beauty of free markets - multiple products for different tastes and different perceptions of value. I can go out and choose from a small or large, basic or luxury, fuel efficient or not, large capacity or small. If I don’t think the price is worth the offering, I don’t buy and that impacts the price in some small infinitesimal way. In aggregate across all car buyers manufacturers price for certain segments. Each product has a subset of buyers who buy the car based on their own interpretation of value.

stopdropnhotpot 4y ago