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First, you are getting this casualty reversed if you think a few thousand billionaires just drop on a poor country, raising GDP. What happens is wealthy countri

by rsj_hn 4y ago

First, you are getting this casualty reversed if you think a few thousand billionaires just drop on a poor country, raising GDP. What happens is wealthy countries give rise to wealthy elite, and poor countries have poorer elite. The billionaire's income cannot just be added to GDP, and removing the billionaire does not reduce GDP by the amount of his income. We can do a thought experiment -- let's say Taylor Swift makes $100 million. Does that mean she increases GDP by $100 million? No, because part of that $100 million is taking money away from other uses, e.g. someone with a fixed entertainment budget going to see her instead of doing something else. Only the resulting increase in overall income -- if any -- is the measure of how much Taylor adds to GDP. GDP is the sum of total final production in an economy, and while a billionaire may play an important role in organizing production and encouraging more production to happen, it's usually the case that if they were never born or left, the economy would continue with other replacements for the billionaire's contribution. The replacements would be less efficient and so output would be a bit smaller. That difference is the contribution to GDP, not the billionaire's entire income. And if you talk about Saudi oil princes, then they are not producing anything at all. Make those Oil princes disappear, and Saudi Arabia's GDP would be unchanged. Actually it would certainly increase, since imports subtract from GDP and those oil princes like to stash their wealth overseas and import luxury goods. Bottom line, please don't confuse household income with national income, they are different beasts, and you cannot increase or decrease national income in a material way by adding or removing rich households to the country, anymore than you can make a business increase or decrease in revenue by paying the CEO more. Rather, CEOs of high revenue companies earn more, and those of lower revenue companies earn less. You can't just look at a company that is earning less revenue and say "Oh, just add a few thousand highly paid executives to the company, and the revenue will be way up".

kragen 4y ago
> What happens is wealthy countries give rise to wealthy elite, and poor countries have poorer elite. This does occasionally happen, and by choosing your definition of "elite" carefully enough you can make it happen in more cases, but it is generally not the case. Poor countries generally have much greater inequality than wealthy countries, with the result that elites in poor countries (say, top 1%, 5%, or 10% by either net worth or income) are often wealthier than elites in richer countries. > let's say Taylor Swift makes $100 million. Does that mean she increases GDP by $100 million? Generally, the answer in cases like this is "almost". Your explanation leaves out what she does with the money after she gets it. If she spends it all immediately on domestic products and services, then yes, she does increase GDP by her earnings, because her spending replaces the forgone spending you correctly identify on the part of her fans. Similarly if she lends it to businesses who use it to buy domestic products and services, or if she buys their stock from them or from other shareholders who then go on to use it in the same way. So-called "entertainers" tend to be quite spendthrift, and those from the US mostly spend their money in the US. To some degree Ms. Swift is an exception on this count, known for her wise investing, estimates are that she's grown her net worth to only US$450 million over her 18-year music career, despite currently earning US$150 million per year from her work; as a very rough approximation that means she's spent the first 15 of her 18 years of showbiz earnings already, and most of her savings are probably also in US stock markets and money markets.
- rsj_hn 4y ago
  > Poor countries generally have much greater inequality than wealthy countries, with the result that elites in poor countries (say, top 1%, 5%, or 10% by either net worth or income) are often wealthier than elites in richer countries. This is false, and massively so. Look here: https://ceoworld.biz/2020/02/07/how-much-the-top-1-of-worlds-richest-earn-in-different-countries/ https://ceoworld.biz/2020/02/07/how-much-the-top-1-of-worlds... The relationship between Gini and GDP is complex and the correlations are small. The top 1% of poor countries like Haiti or Bangladesh are not richer than the top 1% of the US, they are much poorer, because even if the lorenz curve is such that 1% of the population get 40% of the income in one place and 30% in another -- which is a huge change -- it does not change the fact that one of these has a GDP of $800 per capita, and the other of $70,0000. This is really just math and an understanding of the definitions, plus a rough understanding of the possible differences in Lorenz curves (hint: in poor countries, there just isn't that much of a surplus for the wealthy to accumulate and Lorenz curves don't vary that much). > Generally, the answer in cases like this is "almost". Also false. Gross Domestic Output is usually 150% of Gross Domestic product, and then market income varies much more because NIPA (National Income Product Accounts) throws away spending on purchase and sale of assets, nor does it care about moving money around, but it tries to focus purely on net addition of domestic production, with appropriate netting for intermediate inputs. Here are the definitions - https://www.bea.gov/resources/methodologies/nipa-handbook https://www.bea.gov/resources/methodologies/nipa-handbook. National income and product accounts can be a little confusing, but it's not too hard and you do need to know what GDP is before getting into discussions about it. Here is a brief summary: GDP is production of final goods services in a region. If an island that produces fish has 1000 billionaires move to it. Then the GDP of the island only increases by the number of extra fish that are produced to feed the billionaires when they live there. Once you understand this point, and stop thinking that the billionaires are somehow adding to the island's GDP with their billions, then you will have an idea of what GDP actually is, and then you will have a better intuition for the methods of measuring a billionaire's contribution to GDP. But it does take some study because GDP, as an economic concept, tries to measure actual production of final output, and is not a measure of market income at all. > Your explanation leaves out what she does with the money after she gets it. Yes, because I do not double count. You can measure final output by looking at what everyone earns from producing goods with appropriate netting, or you can measure final output by looking at what people spend on the purchase of other's production, again with appropriate netting, but it is really double counting to do both at the same time. We are talking about how much Taylor Swift produces. Her purchase of other people's production doesn't get added to her own production. That is their production and they deserve the credit for doing it, whether that is equipment for recording studios, marketing people, construction workers maintaining venues, all those others involved in the music business who also contribute to GDP, not just Taylor Swift. And if she retired, they would work for someone else, continuing to produce. Similarly, when Taylor buys someone else's production, that does not add to her own production, it is the production of whoever produced that good. If Taylor likes fine cuisine, then cooks are the ones adding to GDP when she buys their food. GDP is a measure of production in an economy. We can change this and look at GDI, and try to measure income -- what people spend on production. In that case, we would only look at Taylor's spending, and we wouldn't look at her earnings at all. But what you want to avoid is doing both.

by rsj_hn 4y ago

kragen 4y ago

> What happens is wealthy countries give rise to wealthy elite, and poor countries have poorer elite. This does occasionally happen, and by choosing your definition of "elite" carefully enough you can make it happen in more cases, but it is generally not the case. Poor countries generally have much greater inequality than wealthy countries, with the result that elites in poor countries (say, top 1%, 5%, or 10% by either net worth or income) are often wealthier than elites in richer countries. > let's say Taylor Swift makes $100 million. Does that mean she increases GDP by $100 million? Generally, the answer in cases like this is "almost". Your explanation leaves out what she does with the money after she gets it. If she spends it all immediately on domestic products and services, then yes, she does increase GDP by her earnings, because her spending replaces the forgone spending you correctly identify on the part of her fans. Similarly if she lends it to businesses who use it to buy domestic products and services, or if she buys their stock from them or from other shareholders who then go on to use it in the same way. So-called "entertainers" tend to be quite spendthrift, and those from the US mostly spend their money in the US. To some degree Ms. Swift is an exception on this count, known for her wise investing, estimates are that she's grown her net worth to only US$450 million over her 18-year music career, despite currently earning US$150 million per year from her work; as a very rough approximation that means she's spent the first 15 of her 18 years of showbiz earnings already, and most of her savings are probably also in US stock markets and money markets.

rsj_hn 4y ago
> Poor countries generally have much greater inequality than wealthy countries, with the result that elites in poor countries (say, top 1%, 5%, or 10% by either net worth or income) are often wealthier than elites in richer countries. This is false, and massively so. Look here: https://ceoworld.biz/2020/02/07/how-much-the-top-1-of-worlds-richest-earn-in-different-countries/ https://ceoworld.biz/2020/02/07/how-much-the-top-1-of-worlds... The relationship between Gini and GDP is complex and the correlations are small. The top 1% of poor countries like Haiti or Bangladesh are not richer than the top 1% of the US, they are much poorer, because even if the lorenz curve is such that 1% of the population get 40% of the income in one place and 30% in another -- which is a huge change -- it does not change the fact that one of these has a GDP of $800 per capita, and the other of $70,0000. This is really just math and an understanding of the definitions, plus a rough understanding of the possible differences in Lorenz curves (hint: in poor countries, there just isn't that much of a surplus for the wealthy to accumulate and Lorenz curves don't vary that much). > Generally, the answer in cases like this is "almost". Also false. Gross Domestic Output is usually 150% of Gross Domestic product, and then market income varies much more because NIPA (National Income Product Accounts) throws away spending on purchase and sale of assets, nor does it care about moving money around, but it tries to focus purely on net addition of domestic production, with appropriate netting for intermediate inputs. Here are the definitions - https://www.bea.gov/resources/methodologies/nipa-handbook https://www.bea.gov/resources/methodologies/nipa-handbook. National income and product accounts can be a little confusing, but it's not too hard and you do need to know what GDP is before getting into discussions about it. Here is a brief summary: GDP is production of final goods services in a region. If an island that produces fish has 1000 billionaires move to it. Then the GDP of the island only increases by the number of extra fish that are produced to feed the billionaires when they live there. Once you understand this point, and stop thinking that the billionaires are somehow adding to the island's GDP with their billions, then you will have an idea of what GDP actually is, and then you will have a better intuition for the methods of measuring a billionaire's contribution to GDP. But it does take some study because GDP, as an economic concept, tries to measure actual production of final output, and is not a measure of market income at all. > Your explanation leaves out what she does with the money after she gets it. Yes, because I do not double count. You can measure final output by looking at what everyone earns from producing goods with appropriate netting, or you can measure final output by looking at what people spend on the purchase of other's production, again with appropriate netting, but it is really double counting to do both at the same time. We are talking about how much Taylor Swift produces. Her purchase of other people's production doesn't get added to her own production. That is their production and they deserve the credit for doing it, whether that is equipment for recording studios, marketing people, construction workers maintaining venues, all those others involved in the music business who also contribute to GDP, not just Taylor Swift. And if she retired, they would work for someone else, continuing to produce. Similarly, when Taylor buys someone else's production, that does not add to her own production, it is the production of whoever produced that good. If Taylor likes fine cuisine, then cooks are the ones adding to GDP when she buys their food. GDP is a measure of production in an economy. We can change this and look at GDI, and try to measure income -- what people spend on production. In that case, we would only look at Taylor's spending, and we wouldn't look at her earnings at all. But what you want to avoid is doing both.