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The GDP is a measure of economic activity, meaning the exchange of money for products or services. Of course there are activities, such as the ones you describe
by epups 3y ago
The GDP is a measure of economic activity, meaning the exchange of money for products or services. Of course there are activities, such as the ones you describe, that will not be accounted because they are done for free or in exchange for something else.
> How about me looking after my old parent vs me working overtime and paying a care home to do it?
Yes of course the latter will have an impact on the GDP, and the former not. You are producing more work for money and you are buying more work for money.
- brvsft 3y agoThe point is that the country is no wealthier in either scenario, yet people use GDP as a proxy for the productive output and wealth of a country.
- epups 3y agoBut the country is wealthier in the scenario where you produced and sourced more labor for money. Arguably more productive too, because you expanded the pool of labor when you worked more hours, which your employer (presumably) transformed into more money.
- MichaelZuo 3y agoCan you explain how? If someone is paid to dig holes and fill them up right after, the country is not any wealthier even though GDP is increased, in fact slightly less wealthy because of wear and tear on the shovel/excavator.
- antisthenes 3y agoGPD is an estimate that relies on most people being rational. A company that pays contractors to do nothing but dig up holes and fill them back up again will quickly go bankrupt, so most people aren't going to engage in such enterprise. Just because you found a way to hack the GDP in an online argument doesn't immediately throw its usefulness in the real-world.
- MichaelZuo 3y agoRepeatedly digging up the same place is a relatively common real world scenario, such as when multiple utilities need to be installed or repaired on the same stretch of ground. e.g. repairing a water main, then laying some underground electrical cables, then laying some fiber optic wire. Due to inefficient coordination, country A may have the same patch of ground dug up and filled three times. Whereas country B, more efficient, only has to dig once, do all the work, then fill it up once. So country B records lower GDP but in fact ends up slightly wealthier.
- antisthenes 3y agoI certainly agree that different countries will not only have different levels of efficiency, but also different accuracies in their GDP measurement. Shadow economies also exist and comprise different % in different countries.
- epups 3y agoThe example that started this is someone taking care of an elderly person themselves vs working overtime and paying someone to do so. Simply by working overtime for a company, this person created economic value, likely higher than of their own wage. Second, other economic agents received payment in exchange for services, so this also increased our productive output. In both sides of this operation, taxes were paid, and the country is therefore wealthier in both a fiscal and economic sense. I think the confusion here is because it seems odd that taking care of your parents by yourself is not considered productive unless you exchange money for it. GDP is an imperfect measure, and by definition does not take into account such voluntary/unpaid activities.
- MichaelZuo 3y agoI don't see how formalizing and adding money to an informal relationship increases wealth. The caregiver is doing the same work either way. Where is the wealth increase coming from?
- epups 3y agoBefore we continue our discussion, can you tell me what is your definition of wealth?
- MichaelZuo 3y agoI go by the OED standard definition.
- epups 3y agoAssuming you mean OECD, and that for these purposes we consider money reserves as an asset, then the person doing overtime has no increase in wealth (assuming they paid the same to the caregiver), the caregiver has an increase, every company involved have an increase, and the government also has an increase in wealth. If the person doing overtime is more qualified than the caregiver, then productivity increased as well.
- iso1631 3y ago> Yes of course the latter will have an impact on the GDP, and the former not. You are producing more work for money and you are buying more work for money. I neglected to mention I work in an old peoples home. The overtime is the exact amount of care my parent needs.