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Enormous amounts of valuable activity is not captured in GDP and never has been. This makes it dangerous to take two GDP numbers from different polities (or eve
by crawshaw 2y ago
Enormous amounts of valuable activity is not captured in GDP and never has been. This makes it dangerous to take two GDP numbers from different polities (or even GDP PPP) and compare them to compare their wealth.
However, change in GDP can tell you something broader about a society. It is a compounding value, which means only a trivial amount of GDP change can be explained by moving some of a society's value into or out of the GDP measure. Over a century, the compounding effect eclipses the non-measured component.
So if two societies, over the long term, have different GDP growth numbers, one of those societies will end up rich and the other end up poor.
Slow down GDP growth even a little and you will impoverish your grandchildren. They will have to choose between becoming doctors in their poor society, or emigrating and waiting tables in the rich society.
- MichaelZuo 2y agoPerhaps growth rates in GDP PPP would be even better for comparing between countries? For example in the case of Ireland people might be misled if they looked only at nomial GDP growth…
- crawshaw 2y agoGrowth is only valuable in the long-term, and in a long-term analysis PPP (which I generally find very hard to reason about) is going to wash out, just as the fraction of the economy measured by GDP washes out. The non-linear function dominates. Year-to-year, the difference between 2.5% and 5% doesn't matter, which is how people convince themselves to downplay growth. But they are two radically different worlds for your grandkids.
- MichaelZuo 2y agoHuh? Why wouldn’t that matter? A 250 basis point difference in growth rate is enormous for pretty much every industry in the US. That’s hundreds of billions of dollars extra circulating in tne economy.