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That's not how the economy works though — the GDP is correlated, not causated, with economic strength. What drives the economy in the end is positive-sum value
by n2d4 2y ago
That's not how the economy works though — the GDP is correlated, not causated, with economic strength. What drives the economy in the end is positive-sum value creation, not trade in itself (although without any market failures, trade tends to create value). The only reason we use GDP as a measure is because actual subjective value created is very hard to measure.
If I start an extortion business, and make you pay me money in order for me to not kidnap your family, this will increase the GDP but not economic strength. This is particularly obvious during wartime, when GDP is artificially inflated, but the actual economy tends to be doing very badly regardless.
In other words, a trade that harms one party more than it helps the other makes the economy worse — regardless of how it affects GDP.
- orwin 2y agoBut fiscal and debt policies are built on GDP as primary indicator. That is why recently, some states/nations privileged GDP growth over economic wellbeing (gambling is such any easy example)
- rented_mule 2y agoGoodhart's law strikes again. It's one of those things that explains so many problems in the world once you understand it. I wish there were ways around it, but I think it's a natural thing in matters involving a lot of people.