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> like scoring a soccer game based on how far your players run That’s a pretty good analogy for what GDP is counting, actually. But I think the larger point i

> like scoring a soccer game based on how far your players run That’s a pretty good analogy for what GDP is counting, actually. But I think the larger point is that manufacturing is grounded in something real. It’s a measure of how many tanks and fighter jets you can make, no matter how much they cost to make.

dbtc 2y ago
Interesting, so to extend the metaphor - in the game of soccer it's the scoring of goals that matters, not the raw physical stamina of the player, but if that facade of civilized competition breaks down, then it's back to the basics.
- TeMPOraL 2y ago
  Right. This facade is what makes soccer a sport instead of a brawl. In sports, and in life in general, there's all sorts of extra rules that make activities interesting and/or prevent them from decaying into violence. Playing for keeps - like, really, seriously, going for the win no matter what, is universally frowned upon and basically a telltale sign of dangerously pathological sociopathy.
  - deleted 2y ago
    [deleted]
jazzyjackson 2y ago
Right, velocity of money! I think this is the meatier part of the essay and I wish geohot would have skipped the bit about the gold standard - our main measure of growth is how quickly we hand money back and forth (is there another measure that allows expenditures to cancel out ? Net Domestic Product ?) The graph that shocked me tho was the electricity production, I didn't realize US was so flat but it rings true, I know there's a 2 year wait-list to even have your energy production considered to be hooked up to the grid, but I assumed there was some at least some throughput, now we're taking about onsite mini nukes while China is building.
- ryandamm 2y ago
  Two quick thoughts… one, because every transaction in theory happens because the purchasing party values the good or service more than the money, every transaction does — in theory — create wealth, velocity of money is sort of measuring a proxy for growth. But I agree it’s weird. Second, “GDP/watt” is absolutely an economic metric, and it captures something about energy efficiency but also the mix of an economy. Software and services scores highly; aluminum smelting does not.
  - Terr_ 2y ago
    I know you qualified it as "in theory", yet I find myself thinking of wash-trading as an example where transactional value is neutral or even very slightly negative, because they actually value manipulating the metrics.
    - ryandamm 2y ago
      That's a fair counterexample. In that case, you could argue that "true GDP" didn't change at all, merely our measurement of it had error. But pretty soon you ask 'well, what is the real signal?' And it's turtles all the way down. Again, economics is weird, but perhaps interesting because it's weird. (I'll confess I didn't care about the field at all until it suddenly got very interesting in ~2008.)
  - roenxi 2y ago
    Normalising GDP for the amount of money in the system suggests that velocity of money is the is actually the interesting metric. Say the monetary base is $100 and the GDP is $1,000 initially, then the monetary base doubles to $200 and the GDP doubles to $2,000. It looks suspiciously like no real economic activity was generated and that suggests that velocity is the growth measure.
    - AnthonyMouse 2y ago
      You're essentially assuming an increase in the money supply leads to inflation, which it does if nothing else is different either, but if you also have e.g. a larger population then you're looking at something else.
rat87 2y ago
Intangible products are very real Manufacturing plastic one use sponge bob toys are also real. Real and not particularly useful and perhaps not what most people imagine when they vastly overstate the importance of manufacturing to an economy. Now jets and planes and military supplies is a real issue. But Manufacturing in general isn't how many tanks and fighter jets you can make at best it correlated.
Aeolun 2y ago
Having lots of money is great when you have people willing to sell you stuff. Not so much when you are trying to fight the ones you bought your raw materials from.
agumonkey 2y ago
Makes me wonder, if anybody knows how economies were measured in more socialist countries before the 80s. Did they take other factors into account since a lot of things were shared (based on a documentary about east germany, people used a lot more social services, places, parks, libraries, and exchanged stuff without paying).

dbtc 2y ago

Interesting, so to extend the metaphor - in the game of soccer it's the scoring of goals that matters, not the raw physical stamina of the player, but if that facade of civilized competition breaks down, then it's back to the basics.

TeMPOraL 2y ago
Right. This facade is what makes soccer a sport instead of a brawl. In sports, and in life in general, there's all sorts of extra rules that make activities interesting and/or prevent them from decaying into violence. Playing for keeps - like, really, seriously, going for the win no matter what, is universally frowned upon and basically a telltale sign of dangerously pathological sociopathy.
- deleted 2y ago
  [deleted]

jazzyjackson 2y ago

Right, velocity of money! I think this is the meatier part of the essay and I wish geohot would have skipped the bit about the gold standard - our main measure of growth is how quickly we hand money back and forth (is there another measure that allows expenditures to cancel out ? Net Domestic Product ?) The graph that shocked me tho was the electricity production, I didn't realize US was so flat but it rings true, I know there's a 2 year wait-list to even have your energy production considered to be hooked up to the grid, but I assumed there was some at least some throughput, now we're taking about onsite mini nukes while China is building.

ryandamm 2y ago
Two quick thoughts… one, because every transaction in theory happens because the purchasing party values the good or service more than the money, every transaction does — in theory — create wealth, velocity of money is sort of measuring a proxy for growth. But I agree it’s weird. Second, “GDP/watt” is absolutely an economic metric, and it captures something about energy efficiency but also the mix of an economy. Software and services scores highly; aluminum smelting does not.
- Terr_ 2y ago
  I know you qualified it as "in theory", yet I find myself thinking of wash-trading as an example where transactional value is neutral or even very slightly negative, because they actually value manipulating the metrics.
  - ryandamm 2y ago
    That's a fair counterexample. In that case, you could argue that "true GDP" didn't change at all, merely our measurement of it had error. But pretty soon you ask 'well, what is the real signal?' And it's turtles all the way down. Again, economics is weird, but perhaps interesting because it's weird. (I'll confess I didn't care about the field at all until it suddenly got very interesting in ~2008.)
- roenxi 2y ago
  Normalising GDP for the amount of money in the system suggests that velocity of money is the is actually the interesting metric. Say the monetary base is $100 and the GDP is $1,000 initially, then the monetary base doubles to $200 and the GDP doubles to $2,000. It looks suspiciously like no real economic activity was generated and that suggests that velocity is the growth measure.
  - AnthonyMouse 2y ago
    You're essentially assuming an increase in the money supply leads to inflation, which it does if nothing else is different either, but if you also have e.g. a larger population then you're looking at something else.

rat87 2y ago

Intangible products are very real Manufacturing plastic one use sponge bob toys are also real. Real and not particularly useful and perhaps not what most people imagine when they vastly overstate the importance of manufacturing to an economy. Now jets and planes and military supplies is a real issue. But Manufacturing in general isn't how many tanks and fighter jets you can make at best it correlated.

Aeolun 2y ago

Having lots of money is great when you have people willing to sell you stuff. Not so much when you are trying to fight the ones you bought your raw materials from.

agumonkey 2y ago

Makes me wonder, if anybody knows how economies were measured in more socialist countries before the 80s. Did they take other factors into account since a lot of things were shared (based on a documentary about east germany, people used a lot more social services, places, parks, libraries, and exchanged stuff without paying).