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I've talked to a few economists about this and non agree with Elon on this. The biggest issue one person raised is how do you separate out government spending

I've talked to a few economists about this and non agree with Elon on this. The biggest issue one person raised is how do you separate out government spending form GDP? If a US town has a big military base, does that mean the entire towns' GDP is just government spending so ignore it? The government essentially pays for everyone's salary in the town. Where do you draw the line at what is government spending and private spending? Cause if the base went away tomorrow then so does the town and about 95% of its spending, so it would be hard to include any of the towns economy in the GDP calculations if you only want private spending as the private spending in this case is almost all first or second order based solely on government spending. Or at a more macro level. Boeing is a legitimate company but more than 50% and more than 75% depending on how you account for it, comes from government spending. So do you just not include 75% of Boeings spending in GDP? How much of the Boeing employees spending do you include in GDP then as if 75% of their salary is government spending and you are trying to exclude government spending. If you allow their spending to be part of GDP then you are saying you are including government spending in GDP just as a second order event. I'm told people still do their Phd in economics on this topic so its clearly a very hard problemm.

aaronbaugher 1y ago
Maybe the problem is that it's called Gross Domestic Product but we're talking about spending. Spending isn't producing. Sometimes spending promotes production, but may times it doesn't, and a lot of the stuff that gets counted as GDP is just moving dollars from one entity to another.
- greenavocado 1y ago
  You are likely looking for Gross Value Added (GVA): https://www.investopedia.com/terms/g/gross-value-added.asp https://www.investopedia.com/terms/g/gross-value-added.asp
- ajross 1y ago
  > Spending isn't producing. Now you've ruled out lots of other stuff though. Is loaning money "production?" Is spending for services (like, software development!) "production"? Is investing in assets like real estate "production"? All those activities create wealth! Now you've got a definition where only primary production, like farms and construction and mining, have any value. And that's silly too. No, all economic activity creates wealth. The idea of "spending" being separate from "producing" only holds at the microeconomic level where you are playing a zero sum game with a single bank balance.
  - totalkikedeath 1y ago
    [dead]
  - deleted 1y ago
    [deleted]
- braiamp 1y ago
  That's just a historical artifact of when the concept was created [0]. The thing can be measured by income, production (including intermediary products) and expenditure. The government component comes in the expenditure method. Economists don't differentiate between them as they are just looking at the same data with another perspective, we just don't care. [0]: https://www.economist.com/finance-and-economics/2013/12/21/petty-impressive https://www.economist.com/finance-and-economics/2013/12/21/p...
- emseetech 1y ago
  Do we not consider the multiplier effect?
braiamp 1y ago
I don't know why people are entertaining this. The Gross Domestic Product by definition measures every expenditure, income or production of a specific territory. If you exclude government effects in the economy, you get into so many troubles.
- 9rx 1y ago
  Presumably for the same reason you hear people say things like "How can inflation only be 2%? I am spending 10% more. We need to redefine inflation!" In other words, people want the data to speak to the government on their behalf so they don't have to. Musk is playing into that same idea.
  - mschuster91 1y ago
    > Presumably for the same reason you hear people say things like "How can inflation only be 2%? I am spending 10% more. We need to redefine inflation!" The question if the goods basket that is used to define inflation actually reflects reality is valid though! For example, the explosion of rents in urban areas is offset by shockingly low rents in "flyover states" and rural areas, leading to a complete neglect of the problems of urban people because it simply doesn't show up in the statistics. For many poor people, they don't have the money to buy new clothes anyway, much less expensive goods such as new cars or luxury goods - and yet these products are all in goods baskets, offsetting the cost explosion in basic staples (and not just eggs). IMHO, "inflation" as a simple percentage metric is not a KPI that can be used - at the very least, socioeconomic strata and urban/rural differences need to be taken into account because over the last decades, thanks to rural flight the realities have separated way too hard. The problem that the Democrats faced in the last election campaign is that they only focused on KPIs useful for rich people: stock market indices, employment counts, GDP. But that mis-focus completely alienated the wide masses who felt they're being fed lies as their reality (exploding expenses but stagnant wages) was markedly different from what the Democrats pushed.
    - 9rx 1y ago
      > The question if the goods basket that is used to define inflation actually reflects reality is valid though! Why? You're only trying to determine the change in value of the currency. What specific items are in the basket shouldn't matter all that much as long as it is a broad enough sample to be able to separate out the change in value of the goods from the change in value of the currency, along with it being comprised of things consumed frequently enough that you can see any change over a short period of time (e.g. monthly). > socioeconomic strata and urban/rural differences need to be taken into account Implying that an urban dollar isn't the same as a rural dollar? I mean, that is similar to what Musk is saying: That a government dollar isn't the same as a private dollar. But how do we quantify that? If we each throw down a $1 bill and shuffle them around, how can you tell which one represents an urban/government dollar and which represents a rural/private dollar?
Anechoic 1y ago
The biggest issue one person raised is how do you separate out government spending form GDP? (Note that I agree with your larger point) One discussion of this point can be found in an Indicator podcast[0] from a couple of months ago. [0] https://www.npr.org/transcripts/1237470062 https://www.npr.org/transcripts/1237470062
- braiamp 1y ago
  And that issue is non-starter, for the same reasons given in the podcast you even linked: > GDP is just GDP. It's just like, how big is the economy? It's not that hard. And you can't take the government part out of it because the government is a significant part of that.
lossolo 1y ago
The funniest thing is that no one is talking about two trillion dollars of debt a year. Where do they think that money is going?
rsynnott 1y ago
> I've talked to a few economists about this and non agree with Elon on this. Well, I mean, yeah. If you talk to a few astrophysicists, you're fairly unlikely to find one who agrees that the earth is flat and that the stars are LEDs in the earth's roof. Like, it's a fairly fringe idea.

aaronbaugher 1y ago

Maybe the problem is that it's called Gross Domestic Product but we're talking about spending. Spending isn't producing. Sometimes spending promotes production, but may times it doesn't, and a lot of the stuff that gets counted as GDP is just moving dollars from one entity to another.

greenavocado 1y ago
You are likely looking for Gross Value Added (GVA): https://www.investopedia.com/terms/g/gross-value-added.asp https://www.investopedia.com/terms/g/gross-value-added.asp
ajross 1y ago
> Spending isn't producing. Now you've ruled out lots of other stuff though. Is loaning money "production?" Is spending for services (like, software development!) "production"? Is investing in assets like real estate "production"? All those activities create wealth! Now you've got a definition where only primary production, like farms and construction and mining, have any value. And that's silly too. No, all economic activity creates wealth. The idea of "spending" being separate from "producing" only holds at the microeconomic level where you are playing a zero sum game with a single bank balance.
- totalkikedeath 1y ago
  [dead]
- deleted 1y ago
  [deleted]
braiamp 1y ago
That's just a historical artifact of when the concept was created [0]. The thing can be measured by income, production (including intermediary products) and expenditure. The government component comes in the expenditure method. Economists don't differentiate between them as they are just looking at the same data with another perspective, we just don't care. [0]: https://www.economist.com/finance-and-economics/2013/12/21/petty-impressive https://www.economist.com/finance-and-economics/2013/12/21/p...
emseetech 1y ago
Do we not consider the multiplier effect?

braiamp 1y ago

I don't know why people are entertaining this. The Gross Domestic Product by definition measures every expenditure, income or production of a specific territory. If you exclude government effects in the economy, you get into so many troubles.

9rx 1y ago
Presumably for the same reason you hear people say things like "How can inflation only be 2%? I am spending 10% more. We need to redefine inflation!" In other words, people want the data to speak to the government on their behalf so they don't have to. Musk is playing into that same idea.
- mschuster91 1y ago
  > Presumably for the same reason you hear people say things like "How can inflation only be 2%? I am spending 10% more. We need to redefine inflation!" The question if the goods basket that is used to define inflation actually reflects reality is valid though! For example, the explosion of rents in urban areas is offset by shockingly low rents in "flyover states" and rural areas, leading to a complete neglect of the problems of urban people because it simply doesn't show up in the statistics. For many poor people, they don't have the money to buy new clothes anyway, much less expensive goods such as new cars or luxury goods - and yet these products are all in goods baskets, offsetting the cost explosion in basic staples (and not just eggs). IMHO, "inflation" as a simple percentage metric is not a KPI that can be used - at the very least, socioeconomic strata and urban/rural differences need to be taken into account because over the last decades, thanks to rural flight the realities have separated way too hard. The problem that the Democrats faced in the last election campaign is that they only focused on KPIs useful for rich people: stock market indices, employment counts, GDP. But that mis-focus completely alienated the wide masses who felt they're being fed lies as their reality (exploding expenses but stagnant wages) was markedly different from what the Democrats pushed.
  - 9rx 1y ago
    > The question if the goods basket that is used to define inflation actually reflects reality is valid though! Why? You're only trying to determine the change in value of the currency. What specific items are in the basket shouldn't matter all that much as long as it is a broad enough sample to be able to separate out the change in value of the goods from the change in value of the currency, along with it being comprised of things consumed frequently enough that you can see any change over a short period of time (e.g. monthly). > socioeconomic strata and urban/rural differences need to be taken into account Implying that an urban dollar isn't the same as a rural dollar? I mean, that is similar to what Musk is saying: That a government dollar isn't the same as a private dollar. But how do we quantify that? If we each throw down a $1 bill and shuffle them around, how can you tell which one represents an urban/government dollar and which represents a rural/private dollar?

Anechoic 1y ago

The biggest issue one person raised is how do you separate out government spending form GDP? (Note that I agree with your larger point) One discussion of this point can be found in an Indicator podcast[0] from a couple of months ago. [0] https://www.npr.org/transcripts/1237470062 https://www.npr.org/transcripts/1237470062

braiamp 1y ago
And that issue is non-starter, for the same reasons given in the podcast you even linked: > GDP is just GDP. It's just like, how big is the economy? It's not that hard. And you can't take the government part out of it because the government is a significant part of that.

lossolo 1y ago

The funniest thing is that no one is talking about two trillion dollars of debt a year. Where do they think that money is going?

rsynnott 1y ago

> I've talked to a few economists about this and non agree with Elon on this. Well, I mean, yeah. If you talk to a few astrophysicists, you're fairly unlikely to find one who agrees that the earth is flat and that the stars are LEDs in the earth's roof. Like, it's a fairly fringe idea.