4 ms·

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

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?
    - mschuster91 1y ago
      > Implying that an urban dollar isn't the same as a rural dollar? The same dollar buys me a lot more food and accomodation in rural areas. To give you an example, average rent for 60 m² in Munich will easily run to 1200-1500€ a month, and that's net (so you got to add heating and utilities on top). In Eastern Germany, you can get 80 m² for 300€ a month. A trip to the grocery store is about 100€ in Munich, maybe 50-60€ in Eastern Germany, simply because the staff and rent cost of the grocery store are also much lower than in Munich. Unfortunately, collective wage agreements, UI benefits and pensions are federally the same across Germany - that means for example the train driver in Munich barely scrapes by because cost of living eats >50% of his paycheck while the train driver in Eastern Germany lives like a king.
      - deleted 1y ago
        [deleted]
      - 9rx 1y ago
        > The same dollar buys me a lot more food and accomodation in rural areas. That's because food and accommodations are often less valuable in rural areas. Supply and demand, as they say. But that is outside of the scope of inflation. As before, inflation seeks to measure the value of the currency itself, which also fluctuates in value just like everything else. > Unfortunately, collective wage agreements, UI benefits and pensions are federally the same across Germany Theoretically the value of the dollar could differ from place to place like food and houses – value is just arbitrary human opinion, after all – but as currency moves freely, everyone tends to agree on its value across entire countries (and usually the entire world). In practice, you'd also find accommodations and food settling on the same value across entire countries if we had magical portals that could move them to and fro on a whim like we can with currency. But it seems like what you are really thinking of is a cost of living index. Usually those are prepared on a regional basis for the reasons you have described. Inflation is decidedly not intended to be a cost of living index and there is no reason to turn it into a cost of living index. We already have that – not to mention that we also need to understand inflation. You may be also implying that some people use the wrong tool for the job (i.e. trying to use inflation as a cost of living index), but in that case the problem isn't that the tool broken, the problem is that the people are broken. The question then is not "What will it take to modify this screwdriver so that it is better at driving nails?" The question is "Why the fuck aren't you using a hammer?"
snapplebobapple 1y ago
Because they want to make the correct argument that there is moderate waste on the budget when measured in the traditional sense of government paying more than a decent negotiator would payand a staggering amount of waste when measured as utility to the people paying the taxes vs alternatives. Saying gdp is wrong is a fail way to do this.
- braiamp 1y ago
  And yet the fiscal multiplier of money spent by the government is >1. Per each dollar spent by the state, there's a economic growth above one (btw, there's a paper that looks at many actions done by the government[0], guess which actions actually drag the multiplier down even in the most favorable estimations). [0]: https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/49925-FiscalMultiplier_1.pdf https://www.cbo.gov/sites/default/files/114th-congress-2015-...
  - snapplebobapple 1y ago
    Yah, I personally don't think fiscal multiplier is a great measurement because it pushes you towards thinking about government spending in a couple of wrong ways. First of all, it's not correct to say government spending is good because it causes an increase in national income greater than the spending. The correct comparison is to what would have happened without the spending and it's both hard to figure out and not very clear that the government spent that money better than had the left it alone and the populace deployed their own cash/didn't adjust their own capital deployment to account for the extra debt the government took on in their name. This leads to the second problem with it and that's that the next thing someone who likes this measure will say is "the spending is exogenous" which is neither true or a good model of reality. Also, looking at your paper I see the estimate range has 1 in it in all cases so I question the actual correctness of your statement. If one is in the likely range of effect you can't say spending is stimulating additional anything.

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?
  - mschuster91 1y ago
    > Implying that an urban dollar isn't the same as a rural dollar? The same dollar buys me a lot more food and accomodation in rural areas. To give you an example, average rent for 60 m² in Munich will easily run to 1200-1500€ a month, and that's net (so you got to add heating and utilities on top). In Eastern Germany, you can get 80 m² for 300€ a month. A trip to the grocery store is about 100€ in Munich, maybe 50-60€ in Eastern Germany, simply because the staff and rent cost of the grocery store are also much lower than in Munich. Unfortunately, collective wage agreements, UI benefits and pensions are federally the same across Germany - that means for example the train driver in Munich barely scrapes by because cost of living eats >50% of his paycheck while the train driver in Eastern Germany lives like a king.
    - deleted 1y ago
      [deleted]
    - 9rx 1y ago
      > The same dollar buys me a lot more food and accomodation in rural areas. That's because food and accommodations are often less valuable in rural areas. Supply and demand, as they say. But that is outside of the scope of inflation. As before, inflation seeks to measure the value of the currency itself, which also fluctuates in value just like everything else. > Unfortunately, collective wage agreements, UI benefits and pensions are federally the same across Germany Theoretically the value of the dollar could differ from place to place like food and houses – value is just arbitrary human opinion, after all – but as currency moves freely, everyone tends to agree on its value across entire countries (and usually the entire world). In practice, you'd also find accommodations and food settling on the same value across entire countries if we had magical portals that could move them to and fro on a whim like we can with currency. But it seems like what you are really thinking of is a cost of living index. Usually those are prepared on a regional basis for the reasons you have described. Inflation is decidedly not intended to be a cost of living index and there is no reason to turn it into a cost of living index. We already have that – not to mention that we also need to understand inflation. You may be also implying that some people use the wrong tool for the job (i.e. trying to use inflation as a cost of living index), but in that case the problem isn't that the tool broken, the problem is that the people are broken. The question then is not "What will it take to modify this screwdriver so that it is better at driving nails?" The question is "Why the fuck aren't you using a hammer?"

snapplebobapple 1y ago

Because they want to make the correct argument that there is moderate waste on the budget when measured in the traditional sense of government paying more than a decent negotiator would payand a staggering amount of waste when measured as utility to the people paying the taxes vs alternatives. Saying gdp is wrong is a fail way to do this.

braiamp 1y ago
And yet the fiscal multiplier of money spent by the government is >1. Per each dollar spent by the state, there's a economic growth above one (btw, there's a paper that looks at many actions done by the government[0], guess which actions actually drag the multiplier down even in the most favorable estimations). [0]: https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/49925-FiscalMultiplier_1.pdf https://www.cbo.gov/sites/default/files/114th-congress-2015-...
- snapplebobapple 1y ago
  Yah, I personally don't think fiscal multiplier is a great measurement because it pushes you towards thinking about government spending in a couple of wrong ways. First of all, it's not correct to say government spending is good because it causes an increase in national income greater than the spending. The correct comparison is to what would have happened without the spending and it's both hard to figure out and not very clear that the government spent that money better than had the left it alone and the populace deployed their own cash/didn't adjust their own capital deployment to account for the extra debt the government took on in their name. This leads to the second problem with it and that's that the next thing someone who likes this measure will say is "the spending is exogenous" which is neither true or a good model of reality. Also, looking at your paper I see the estimate range has 1 in it in all cases so I question the actual correctness of your statement. If one is in the likely range of effect you can't say spending is stimulating additional anything.