3 ms·
GDP = C + I + G + Xn = W + I + R + P (To grossly simplify the single-nation macroeconomic picture, at least) C = consumption I = investment (the first one) G
by jaggederest 4mo ago
GDP = C + I + G + Xn = W + I + R + P
(To grossly simplify the single-nation macroeconomic picture, at least)
C = consumption
I = investment (the first one)
G = government
Xn = net exports
W = wages paid to labor
I = interest on capital
R = rent on resources and real property
P = profit to entrepreneurs
consumption ~= wages, so if wages go to zero, the economy massively shrinks unless government steps in with something like taxation to fund UBI, sovereign wealth fund distributions, or direct universal ownership.
- jeremysalwen 4mo agoWages could go up, it's just in the form of trillionare paying another trillionare a trillion dollars a day. GDP would be looking rosy!
- dlev_pika 4mo agoThis is kinda what’s been happening for a while - Wages are decoupled from consumption, and it is increasingly aggregated in the higher income brackets. This is the ‘K’ economy. https://www.dallasfed.org/research/economics/2025/1125-yang-consume https://www.dallasfed.org/research/economics/2025/1125-yang-...
- dlev_pika 4mo agoSure, what you describe is usually in the Macro textbooks. However in XXI century USA, Consumption has been detached from ‘wages’ for a while now (“since the 1970s”, ie 2 generations, per https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/) In reality, the top income brackets are propping up Consumption numbers. This is part of what have become to understand as the ‘K’ shaped economy, together with the speeding up of capital accumulation/concentration. https://www.dallasfed.org/research/economics/2025/1125-yang-consume https://www.dallasfed.org/research/economics/2025/1125-yang-... Edits for clarity