Is GDP a ponzi measurement?

[Agorism]

I've been annoyed by the concept of reporting GDP for the longest time, but I've never seen any Libertarian objection to it so maybe I'm missing something. It's equation includes government spending in a 1:1 manner.

If the government spends a ton of money, then we get a huge GDP quarter, and it's reported on the news that the economy is fired up.

Anyone else see a problem with this?

[low preference guy]

the GDP is a joke concept

[kah13176]

A lot of those numbers are misleading. Take unemployment for example: it "measures the strength of the economy" whilst 1 in 7 people are employed by the government - an instution which IMPEDES economic growth.

[ClayTrainor]

Yea, you're definitely right. Here's the equation for GDP...

GDP = private consumption + gross investment + government spending + (exports − imports), or

http://upload.wikimedia.org/math/3/9/9/399dfa0d4d327da87f9d0e797185bef2.png

[TheNcredibleEgg]

Including gov't borrowing (deficits) in GDP is the biggest flaw, I think. The gov't can just borrow (print) an extra trillion and artificially boost GDP. Because that money has to be paid back - but, of course, it never will be - it should be excluded.

At least gov't spending (the non deficit portion) is based on tax collections - so those tax collections will diminish the private sector contribution by an equal number. So including gov't spending doesn't overstate GDP by itself. Just gov't borrowings.

[HOLLYWOOD]

Yea, you're definitely right. Here's the equation for GDP...

GDP = private consumption + gross investment + government spending + (exports − imports), or

http://upload.wikimedia.org/math/3/9/9/399dfa0d4d327da87f9d0e797185bef2.png

Formula incomplete... Multiplied by a big "I" for Inflation!

[ClayTrainor]

What are some good alternative market indicators to the GDP?

[terp]

I think Murray Rothbard's Private Product Remaining (http://en.wikipedia.org/wiki/Private_Product_Remaining)is a much better metric.

[Stary Hickory]

Yeah read De Sotos banking book, he thoroughly debunks GDP.

[JohnEngland]

Yeah read De Sotos banking book, he thoroughly debunks GDP.

I've seen De Soto in person! In London. Quite a funny guy actually.

[zadrock]

I've seen De Soto in person! In London. Quite a funny guy actually.

Did you see him at LSE in October? I was there!

Z

[erowe1]

I've been annoyed by the concept of reporting GDP for the longest time, but I've never seen any Libertarian objection to it so maybe I'm missing something. It's equation includes government spending in a 1:1 manner.

If the government spends a ton of money, then we get a huge GDP quarter, and it's reported on the news that the economy is fired up.

Anyone else see a problem with this?

Yes. Robert Higgs has argued against including government spending in GDP for a long time. I think you can find some good stuff about it in his book Depression, War, and Cold War, where he argues against the idea that WW2 got us out of the Depression, and shows how fallacious it is to use GDP and unemployment figures as evidence of that claim.

[dbill27]

The Soviet Union's GDP made it's economy look great up until the moment it collapsed. That's got to say something about it.

[V for Voluntary]

Madoff: 'Whole government is a Ponzi scheme'
http://www.msnbc.msn.com/id/41825072/ns/business-consumer_news/
http://www.cbsnews.com/stories/2011/02/27/national/main20037063.shtml

[nathanmn]

Including gov't borrowing (deficits) in GDP is the biggest flaw, I think. The gov't can just borrow (print) an extra trillion and artificially boost GDP. Because that money has to be paid back - but, of course, it never will be - it should be excluded.

At least gov't spending (the non deficit portion) is based on tax collections - so those tax collections will diminish the private sector contribution by an equal number. So including gov't spending doesn't overstate GDP by itself. Just gov't borrowings.

I kind of agree with this. The government is growing from unsustainable borrowing right now, and to some extent that spending is artificially ballooning up the GDP. Still, the government hiring people and buying things is economic activity. That is what the GDP is designed to measure, and that is what it does. Its a relatively simple measurement and should be left alone the way it is. Right now you know what goes into it and you can find the breakdowns of what has expanded or contracted. If someone wanted to they could make their own modified GDP numbers pretty easily.

[LibertyIn08]

Did you see him at LSE in October? I was there!

Z

Sounds like some of us need to plan a London meetup.

[juvanya]

Japan will gain GDP after its reconstruction.