625 sats \ 1 reply \ @Voldemort 21 Feb \ on: GDP is a Poor Measure of Economic Health econ
I take issue with any article that bemoans GDP without discussing real GDP. This is the typical disingenuousness of Austrian economists that turned me away from them so many years ago.
Also, a cursory comparison between gross output mentioned in that article and real GDP and the two basically move in lockstep, with GO just being a higher number. I just don't see how it adds any additional value.
WRT to your question - GDP is far from perfect but it has its utility.
Think of it as a general health marker, like blood pressure or something. Sure, I can have normal blood pressure but have something else causing issues. Or I can have high blood pressure because I am anxious but otherwise healthy. That is why there are experts to interpret such things.
Real GDP should be considered as means to understand the growth of an economy. It is not perfect, but in general does a decent job of capturing that information. Let's not throw the baby out with the bath water because people use incorrectly.
Also, if one knows where it falls short, one can check other data to get a more holistic picture. It is not hard to check the percent of GDP that comes from government deficits, for example.
Government expenditures being included in GDP is my main problem with it, which is why I also follow how much government deficits contribute.
Here are my knee jerk reactions to the first two conceptual issues you have listed.
People spend money on leisure goods directly (TVs, subscriptions, books, etc.) and they spend money indirectly when they e.g. pay someone to mow their lawn. Also, an increase in leisure does not generally grow the economy.
How is producing a home adding value if no one buys it? If someone builds a home that sits on a hill and never gets used, I fail to see how that should be considered any more productive than digging holes.
"Home production" is the econ term for everything that might be considered "housework" or "do it yourself", not building houses. The problem with excluding it is that the same service done by a contractor or employee would count towards GDP.
The leisure problem, is that leisure time is a consumer good, but it's free and we have no good way of pricing its value to the consumer.
"Real GDP" has all of the same problems as GDP. It just has a very flawed inflation adjustment applied to it so that comparisons over time make more sense.
I'm not an expert on "Gross Output", but my understanding is that it captures more of the structure of production, by including intermediate stages. There are pro's and con's to doing this. The con that most people will raise is the supposed "double counting", since the earlier stage prices are supposedly included in the price of the final goods. The pro's are that you don't have to make arbitrary decisions about which goods and services are final goods and services vs which are intermediate. It is also more of a measure of overall economic activity. It does move with GDP most of the time, but it generally declines more sharply during recessions.
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