Geoff Carmody,

I agree with all your points at the end of your article about the policies that should be on the table. I agree none should be excluded.

However, why didn't you include in your list, carbon pricing, renewable energy policies and the other carbon restraint policies? I understand these polices, in total, are costing about $20 billion per year, but are highly unlikely to deliver benefits (in terms of climate change or climate damages avoided) in either the short term or long term (ref. my submission to the Senate Committee on repeal of the Carbon Tax legislation, Submission No.2 here: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Clean_Energy_Legislation/Submissions ).

Geoff, I suspect that much of the fall in recent times can be attributed to a decade and a half of falling productivity growth. Governments of both major parties do not seem to be serious about this rather vital indicator or perhaps even know what to do. Unfortunately, living off the proceeds of mining inflows for so long while our major competitors catch up is a recipe that can only deliver the situation you speak of. Growth in GDP will not correct this malaise. Productivity must improve as well.

Peter Lang, I understand why carbon pricing is included. We must look beyond the prism of simple carbon abatement. It is true that an Aussie only tax will have little effect. However, once the marginal cost of carbon derived power approaches that of renewables, investment in these emerging technologies will naturally ramp up. In these cases it is usually the one that is first to the market that turns out to be the winner. More investment by private industry should be encouraged.

‘Real’ GDP!!

What an extraordinary concept!

So there’s real GDP and there’s ?ordinary or perhaps unreal GDP ??

How on earth does ‘real’ GDP differ from whatever other form of GDP there might be?

Is it somehow a better measure of growth and/or prosperity?

Or is still just as fundamentally flawed?

I think it is pretty clear that it is still just as flawed as ?unreal GDP!

Crikey, when are we going to get it through our thick heads that we need a measure of wellbeing that is a whole lot more realistic and meaningful than GDP?

GDP includes all sorts of things which really should NOT come out on the positive side of the ledger, such as economic activity generated by smoking-related illness, or by floods and earthquakes, or by continuous population growth, all of which does NOTHING to improve the lot of the average citizen.

And even with all the stuff added to GDP which just simply should NOT be part of it, it is still faltering. So if we were to consider only the genuinely good part of it, it would indeed be very badly faltering.

< Growth-supporting reform should start now. >

Hells bells, what a totally WRONG solution!!

This is what we’ve always done! It has been tried to the nth degree and shown to be an abject FAILURE!

What we need is to carefully define the good growth and the bad growth and concentrate on improving the good stuff and minimising the bad stuff.

One thing that has always come out on the positive side of the ledger is population growth. Our very rapid pop growth generates enormous economic activity. But hey, it is almost entirely just a case of economic activity which duplicates all the needs for the growing population without doing much at all for the pre-existing population.

Population growth increases the demand for everything. This is seen in the eyes of the Geoff Carmody’s of the world as good thing. But it is JUST THE OPPOSITE!!

continued

What we desperately need is to slow the increase in the demand for everything right down, so that the supply side can catch up and start to generate some real improvements, instead of just battling to supply the same level of everything to ever-more people.

We need to be able to improve the quality of supply (of resources, goods, services and infrastructure), rather than spending all our efforts on increasing the quantity!

THIS is of FUNDAMENTAL importance.

So, a couple of the key points in the reform of failing national well-being and prosperity are:

1. Develop a meaningful indicator and get right away from the critically flawed GPD indicator and

2. Significantly and steadily REDUCE population growth so that we can balance supply and demand, instead of be forever chasing the tail of rapidly increasing demand.

We do need to grow, but in a sustainable way.
What we need are leaders with both courage of conviction and virtually unlimited future vision.
Future vision would allow us to use our own massive super funds to develop Australia, with nation building projects, that are created to earn a exponentially growing profit!
Making such investment by our super funds tax free, is a no brainer.
We not only get no tax when this money is invested offshore, but miss out on the huge nation building, income earning projects as well.
What we need is an inland shipping canal, that not only massively reduces the time and energy component, of shipping our goods to Asia, but provide a new source of usable totally reliable water.
We should build a fleet of nuclear powered roll on roll off submersible Ferries, built for the same purpose.
Being submersible will allow them to take full advantage of ocean currents, sail in all weather, and provide a comfortable armchair ride, where sea sickness is little more than a distant memory!
Bulk transfer, is still the most profitable enterprise, and removing most if not all nonessential handling, will only ever improve both outcomes.
And a dual lane canal, will allow lock gates to continually move the water around, carrying the freight carriers, in and out!
And ensure, continual flushing, meaning this water could be harvested to support agriculture and industry, in our formerly dead heart.
Meaning, we can grow, and support maybe as much as 100,000,000 people sustainablably, and economies of scale, that make many new industries and investment, eminently possible and practical.
Like rapid rail, which would link the Ferries, with their ultimate customers!
If Curtain or Chiefly were alive today, and proposed a Snowy mountain scheme, there'd be almost universal howls of derision, and people, (experts, who know all the reasons something can't be done,) screaming from the roof tops, DREAMERS, we can't afford it, it can't be done!
I rest my case.
Rhrosty.

Geoff, there is only one real reform we need to undertake, and now, and thats real tax reform.

We MUST find a way to raise additional taxes, without asking hard working Australians to dig deeper into their already strained pockets.

Which ever way you look at it, we are headed for a train wreck, the likes few of us alive today have ever seen, with mining coming off the boil, iro ore looking like its headed for a basket case scenario, as the best prices have been during the infrastructure building process, and now that production is about to start, the mining tax will most likely take any cream.

The other problem we face is the reality that we no longer have to funds to buy jobs, so tens of thousands will go, placing more strain on taxes, both from reduced collection and increased support payments.

It is my view that We must have a serious look at the pros and cons of a financial transaction tax. If not, why not?

Footnote:
Said canal, would support several brand new thorium reactors, and or, solar thermal power plants, or some combination of both!
This would allow a natural progressive migration from the cities, and brand new industries to follow or lead?
The left over salt load from various new agribusinesses, i.e., would support things like light metal smelting, Magnesium and titanium, which we have lots of!
And support brand new niche industries, like 3D printing, which by the by, can use titanium, to create jet/rocket engine parts and so on.
Thorium is currently a waste product of rare earth processing, we have lots of that as well!
Rhrosty.

<< We do need to grow, but in a sustainable way. >>

Rhrosty, we do need to develop a sustainable society. Then once we have confidently got ourselves on the right track towards it, we could accommodate some extra growth (expansion in population, infrastructure and everything else that goes with it), if we can do it without compromising the all-important sustainability imperative.

<< What we need are leaders with both courage of conviction and virtually unlimited future vision. >>

But it simply MUST be a future vision based on a paradigm of sustainability, and NOT one based on growth as the overriding priority.

Oh, Ludwig, Ludwig. What an embarrassing rant.

>>‘Real’ GDP!! What an extraordinary concept! So there’s real GDP and there’s ?ordinary or perhaps unreal GDP ?? How on earth does ‘real’ GDP differ from whatever other form of GDP there might be?Is it somehow a better measure of growth and/or prosperity? Or is still just as fundamentally flawed? I think it is pretty clear that it is still just as flawed as ?unreal GDP!<<

In the time it took you to write that sentence, you could have discovered that the "real" part is what you arrive at after taking inflation into account.

http://www.investopedia.com/terms/r/realgdp.asp

Otherwise, you would be left with a raw dollar figure that includes inflation, which is not particularly useful.

>>GDP includes all sorts of things which really should NOT come out on the positive side of the ledger, such as economic activity generated by smoking-related illness, or by floods and earthquakes, or by continuous population growth, all of which does NOTHING to improve the lot of the average citizen.<<

What a crock.

Illnesses create work for nurses and doctors, who then spend their wages at the corner store, keeping Mr and Mrs Chang in business, who then spend their profits on educating their children, causing employment for teachers, who then etc. etc. Floods and earthquakes siphon money back out of the insurance companies, into the hands of builders, whose labourers spend their wages down at the corner store and so on.

>>What we desperately need is to slow the increase in the demand for everything right down, so that the supply side can catch up.<<

Really? You are assuming that everyone else is like you, and is content with the lifestyle they have, and are also prepared to accept the slow and steady decline in the future that your prescription dictates. Unfortunately for your model, there are still many people who would like very much to improve their lot, live in better accommodation, have overseas holidays, choose their children's education and so on.

For that to be permissible, we need to continue to allow our economy to grow.

Croc099,

Carbon pricing will not change the climate nor deliver benefits in terms of climate damages avoided. Read the link I gave to understand why.

Can you explain, objectively, why you advocate renewable energy? What are your objective criteria, e.g.:

Energy security
Energy supply reliability
Energy quality (e.g. voltage and frequency control)
Cost of energy
Health and safety
Environmentally benign

Renewable energy is a poor option for meeting these criteria. So why do you advocate it? The reason most of RE proponents advocate it is emotive and/or ideological, not rational.

Peter, none of those things on the list. I actually agreed with you that the local initiative will have little effect on the global production of carbon effluents. I stated that I tend to look at the investment in the newer technologies as the marginal price of fossil fuel energy approaches the renewable thresholds. It is a mostly untapped market at the moment. Many other industries are leaving our shores so business investment in other industries is needed.

Croc099,

I suggest there are two serious misunderstandings in your comment. Carbon pricing will succeed, anywhere, for the reasons explained in the submission No.2 linked in my first comment. It is an enormous waste of money. It is seriously damaging our economy and will damage all economies that try it.

"the marginal price of fossil fuel energy approaches the renewable thresholds."

That is flim-flam and gobbledigook. Any government impost to favour renewable energy damages our economy. The Labor-greens carbon restraint policies are costing us $20 billion a year. Renewables can achieve nothing of significance. They are an enormous waste of money, and a massive distraction from pragmatic policies.

And to ignore, reject, avoid or not understand the requirements of the energy consumers, as I listed above, suggests you lack an understanding of the basics.

If we want to meet all the requirements that energy (actually electricity) consumers want and need, and also want to cut global GHG emissions, then the solution has to be economically rational. That means, governments and utilities will select the technological options without government incentives.

The only technology that is capable of achieving all the requirements and large global CO2 abatement as well is nuclear power - with small, low cost units that are suitable for all countries and regions. To achieve that, we need to advocate removing the impediments that are preventing competition in development of low cost nuclear power plants.

One early win would be to raise the allowable radiation limits to levels that are justified on the basis of evidence - as simply and well explained here: http://home.comcast.net/~robert.hargraves/public_html/RadiationSafety26SixPage.pdf . That step alone would greatly reduce the cost of nuclerar power (over time), reduce fear, and boost development, commercialisation and competition.

Peter, there is no need to be pompous about it. Your suggestion that I don't understand just shows an abject ignorance. There is no reason why carbon pricing should cost anything as the tax raised could be used to reduce other taxes so that the net transfer of money to the government is zero. Renewables have not achieved stellar results because there is a lack of investment not despite it. In any case, there is no great reason to kill off all fossil fuels. Carbon effluents only need to be reduced to sustainable levels, not eliminated.

It will continue to get worse no matter how low interest rates become. When we sold off all our Govt banks, we lost monetary sovereignty. Now even our inflationary money gets created as debt by private banks here and OS. So our currency gets depreciated and we have to pay back principal + interest on a loss. How insane!

Who are the major shareholders in all our banks ? JP Morgan, HSBC, Citbank and NAB own up to 40% of all our bank,so the profits go OS.

At the last G20 China gave the USA a serve about money printing and living off the fumes of a false economy. They were right. The west has totally lost the plot letting big private central banking cartels dictate the money supply and what country we will invade next to shore up their profits.

Croc099,

>”There is no reason why carbon pricing should cost anything as the tax raised could be used to reduce other taxes so that the net transfer of money to the government is zero.”

Sorry. That statement is nonsense. It’s been discussed to death for 20 years, and know one seriously suggests you can have a carbon price regime with no economic repercussions. The repercussions of damaging our economy relative to others is huge. If you’d take the time to read the link, you might begin to understand. Carbon pricing cannot succeed.

“Renewables have not achieved stellar results because there is a lack of investment not despite it.”

No. That is not the reason. The reason is that there are physical constraints, such as no viable storage. And wind and solar (PV or CST) for example require about 10x the materials nuclear requires to supply the same energy over a life time. And most important, they are hugely expensive and don’t meet the basic requirements listed in previous comments. You haven’t acknowledged that yet.

>”In any case, there is no great reason to kill off all fossil fuels. Carbon effluents only need to be reduced to sustainable levels, not eliminated.”

What are sustainable levels and how do you reduce emissions to that level without cutting fossil fuels by around 80% be end of century? And how do you think renewables can make any significant dent in the amount of energy we will need by mid century and end of century? Clearly you are not across any of the numbers.

Actually, future carbon constraints don't need to be an impediment to economic growth, but something that actually stimulates it!
We should put a price on carbon, say a million dollars a ton!
There's another component, the cap.
The cap can be current emissions, meaning no sanely operated business will actually pay this tax, unless they fall below a progressively lowered cap!
So, tax credits, could be earned for lower carbon outcomes, such as would occur, if we limited steel production only to direct reduction arc furnaces, and located the smelters, right alongside new cheaper than coal thorium power stations! [Reductions need to be proven, before any credits could be distributed.]
The first outcome, removing transmission line losses,and halving current steel/aluminum smelting carbon emission!
And indeed, make exporting iron ore totally uneconomic, when compared to ready to use metal/products.
After cheap energy, the other component is tax!
I don't believe we can continue to operate any sanely run economy, with a built in structural deficit, compounded, by a shrinking cadre of actual tax payers!
So the second part of sustainable growth, is tax reform and simplification, that removes compliance, and compliance costs, which currently is a huge averaged 7% impost on the averaged bottom line, of Australian based business.
Moreover, sensible reform, would at last, include all those currently avoiding tax, or just a fair share, meaning the rate could be surprisingly low.
The lowest tax component in the world, coupled to the lowest energy costs, would have the high tech industries of the world, and many self funded retirees, queuing to relocate here, and in so doing, actually and massively, increase total tax receipts!
More inland revenue, would allow more infrastructure rollouts, and at a faster but sustainable pace, ahead of demand.
We need to grow, for many multiple and extremely credible reasons?
Rhrosty.

The real issue is the "per capita".

The stock market peaked in November 2007 and its been mostly dark clouds ever since.

In the years since, we've added 1.18 million more immigrants.

More than *three quarters* are from Third World/less-developed countries.
What are these people likely to contribute to our economy?
Unless we stop this ridiculous self-sabotage, no other measures will make a damn difference.

I agree with those who suggest a transaction tax.
But it must replace *all* other taxes.

MORONS please note.You don't need any more taxes if you have Govt banks who create credit debt free.

Govts should never be allowed to borrow and private banks should not be allowed to create and loan out money they do not have.

I agree with this points.

Hmm, so the G20 wants above trend growth and thus there will be growth.

Sounds a little far fetched to me. Real growth requires the consumption of stuff. Stuff is becoming increasingly to produce as the little phrase so conveniently overlooked in this and similiar views is ignored. That phrase is 'the limits to growth.'

We may not yet be at the limits but we are getting close. Just because we want something doesn't make it so. I would suggest continual disappointment is the future for those wanting or expecting growth.

It's now time to adapt to a post growth economy whether you like it or not.

Why should growth be an imperative?

So long as we want to grow, we are not happy with what we have.

How much and how long do we want to grow? 2 meters? 3 meters? as tall as Mt. Everest?

Unless we decide on a fixed limit to growth, we will never be happy!

But, you may say, it's all about ECONOMIC growth...

Then why doesn't the title say so?

Because the West has lost all touch with reality (and dragged the rest of the world along), all proportion, so exaggerating the importance of economy and GDP that it forgot what life is about; that money cannot make one happy; and that there are other forms of growth, such as in character-building, increasing compassion, courage and loving relationships (also spiritual growth, but accepting it is not a requisite for this discussion).

In fact, even the meaning of the word 'economy' was forgotten: the online dictionary gives:

1. thrifty management; frugality in the expenditure or consumption of money, materials, etc.
2. an act or means of thrifty saving; a saving.
3. the management of the resources of a community, country, etc., especially with a view to its productivity.
4. the prosperity or earnings of a place.

But the first two definitions are forgotten.

We better learn to be happy with what we already have. If we do so, we will be happier (a tautology)!

Instead of looking for how we can make more dollars (you can't take them with you to heaven anyway), we better cultivate the things in life that bring joy without costing a cent as well as making the most of those things that cost little, which we already have.

Contentment is superior to growth.

While the practical steps suggested by the author are generally positive, the goal they try to achieve is a mirage.

Excellent post Yuyutsu.

Surely there has to be growth to pay for the increasing cost of the growing human population.

If there has to be growth, it must be productive growth, in other words, of those who make up the growth numbers, the vast majority of them must contribute, not just be another source of expenditure we have to pick up the tab for, which has been our main problems of past years.

On the one hand,we have been taking in people who don't contribute, while on the other, we have also been giving many of our jobs to 457 holders. Then there is our aging population to consider as well.

However, with our looming jobs cricis, we must suspend all 457 visas and, we must put a hold on immigration, at least until we get a tax system that can cope, because at the moment we are headed south, big time.

<< Oh, Ludwig, Ludwig. What an embarrassing rant. >>

Oow, sorry to embarrass you Pericles, old mate!

Actually, I think you have embarrassed yourself considerably more with your amazing response.

So ‘real’ GDP is simply GDP that is inflation-adjusted. Well how about that!

So does that make it a more meaningful indicator of our national wellbeing?

Erm… no. GDP is so critically flawed that presenting it in an inflation-adjusted manner is akin to a presenting a wolf in goat’s clothing rather than sheep’s.

I wrote:

>> GDP includes all sorts of things which really should NOT come out on the positive side of the ledger… <<

You wrote:

<< What a crock >>

And then:

<< Illnesses create work for nurses and doctors… >>

and

<< Floods and earthquakes siphon money back out of the insurance companies… >>

In other words, what I was saying is not a crock at all! You AGREE that bad things are counted as a positive part of GDP!

So by your reasoning, if we had more illness and more natural disasters, we’d have a bigger GDP, all else being equal, which would indicate a better outlook for our economy and national wellbeing!!

Crikey Pericles, you’d have to be embarrassed about that faux pas!!

continued

Pericles, going by the same sort of reasoning, you would be all for rapid population growth, because it would generate a great deal of economic activity, end of story. You wouldn’t even consider the downsides that this sort of growth has for our environment, resource base, infrastructure and services, or the fact that the vast majority of that economic activity is self-serving for the new residents and of very little use to the pre-existing population.

Also, you apparently completely don’t grasp the concept of balancing supply and demand and think that it is not only ok to have an ever-increasing demand for everything, but that it is essential for economic growth…. and that economic growth is essential for a decent national future.

That is simply amazing!!

We surely MUST head towards stabilising demand. As the demand slows, we will be able to function with a lower rate of economic growth. And then we will reach a point, some time after the demand stops growing, where we will be able to provide all our needs and maintain a high quality of life without a growing economy.

Surely you can appreciate that the demand cannot keep growing forever. Likewise with the economy. So please, get your headspace around the absolute imperative for us to strive for a stable population and a stable non-growing economy….. and STOP worshipping this insane notion that we have to have continuous economic growth, forever more.

Farmers know about growth needing to be productive, if it's not they quickly pull it out of the ground.

'Experts' however seem to come up with high speed train 'visions' with no export product ability between cities 1,000km apart, where airlines and buses already operate.

In contrast, a northern Qld Gregory Range wet season water harvesting system with aqueduct south to the upper Darling River catchment to water new and existing food and fibre local and export production en route, should be in focus.

How to get the blinkers off and overcome the apathy and jealousy seems the difficult task to get some talk happening.

In other words, how to get government interested in productivity and growth involving the Gregory Range Qld?

Scroll down here to, The Climate.
http://www.rgsq.org.au/19-143c
Quote, "The greatest rainfall recorded in a year was 2 045.7 mm in 1974, and the least was 308.4 mm in 1926."

You are joking, of course, Ludwig.

>>Oow, sorry to embarrass you Pericles, old mate!<<

I wasn't the one embarrassed, Ludwig, it was your rant, not mine.

>>So by your reasoning, if we had more illness and more natural disasters, we’d have a bigger GDP<<

Don't be silly. If we had twenty million nurses tending a single patient, there would not be sufficient money to pay their salaries, would there? I'm amazed that you would even imagine that is my "reasoning", unless you were deliberately setting out to be insulting.

Which is not out of the question, of course, but I'd like to imagine that you are above that sort of thing.

The point is, though, that if there was only enough money from (say) mining to pay for their employees' food and lodging, then the economy would be worth $x. If however there is enough excess generated (lets call that $y) to pay for doctors and nurses, GDP would be ($x+$y). And if there was even greater surplus generated, enough ($z) to pay for a holiday in Cairns, then GDP would be ($x+$y+$z). So the economic activity that keeps doctors, nurses, hotel receptionists etc. in employment needs to be taken into consideration.

You may ask, why then do we not just count the money generated from mining? And the answer would be yes, we could do that. But it wouldn't tell us much about the prosperity of the nation as a whole, just the profitability of Gina Rinehart.

Are you with me?

And you are right that GDP only measures economic activity. The reason for that is because, well... that's what it is designed to do. If you want a Happiness Index like Bhutan has, then by all means invent one.

>>Also, you apparently completely don’t grasp the concept of balancing supply and demand...<<

Actually, I do. We have significant spare capacity for growth in our economy, with low interest, low unemployment and low inflation. I don't see the need to throttle growth just yet awhile.

<< We have significant spare capacity for growth in our economy, with low interest, low unemployment and low inflation. I don't see the need to throttle growth just yet awhile. >>

Interesting statement Pericles.

Firstly, you are not separating the good and bad growth. This is a fundamental flaw that just about all analysts and commentators on this enormous subject have.

There is the good part – which should lead to bigger average profits, better services and infrastructure, high employment rates, etc, etc…

And then there’s the bad part, which forever increases the demand for more economic turnover, more services and infrastructure, and the creation of ever-more jobs in order to just maintain the same unemployment rate.

Of course, this bad part is population growth... which just completely works against the good part!!

So, if you are using the term ‘growth’ to include both good and bad growth, which I’m sure you are, just as practically everyone else does, then…..

NO! We do NOT have much ‘spare capacity’ for growth at all!

Look at water supplies, and congestion, and at all manner of other indicators, that are telling us that enough is enough!

continued

And we worship this insane thing called GDP…. which we want to be strongly growing all the time, and if it isn’t, our silly economists (actually; pseudoeconomists or false economists, or complete anti-economists) and politicians shake their heads and mumble to each other that something is very wrong!

GDP is made up of the good and bad elements of growth, all of which come out on the positive side of the ledger… which is just insane!!

GDP is not just a very bad indicator of our economic wellbeing, it is a fundamentally counterintuitive and terribly WRONG indicator.

It really does need to be completely abandoned in anything like its current form.

Pericles, it seems to me that you do indeed have no problem with economic activity from things like illness and natural disasters contributing to GDP, and that if we had more of these, we would indeed have a larger GDP, and that you would be happy with that!

And you don’t seem to get the supply / demand bit. If you did, you would see the enormous folly in the promotion of ever-increasing demand, for as long as we have major issues with the supply side (of resources [especially water], goods, services and infrastructure). You apparently don't appreciate that at all.

Yes look at the folly with all the CO2 propaganda spin.
What a waste of time and money.

In reality there appears to be evidence of human impact changing the climate but the cause is not CO2.

As I have said before, AGW and Kyoto science has not even measured and assessed photosynthesis linked warmth in unprecedented ocean algae plant matter proliferated by unprecedented sewage nutrient pollution dumped daily into ocean ecosystems.

Empirical evidence indicates need for whole of water ecosystem management and if that was to occur there could be very significant economic and environment growth worldwide.

Engineers are capable but economists appear to be blocking insight to the problem, therefore solutions are being obstructed.
Economists want dollars whereas the ocean needs less nutrients. Economist push aquaculture policy but not ecosystem science policy.

Water has been harness by engineers in the past while at the same time providing much business and employment in plumbing.

Now fresh water starved estuaries need rehabilitation, such as by plumbing environment flows into estuaries via a water harvesting and aqueduct system, southward from Queensland's wet north.

The would be if they could be ETS "scheme" traders hell bent on making millions in commissions from selling nothing of value such as CO2, should think again.

Talk should include potential or not of a water harvesting scheme with commissions from selling new arable land and viable agricultural industry pumping out local and export product, from the Gregory Range NQ to SA - instead of a high speed inter-city 'gravy' train.

I think you may be misinterpreting the situation, Ludwig, just a little.

>>GDP is made up of the good and bad elements of growth<<

As I tried to explain to you, there is no such thing as "good" and "bad" GDP. There is just GDP - nominal GDP that includes inflation, and real GDP that has inflation extracted. If you deny the contribution made by the doctors and nurses who look after sick people, then you need to separate the amount they spend at the corner store from the money spent by the miners etc. Can you see how difficult that would be?

>>Pericles, it seems to me that you do indeed have no problem with economic activity from things like illness and natural disasters contributing to GDP, and that if we had more of these, we would indeed have a larger GDP, and that you would be happy with that!<<

The logic behind "if we had more of these, we would indeed have a larger GDP" is fundamentally and irredeemably wrong. The disasters, illnesses etc. do not themselves "contribute to GDP".

Think of bushfires for a moment. If the entire country (let's take an extreme example, so you can join the dots) were ablaze, and needed 22 million people to fight the fires, what, do you think, would happen to GDP? Would it a) increase because "natural disasters contribute to GDP", b) stay the same or c) decrease?

Same for earthquakes. Same for medical support. The people who perform the tasks of reconstruction, or nursing or whatever, are counted in the GDP figures, because these are services that are provided in exchange for money, and GDP is the totality of goods and services produced within an economy.

Is it becoming clearer now?

If there is any part of the logic above that you find difficult to accept, by all means highlight it so that we can explore it. This idea that earthquakes increase GDP is sadly such a common fallacy, it is best that we try to put it to bed once and for all.

Don't worry Ludwig, it ain't gonna happen.
Growth is dependant on energy, nothing else just energy.
"They" think by changing rules and playing monopoly with real money
that they can change reality.
The energy areas of coal, oil & gas are what will govern our productivity.

Coal will not be a problem for some time, perhaps 20 years but oil &
gas are another matter.
Conventional oil is still declining at about 4% per day per year.
Tight oil is still holding up but there is significant risk that it
will start its decline around 2017. However there is a further risk
that tight oil will start its decline this year if interest rates in
the US rise. That will immediately push the Wall St money men out of
the fracking and horizontal well business. If so decline will be very
rapid and it will be finished totally in five years.
All our refineries will be closed and we will import 100% of fuels,
that is provided we can find someone to sell it to us.

All this means that Australia will be a little better off than a lot
of countries, any GDP we manage to squeeze out in the next couple of
years will be short lived.
Money will be very tight and even the printing press will not be able
to keep up with it. Any thought of building nuclear power stations
will just be a dream. Such dreams as the Very Fast Train will be just that.
We will probably run out of money to finish the NBN by then.

Welcome to the Post Peak Oil Woeld !

Pericles, you sound like Zorg (The Fifth Element) breaking a glass so the makers of cleaning robots can feed their children.
Bad = Good.

Ludwig, I don't think disasters would help the economy at all, as many productive people would be injured or killed, so no longer contributing.

The measure presumably includes much the same degree of good and bad every year, so you can still see if it's going up or down.

What hurts is when something "good" leaves our economy and goes elsewhere (most likely China).

Or we add another million immigrants to the "per capita" equation, during the worst economy since the Great Depression.

JF Aus, We will need a faster interstate and intrastate train service
but the VFT is now out of our financial reach. Likewise nuclear power
we have just left it too late.

A fast enough train service will do the trick and the airlines fares
will be such that there will be little traffic except for the likes of politicians,
I mean you couldn't expect them to go to Canberra by train could you ?

Bazz, how many people for what reason would want and need to travel so quickly between Melbourne and Sydney to make a VFT viable?

Best to go to theme parks for the thrill.

I think aircraft fuel will become a lot cheaper and available once science gets recognition and adequate resources to recycle sewage nutrient-fed algae into affordable biofuel.

JF Aus, I think you misunderstood my last post.
There is no justification for a Very Fast Train.
The VFTs are basically a line of sight construction which means the
cost between Newcastle and Wagga would be enormous.

As the airlines become uneconomical and further contract there will be
a need for a fast enough service along the east coast from Brisbane,
Sydney, Canberra, Melbourne & Adelaide.

The existing track was built using horses and scoops, but while the
fuel is readily available and not too costly the track should be
straightened and relaid for the existing trains to be run at their maximum speed. (XPT @ 125 MPH).
In any case the mainlines should be electrified and then
somewhat higher speeds might be possible, say 150 Mph.

Think what can be done with the money saved by not building Badgeries
Creek or transferring Mascot operations to Badgeries Creek and selling
Kingsford Smith Airport for housing or new zero growth age industry.
By the time all that is done the airlines will no longer be operating
in a manner that we now would recognise.
The fuels you mention are likely to be either unsustainable or
uneconomic. The problem that usually surfaces with fuels of these
types is to scale them up to the required volumes.

Geoff Dixon, past CEO of QANTAS recognises that airlines are on
borrowed times. I suspect that many more understand that but dare not
recognise the elephant in the corner.

More like Canute than Zorg, I think, Shockadelic.

>>Pericles, you sound like Zorg (The Fifth Element) breaking a glass so the makers of cleaning robots can feed their children. Bad = Good.<<

I was only trying to illustrate the underlying fallacy that disasters/disease etc. add to GDP, and instead put it into a more understandable context for Ludwig.

I actually support the "Zorg got it wrong" faction...

"Zorg breaks a glass and a bunch of little robot helpers immediately come in to clean it up, as Zorg explains that "all life comes from destruction" ... but that makes no sense in this context, because there'll be nothing to clean up after the universe explodes and no one to do the cleaning.

http://www.cracked.com/article_19498_the-5-most-needlessly-evil-movie-villain-strategies_p2.html

Although I would have suggested that if all he did all day was break glasses, there's be no time left to destroy the world anyway.

In exactly the same way, while disease and bushfires have economic consequences through the employment of nurses and firefighters, it is the economic activity we measure, not the disaster itself. The argument "if they didn't have to tend the sick/put out fires, they would be doing more for the economy" only holds true if you a) eliminate disease and b) eliminate bushfires.

Both eminently desirable of course. But not going to happen in this lifetime.

"a) eliminate disease and b) eliminate bushfires."

Of course, the only way you could get bad stuff out of the economy is for there to be no bad stuff.
Impossible.

Zorg wasn't really "wrong". He just didn't actually know the reason Mr Shadow wanted the stones, it was just a "deal" to him.
I'm sure if he knew, he'd be smart enough to know that would put him out of business.

Bazz, generally we are on the same track then.

I think algae has sustainable potential is food supply to feed the world human population can be sustained.
From my point of view there is so much nutrient overload/pollution proliferating algae that algae is choking ecosystems of the ocean, including causing ocean dead zones.

Biofuel using algae and fuel from new gas wells will all go toward sustaining world fuel supply.
Then there are the reports of oil newly formed in well that have been pumped reasonably dry.

The aqueduct I refer to could even be harnessed to grow algae for biofuel.

I think what is needed is more "walk the talk" about sensible sustainable growth from productive projects capable of providing local supply and exports.

Productive talk is needed.

GDP is made up of the good and bad elements of growth.

Pericles, I’m not quite sure, but I think you agree with this ??

There is no such thing as "good" and "bad" GDP. There is just GDP.

Ok, we can definitely agree on that.

<< If you deny the contribution made by the doctors and nurses who look after sick people, then you need to separate the amount they spend at the corner store from the money spent by the miners etc. >>

Sure. But you’ve got to admit that if illnesses increase, there would be more economic activity resulting from more doctors and nurses… and there would be a fundamental problem with that appearing as a positive contribution to GDP... if GDP is to be a meaningful indicator of economic prosperity and wellbeing.

Similarly with floods, droughts, earthquakes, road accidents, etc, etc.

The same principle applies to continuous population growth, which keeps the amount of economic activity constantly increasing, but which needs a vast amount of economic activity just to maintain the same standard of living for evermore people. Not to mention all the other negatives that accompany high population growth (think: degradation and stress on the environmental, resource base, infrastructure and services).

Economic activity generated by high pop growth contributes enormously to GDP. But it is almost entirely a FALSE contribution towards economic wellbeing. Indeed, this factor is vastly bigger than the false economic positives generated by illness and disasters.

continued

<< …disasters, illnesses etc. do not themselves "contribute to GDP" >>

Really Pericles?

<< Think of bushfires for a moment… needed 22 million people to fight the fires, what, do you think, would happen to GDP? >>

Depending on the nature and magnitude of a fire or earthquake or whatever, people may no longer be able to work, which would reflect negatively on GDP. But nonetheless, all the economic activity undertaken to get back on track after a disaster would be added to GDP, which of course it shouldn’t, if GDP is to be a meaningful indicator of economic prosperity.

<< This idea that earthquakes increase GDP is sadly such a common fallacy >>

I really think you will find that there is no fallacy here. But please keep trying to convince me.

Much more significantly, I would love to know what you think about the enormous economic growth generated by rapid population growth and how this is reflected in GDP… and how positive or negative it really is for our economy and wellbeing.

<< …it is the economic activity we measure, not the disaster itself. >>

YES! And not the benefit to society either! Just the raw economic activity. Such is the critically flawed nature of GDP.

Ludwig, population increase cannot produce growth,unless perhaps they
are put to work in coal mines, but if they do not produce a net
increase in energy they cannot generate growth.

Agreed Bazz. Population growth doesn’t produce meaningful growth. But it sure as hell does produce a whooooole lot of meaningless growth which makes our GDP and economy look wonderful to all those silly hare-brained pseudoeconomists and politicians!

Seasonally adjusted, of course!

No Ludwig not pseudoeconomists but real economists, and that is the
source of problem. Politicians take notice of economists but only a
very small number of economists have made the connection between energy and growth.
Some might realise that energy affects the economy but they do not
seem to understand that it is the only thing that can give growth.

Everything else is fluff and bluster.

<< …only a very small number of economists have made the connection between energy and growth >>

Agreed Bazz. Or between economic growth here and now and the real benefit of it for the ordinary citizens or for our society in the longer term.

Only a very small number of economists see things in a holistic manner. The rest are pseudoeconomists, false economists or downright anti-economists!

But alas, they are the ones that our politicians listen to.

I think you are still missing the point, Ludwig. I shall try to explain myself better.

>>But you’ve got to admit that if illnesses increase, there would be more economic activity resulting from more doctors and nurses<<

Absolutely not.

If you follow your idea to its logical conclusion, if the economy consisted of only patients and their doctors and nurses, where would the money come from to pay the wages? The government and the insurance companies would soon have emptied their coffers, simply to care for the sick. As a result, there would be no GDP to measure, since GDP is measured in dollars. If you disagree with this, try to describe for me where exactly the GDP in such a scenario may be found.

>>I really think you will find that there is no fallacy here. But please keep trying to convince me.<<

Frankly, if you cannot see the light, having been offered the simplest possible example, there is no point in my wasting any further energy on the task.

>>Much more significantly, I would love to know what you think about the enormous economic growth generated by rapid population growth and how this is reflected in GDP…<<

If you are unable to comprehend the previous, blindingly simple example, then tackling anything more complex is an even greater waste of time.

Have a great day.

Walking the talk it is.
With more illness, doctors and nurses prescribe and apply more medicine.
Production of medicine creates mega millions in GDP.
Income of more doctors and nursers can buy more locally made cars etc etc.
Medicine is an almost forgotten industry.
Some politicians reduce spending on science and medicine instead of encouraging further development of that (and other) industry.
Sensible new science and innovation should be encouraged to increase GDP

BTW Pericles, what is it about Canute that you identify with?

All too true JF Aus.

It is surely patently obvious that increased illness increases economic activity in various ways, all of which appear as positive additions to our GDP calculations, but which absolutely shouldn’t if we are to use GDP as a primary indicator of economic prosperity.

Pericles, your post has done nothing to further our debate.

As JF Aus points out, increasing illness increases economic activity, which is reflected in GDP. Same for disasters, car accidents, and all sorts of thing related to population growth, such as environmental repair, infrastructure upgrades, duplication of services, etc.

I wrote:

>> Much more significantly, I would love to know what you think about the enormous economic growth generated by rapid population growth and how this is reflected in GDP… <<

You replied:

<< If you are unable to comprehend the previous, blindingly simple example, then tackling anything more complex is an even greater waste of time. >>

That tells me nothing. But it does suggest that you can’t address my query.

You took me up on this debate. Now it seems that you are trying to worm out of it.
.

Lets go back to the basics:

We want economic growth in order to improve the quality of life for the people of this country, yes?

That is the primary motive, is it not?

So, any economic activity that doesn’t do that really should not be a part of the primary indicator of economic health. Fair enough?

It is really very, very simple, Ludwig.

>>As JF Aus points out, increasing illness increases economic activity, which is reflected in GDP. Same for disasters, car accidents, and all sorts of thing related to population growth, such as environmental repair, infrastructure upgrades, duplication of services, etc. <<

That is a complete and utter fallacy, as I have tried very hard to point out to you.

These events are simply redistributory. Money that otherwise would have been spent on cars, plasma panels and holidays is instead spent on hospital care, firefighting etc.

If you choose to spend money on health insurance, you cannot use it to repair your car. If a country spends money rebuilding devastated cities, it cannot buy rice to feed its people, others have to tip money into the till. If your theory is correct, they would welcome the earthquake, as it would boost their GDP.

Can't you see how simply ridiculous that is?

Is there a way to divide GDP into Productive activity or Overheads activity ?
That seems to be the crux of Pericles & Ludwig's argument.

Who said anything about insurance cost being part of GDP? Although bank interest may be a ‘product’ from finance.

If a country has to pay workers to rebuild a city then those workers have income to buy their own rice and rice farmers receive some of that money to grow more rice, adding to GDP.
The doctors and nurses do not eat imported cars or plasma panels so why refer to such?

The roofing repair business welcomes big wind and rain. Tile and roofing iron manufacturing adds to GDP, so does a great deal of worker expenditure on domestic product such as a new locally made/produced car,house,food.
Some countries welcome a war (somewhere else) to increase GDP via arms manufacturing.

Are you an economist Pericles?

<Is there a way to divide GDP into Productive activity or Overheads activity ?
That seems to be the crux of Pericles & Ludwig's argument.>

Good question and point Bazz.

I have often wondered if excise tax on petrol is included in the GDP total.
Does anybody on OLO know about that for sure?

<< Is there a way to divide GDP into Productive activity or Overheads activity ?
That seems to be the crux of Pericles & Ludwig's argument. >>

Well, yes and no, Bazz.

It is more difficult than that. All the various negative things like illness and disasters can lead to increases in what we would normally consider productive activity. And this is very much the case with population growth.

Pop growth generates enormous productive activity…. except that it is by and large geared towards production that the new residents need, and not towards improving the lot for pre-existing residents.

It would indeed be very hard to sort out just what to include and exclude in order to make GDP the best possible indicator of economic wellbeing and more importantly of improvements in quality of life.

It's not hard to figure that loss of oil refinery production in Australia being replaced by fuel imported from overseas, will cause a significant decrease in Australian GDP.

If ever war cuts sea transport and fuel supply for domestic food production and transportation, I guess at least undertakers might significantly add to GDP.

The talk need to be walked forward. Quickly.

Look, if we are going to have a conversation about GDP, it would probably be a good idea to learn something about it before shooting posts in all directions. JF Aus, for a start.

>>Who said anything about insurance cost being part of GDP?<<

This might help:

"GDP is a measure of all the goods and services produced domestically. Therefore, to calculate the GDP, one only needs to add together the various components of the economy that are a measure of all the goods and services produced. Many of the goods and services produced are purchased by consumers. So, what consumers spend on them is a measure of that component."

http://www.mindtools.net/GlobCourse/formula.shtml

So yes, if you pay an insurance premium, it is counted as part of GDP. If you instead spend the same money on a plasma TV, it is counted as part of GDP. In each instance, the measured GDP will be identical.

If you would like to understand where savings fit into the equation, here's a cheat-sheet.

http://www.ssag.sk/SSAG%20study/EKO/RELATIONSHIP%20BETWEEN%20GDP.pdf

You are persistent, Ludwig, I'll give you that..

>>All the various negative things like illness and disasters can lead to increases in what we would normally consider productive activity.<<

That is a complete and utter fallacy, as I have tried very hard to point out to you.

Let me ask a couple of questions, to see if you can answer them without disturbing your theory.

Which part of GDP increases when disease increases? Where does the money come from, to pay the doctors and nurses? If everyone becomes sick, what happens to GDP - does it increase, stay the same, or decrease?

>>Are you an economist Pericles?<<

No, JF Aus, I am a businessman. Are you by any chance a public servant? Or perhaps a teacher?

Having opinions on stuff is fine, highly laudable, and makes the world go round. Being ignorant of factual matters is no shame either, but it is polite to actually learn the facts behind a topic, before issuing an opinion on them.

There's always been a growth imperative. Beyond a subsistence level of existence the basics for any improvement in the quality of life at a national level have remained the same as that for individuals since, like forever…

Since Gork's Neanderthal family clan found themselves with more mammoth meat than they could eat and were able to trade some for cave bear (Ursus spelaeus) furs to better survive the increasingly bitter winters, which those funny looking Homo sapiens in the next valley over said was evidence of climate change and an impending ice age… though Gork denied this because last summer was hotter than any he could remember.

Put simply, you require a surplus. This can be combinations of lots things; food, land, energy, money, slaves, productivity, technology, knowledge, goodwill, et cetera. Even time.

Unfortunately, for continued improvement in a society's 'quality of life' an increase in the surpluses is required… or a redefinition of 'quality'. A bit like North Koreans being told they have never had it so good.

Historically there have been exceptions to this basic rule – a surplus of plague being one example.

[Roman Emperor Marcus Aurelius, who famously said "Our life is what our thoughts make it" got to name his plague… posthumously]

A businessman should be able to briefly and clearly explain exactly why business of running a country is not moving ahead as it should be, especially with all the economic data and business knowledge that now exists.

And why is science and innovation not on national business agenda these days?

As for Pericles questions;
<<Which part of GDP increases when disease increases?>>
The total of GDP increases due to all the medicine and supplies and food manufactured locally.

<<Where does the money come from, to pay the doctors and nurses?>>
Insurance companies pay for some, big dollars for big specialists for those who can afford health insurance.

<<If everyone becomes sick, what happens to GDP - does it increase, stay the same, or decrease?>>
Everyone is never sick at the same time. It does not happen. GDP will always continue up and down somewhere.

It would be nice to "walk the talk" with some innovative and productive new ideas involving local supply and export

Pericles, I see nothing in your two links to indicate that it << is a complete and utter fallacy >> that illnesses, disasters, car accidents and the like add to GDP.

What I do see is that GDP is, as you say: a measure of all the goods and services produced domestically.

More illness, accidents, floods and fires – all of this creates a demand for more goods and services than there would otherwise have been. They add to GDP.

<< Which part of GDP increases when disease increases? >>

C, I & G. Consumer spending, Investment made by industry and Government spending.

<< Where does the money come from, to pay the doctors and nurses? >>

The money for extra doctors and nurses comes via government from the tax base. That’s G.

<< If everyone becomes sick, what happens to GDP - does it increase, stay the same, or decrease? >>

Your habit of projecting examples to the end of the spectrum, which way beyond the realms of possibility, really just doesn’t work for me. You are basically trying to make a logical point out of an entirely illogical situation!

continued

GDP, however you define it, becomes some actual money that you can
use to lend either directly or via banks etc to build further business and
or purchase goods. However you also use that money to buy energy.
Increases in the price of that energy does not leave money available
for the other purposes and the result is zero growth.
If governments try to overcome that money shortage they borrow or print
money (pixel money), they are attempting the impossible and their
demand for extra just drives up the price further or the expansion is abandoned.

I believe the previous government tried to drive growth by borrowing money.
It can't be done unless you can outbid other countries for energy.

If more people are getting sick, then some of them who would be working would not be able to, or less so. This would reflect negatively on GDP. But would it reflect negatively to the same or greater extent as the positive effect on GDP that results from more doctors, as well as more hospitals, medicines, and all sorts of other accompanying stuff?

I would think that the additions to GDP derived from increasing medical activity would well and truly outweigh the losses due to any increase in people needing this sort of service.

Now, let’s again turn to the issue of population growth. This adds to GDP, again via the C, I & G components. And it does it big time! Our super-high immigration rate makes an enormous difference to GDP! And yet all this C, I & G serves the new residents, almost entirely. It does very little for the pre-existing residents. So it is an example, indeed the prime example, of something that adds to GDP but doesn’t add positively to our real economic prosperity, average per-capita prosperity, quality of life or future wellbeing.

Sorry Pericles, but I think that your assertion that things like illness and disasters (and presumably population growth, although you’ve steadfastly avoided discussing this issue) add to GDP is a complete and utter fallacy, is a complete and utter fallacy!

Hey, I tried.

“We'll be saying a big hello to all intelligent lifeforms everywhere and to everyone else out there, the secret is to bang the rocks together, guys.” Douglas Adams

Thanks Pericles for yet another very interesting debate.

Bang the marbles together might be more appropriate.