Pericles, you are putting in a concerted effort to try and convince me that negative things don’t get added to GDP. I appreciate that. But it seems to me that it is having the opposite effect. I am finding my view, which is the view expressed by many, to have consolidated as a result our discussion.

The main reasons for this are that after asking you to point out just where there is any indication that negative things don’t add to GDP in the links that you have provided, there has been no response.

Secondly, the very nature of GDP is that it measures all economic activity regardless of whys or wherefores, end of story. This is now the third time I’ve mentioned this. You have offered no direct response.

Thirdly, what does it matter if money not spent on economic activity now, gets spent on equivalent economic activity later on or not? It’s what gets spent now, in the current GDP time period that gets added to the current (or forthcoming) GDP total. So, money spent on remediation after a disaster gets added to GDP now. Economic activity generated as a result of big and obvious negative things gets added to GDP. It’s as simple as that. Any analysis of what might have happened to that money if it hadn’t been spent now or how it might have displaced other economic activity is really quite irrelevant.

Fourthly, that money if it is not spent now could later be spent on 'good' or 'bad' economic activity, which should or shouldn’t be added to GDP respectively. So it is not a direct trade-off. And we should also be mindful of a portion of that money getting spent overseas if it hadn’t been spent on remediation activity now and thus not adding to our GDP at all.

continued

Pericles, you wrote:

<<When the money is directed - not to productive enterprise, but to repair and remediation work, it cannot possibly cause an uplift in GDP. >>

But then…

<< > ...you still have the issue of them being spent now rather than later as result of the fire <

Absolutely. So the money spent on the firies, builders etc. is of course measured as part of the current GDP. >>

These statements seem to be contradictory.

<< But - and this is the bit you are having difficulty with - it has been displaced from other potential spending, which makes it net zero, at best. >>

Certainly not in the current GDP period. Possibly in the long term. See ‘Fourthly’ above.

<< GDP does at least have the benefit of being factual, rather than subjectively assessed, and also measurable >>

Not if it is measuring the wrong things and adding blatant negatives to the positive side of the ledger.

Well, I guess we’ve reached a total impasse on this particular point.

This is just one of the problems with GDP. There is a bigger one – its connection with rapid population growth. It indicates that rapid growth is good and faster growth is better. And that is just enormously counterintuitive.

Incidentally, just in are unexpected reduced unemployment numbers?
Could this be people dropping out, or employers, believing that the repeal of the mining tax and the carbon tax, will improve things or lower capital cost outcomes?
I think the real outcome, will be debt laden energy providers, pocketing extra profits?
For mine, I would have kept a carbon tax, but amended it to a million dollars a ton.
To offset any actual cost, I would have included a carbon cap, set at current emission; meaning, no sanely run business would actually pay this sword of Damocles tax.
The tax could be doubled every decade, and the cap lowered by around 1% biannually?
This would surely be enough time and forward planning opportunities, to allow all those with a still functioning brain, to stay far enough of the carbon curve, never ever to have to pay this tax, but particularly, when there is a serious business case, for accepting inevitable change!
Those ahead of the carbon reduction curve, best placed to maximize future profits; and or, future economic growth!
I don't like an ETS, given the number of reported rorts and or corruption.
What's next? Carbon derivatives, traded in lieu of real carbon? Given a truly international carbon trading scheme, will surely result in carbon becoming the most traded and valuable, tradable commodity, not worth less than a 140 billion per?
One can't bake bread from wheat derivatives, or run the car with oil derivatives.
One can however, quite massively distort the market, with plucked from the air derivatives.
Someday, a true leader with the courage of conviction, will outlaw these economy harming or crippling instruments, along with other problematic practices, such as cornering the oil market; or, short selling and very high frequency trading, for similar reasons, or just to reinsert, simple inherent fairness!
And where a truly visionary leader leads, others will surely follow, or pay a huge economic penalty, for following the lunatics, (ideologues?) who currently, seem to be running the asylum?
Rhrosty.

Not exactly, Ludwig.

>>Well, I guess we’ve reached a total impasse on this particular point.<<

You are beginning to understand, which is very encouraging. If only you would stop using the words "add" and "added", I think the penny might finally drop.

>>the very nature of GDP is that it measures all economic activity regardless of whys or wherefores<<

Yes indeed. Absolutely correct. Now, hold that thought.

>>It’s what gets spent now, in the current GDP time period that gets added to the current (or forthcoming) GDP total. So, money spent on remediation after a disaster gets added to GDP now. Economic activity generated as a result of big and obvious negative things gets added to GDP. It’s as simple as that.<<

Instead of "added to", substitute "included in". That brings it into line with, and entirely consistent with, the previous statement.

Now, let's go back the the point at issue.

It is not that "money spent on the firies, builders etc. is of course measured as part of the current GDP". We have already agreed, that is entirely true.

But this little gem is the problem:

>>It really is very simple: Bushfires etc increase economic activity, all else being equal.<<

They are accounted for, absolutely. But they are included in GDP. Not added to GDP. As I pointed out, the money spent on them is taken away from other areas, so there is no increase in overall economic activity.

Clearer now?

Ahh Pericles, you appear to be heeding what I am saying and now starting to agree to quite a considerable extent. Excellent!

A quick summary:

I wrote:

>> the very nature of GDP is that it measures all economic activity regardless of whys or wherefores <<

You replied:

<< Yes indeed. Absolutely correct >>

Very good.

I wrote:

>> It’s what gets spent now, in the current GDP time period that gets added to the current (or forthcoming) GDP total. So, money spent on remediation after a disaster gets added to GDP now. Economic activity generated as a result of big and obvious negative things gets added to GDP. It’s as simple as that. <<

You seem to have no disagreement with this.

Excellent.

I wrote:

>> It really is very simple: Bushfires etc increase economic activity, all else being equal. <<

You replied:

<< They are accounted for, absolutely. >>

Wonderful.

So there we have it. We have agreement that negative things such as bushfires do indeed get added to or get included in or contribute to GDP.

Things that should appear on the negative side of the ledger appear on the positive side.

Ahh but hold on…. There is not quite total agreement:

<< As I pointed out, the money spent on them is taken away from other areas, so there is no increase in overall economic activity. >>

1. As I have said; it is irrelevant as to what that money might have been spent on later on if it had not been spent now. In spending it now in response to a bushfire or whatever, it is being added to / included in / contributing to GDP. But it shouldn’t be, because negative events and their resultant economic activity shouldn’t appear as positives in our primary economic indicator.

2. Yes, some of that money, probably most but you can’t assume all, would be spent on Australian economic activity later on if it hadn’t been spent now. Some of it might get spent overseas. Some of it might simply be saved and not spent for decades.

continued

3. And most significantly, when it does get spent, it gets spent on things that should contribute positively to GDP and things that shouldn’t – and the ratio of these two is unknowable until it is actually spent.

So you can’t say that there is no increase in overall economic activity in the long term by spending the money now, and you can’t say that this money would have contributed more legitimately to the positive side of the ledger or not.

The only thing you can say is that the money was spent now in relation to the hypothetical fire, and the resultant economic activity was added / contributed / included in GDP... when it damn well shouldn’t have been.

And as I say: this here-and-now expenditure is what GDP shows. It doesn’t take into, at all, what might or might not happen in the future.

OK, so perhaps we are getting close to agreement here.

So then, what about the bigger and nastier aspect of GDP? The one where rapid population growth creates enormous economic activity and adds / gets included in / contributes to GDP enormously, thus making rapid pop growth look really good for our economy, and faster growth look even better?

THIS is the really SINISTER thing about GDP.

You have said that growth can’t go on forever. But GDP would have us, and our wondrous pollies pseudeconomists and big bizzos saying pushing for rapid expansion for ever more…. completely regardless of all the enormous negative factors that accompany it.

We’ve been over this ground before to a fair extent. But in light of our current well-focussed and amicable discussion, it is I think the right time to revisit it.