<< Productivity improvements will contribute to economic growth. But they are not the same as economic growth. It's like driving in the most efficient gear will beneficially affect your fuel consumption >>

OK. So how does this sit with the fact that our economic growth is very largely driven by population growth? Those insane people in the major decision-making positions are chasing higher economic growth, pretty much end of story. There just isn’t any real push to improve efficiency or increase productivity per unit of primary resource or per resident of this country.

So surely we should be moving right away from economic growth driven by population growth and towards a much less insane economic base – one of manufacturing, technological and other value-adding enterprise. And one which does not have a constantly increasing rate of consumption of resources or increasing demand for evermore basic infrastructure.

Surely you concur with this. And yet you support the continuation of huge immigration, not least because it gives us ‘healthy’ annual GDP growth, right?

<< I don't mention "quality of life", which is a totally subjective issue. >>

And ‘better-off-ness’ isn’t??

Actually, QOL is certainly not totally subjective. Fuzzy around the edges, yes. But it is a very important basic principle. It is more important than standard of living or prosperity, both of which are just as fuzzy around the edges in their definitions.

<< GDP does not measure your personal happiness. >>

Indeed it doesn’t. And it is only distantly related to productivity... and to prosperity. Add these points to those that I have mentioned many times: that it includes economic activity generated by all manner of economically negative things, and while it is based largely on population growth it doesn’t take into account the enormous rate of increase in the demand for everything that population growth causes...

...and we've got an indicator of what exactly??

What on Earth is GDP really about?? What is it actually telling us?

continued

<< The impact of prolonged drought, or massive floods, will be reflected in lower-than-otherwise GDP. >>

Yes. That’s about all you can say about it in reference to the influence of economically negative factors. Which is a very long way from it being useful for tracking any improvements in these negative factors.

<< Show me one example where GDP has been used as a predictive tool. >>

Can you honestly say that there is no predictive aspect to GDP? Surely not. The size of the GDP increase in a given year could be used to give us some indication of what to expect in the following year, or of how much smaller or larger it might be depending on various changes.

It is not supposed to be a tool for predicting the future, but just as with all stats we can look at the numbers and at the things that contribute to them and predict what we can expect in the following year, or few years, and adjust our expectations relative to known or mooted changes in certain variables.

I hope you can see what I mean.

Hardly, Ludwig.

>>I hope you can see what I mean.<<

You keep changing the playing field.

We were talking about GDP, which is a simple, factual number. Now you want to talk about productivity.

>>And you can get a better relationship between GDP and productivity by moving the drivers of economic growth away from population growth and onto value-adding enterprises<<

These are not either/or propositions. You can improve productivity without growing the population, if you a) provide industry with the right incentives to increase output without increasing costs (although the unions might have a problem with that). Or b) you can improve productivity by allowing into the country those people who are going to be more productive that the existing average. Actually, that was behind much of the "favoured category" style of immigration in the seventies and eighties.

Either process will work. Both processes together will work better.

>>So how does this sit with the fact that our economic growth is very largely driven by population growth?<<

Because our immigration policies have historically favoured b), and because over the last few decades it has proved simply too difficult to get the average Aussie worker to put more in, without wanting more out.

And this is simply silly:

>>The size of the GDP increase in a given year could be used to give us some indication of what to expect in the following year<<

Try explaining that to the European countries whose GDP was hit for six by the GFC. Greece. Spain. Ireland. Portugal. UK. There was absolutely nothing predictive in the GDP figures from one year to the next. Only when their economies had started a recovery, did the lagging indicator, GDP, reflect the change.

Leading indicators such as consumer confidence indices, building starts etc. contain a modicum of predictive power. Just not GDP.

<< You keep changing the playing field. >>

No Pericles. I’m trying to broaden the discussion, in my great quest to understand how you can say what you have been saying. I think this is a sensible thing to do, isn’t it, rather than just rehashing what has been said and going around in meaningless circles.

<< We were talking about GDP, which is a simple, factual number. Now you want to talk about productivity. >>

Anything wrong with that? Correct me if I am wrong, but didn’t you raise this aspect first. And um, don’t you think that productivity is, or should be, highly relevant to a discussion about gross domestic PRODUCT?

<< You can improve productivity without growing the population… >>

Absolutely!

So then, I wonder why you aren’t on my side of the population debate. Why aren’t you advocating economic growth that is driven to a much larger extent by manufacturing, technology and innovation? Why don’t you join me in denouncing the absurdity of economic growth that is primarily driven by population growth?

I note that you haven’t picked up on my comment: >> … one which does not have a constantly increasing rate of consumption of resources or increasing demand for evermore basic infrastructure. <<

This is something that I keep emphasising, but which you are very reluctant to comment on. It is of enormous importance. Population growth increases the need for expenditure from or economic growth to about the same extent that it increases economic growth. It really doesn’t get us very far at all. And in the longer term, it is bound to work against us.

continued

<< Either process will work. Both processes together will work better. >>

Why would both processes - better productivity by way of improved value-adding and more economic growth by way of population growth – work better than just the former by itself?

Wouldn’t the best approach be to completely curtail the population-growth-driven aspect, and for us to achieve a stable population and hence not have ever-increasing demands on our resource base, environment, and economic turnover via evermore goods, services and infrastructure?

<< Leading indicators such as consumer confidence indices, building starts etc. contain a modicum of predictive power. Just not GDP. >>

Yes, all manner of indicators do indeed have some predictive element to them. I’m pleased that you can see this. So then, how can you single out GDP as being the only one that doesn’t? That doesn’t compute.

No GDP didn’t predict the GFC. A new factor came out of left field and caused massive change. As I said earlier: GDP is of some use as a predictive tool, on the basis that things remain much the same, or we can reasonably know what things might change.

There is a parallel here between the complete failure of GDP to indicate the GFC and its complete failure to indicate anything about our future economic wellbeing in Australia, in terms of the size of our non-renewable resource base, our progress towards renewables or towards a sustainable society. So it is only useful as a crude indicator of what we can expect in the very short term, and as I have emphasised repeatedly: is a terribly MISLEADING indicator of what our real economic position is and what it is likely to be a few years down the track.

I disagree, Ludwig.

>>I’m trying to broaden the discussion, in my great quest to understand how you can say what you have been saying. I think this is a sensible thing to do<<

In fact, exactly the opposite is the case. If you want to learn about something, you move from generalizations to specifics, do you not? It is pointless trying to read À la recherche du temps perdu in the original, until you have first understood the fact that it a) is written in French, and b) is quite a long book. Those facts may lead you to learn the basics of the French language - structure, simple phrases etc. - before mastering the vocabulary to a point where you can understand the subtleties and emotional torments within M. Proust's oeuvre.

At no point would it be worthwhile to broaden your learning into, say, German or Russian. Unless, of course, you have mastered Proust, and wish to move on to Grass or Dostoevsky.

Stick to the knitting, Ludwig. First understand the concept of GDP, which has absolutely no influence on productivity. As I pointed out, it is the reverse that is true.

>>Correct me if I am wrong, but didn’t you raise this aspect first. And um, don’t you think that productivity is, or should be, highly relevant to a discussion about gross domestic PRODUCT?<<

Actually, you first referred to productivity, in an early post on this thread

http://forum.onlineopinion.com.au/thread.asp?discussion=6365#188311

And for the record, of course productivity is "relevant" to a discussion on GDP. But you were using it as a diversionary tactic, as you were running out of defences for your stance on GDP as a predictive tool.

>>So then, how can you single out GDP as being the only one that [isn't predictive]?<<

As I pointed out, simply because it is a post facto measurement. You cannot predict tomorrow's weather from yesterday's rainfall. GDP tells you about the past. Only. Imagining that it has any other significance is pointless. Like suggesting Proust would have been an easier read if he had written in Urdu.

(Possibly would have, actually)