<< Once again: GDP is a measurement of past activity. If you use it as a predictive tool, you are using it improperly. >>

Fine. But it can be seen as an aid to predicting the GDP total for the following year, simply because the same composition of all the things that contribute to it would result in a similar GDP total, bigger than the previous year in proportion to the increase in immigration. And if some factors change, as they are bound to do, then we can predict the change in GDP as a result. Of course there are very many variables. But at least we can get a rough feeling from one year’s GDP as to what we should get the following year.

That’s it. Its use as a predictive tool doesn’t go any further than that.

<< What they look at is not the GDP number itself, but the inputs. >>

Of course they look at all the inputs. And they look at the number. And after looking at how the various inputs might vary, they can predict how the GDP number might vary from the previous number.

Ok, so you are completely playing down any predictive value of GDP.

I find that interesting. The debate seems to have done a switch-around here. You, as the arch advocate of GDP, should be the one espousing it as having some sort of predictive value, as with all manner of other indicators, which you agree do have some predictive value… and I should perhaps be saying: no GDP doesn’t have anything of the sort.

Well…. I am virtually saying that. But you seem to just be on the wrong side entirely regarding this point. It just doesn’t fit with your great support for GDP.

Oh, Ludwig. It is really very, very simple.

>>Ok, so you are completely playing down any predictive value of GDP.<<

If by "playing down" you mean "stating that it has no predictive content whatsoever", then sure, I'll go with that.

>>I find that interesting. The debate seems to have done a switch-around here. You, as the arch advocate of GDP, should be the one espousing it as having some sort of predictive value<<

Why on earth would you assume that? I couldn't have stated it more plainly: today's GDP number has no predictive capability whatsoever. Nor did last quarter's. Nor last year's. Why would I espouse it as such, when I know it ain't so?

>>..as with all manner of other indicators, which you agree do have some predictive value...<<

But Ludwig. Listen closely. GDP is not used as an indicator. Why, I hear you ask? Because - guess what - it has no predictive qualities.

Some measurements do indeed have the ability to give some idea of what is coming down the track. They are generally referred to as "leading indicators".

Here's Wikipedia's summary:

"Leading indicators are indicators that usually change before the economy as a whole changes".

Investopedia describes an index, a composite of these indicators:

http://www.investopedia.com/terms/c/cili.asp

You will notice that GDP does not feature in their index. For the simple reason that it fails the test - can it indicate what might happen in the future?

No. It can't. And anybody who tries to use it in that manner is an economic idiot. Have you ever seen any competent economist use GDP in this way? I'll bet you haven't.

>>It just doesn’t fit with your great support for GDP.<<

My "support" for GDP, as you describe it, is limited to its ability to accurately track our national prosperity. Which it has done, perfectly competently, for a long while.

You are still conflicted, because you want it to show something completely different. Sadly, you cannot explain what that "something" should look like.

So then, we have established that the predictive use of GDP is extremely limited, and could be used in no other way than to give us a rough guide of what to expect in the following year, and perhaps for a year or two after that if all the contributing factors are likely to remain much the same...

...and that it is indeed a very highly misleading entity to try and use as an indicator of future wellbeing, productivity, prosperity, quality of life or anything else!

Well, given that it is giving us a totally misleading picture about these things now, and in past, of course it is not going to be of any use for future indications.

But alas, there is no shortage of people who will use it as an indicator of future economics... or at least as one factor in amongst a bunch of other indicators.

So, it is basically useless as a future indicator. It is highly misleading as a present indicator of economics or of anything meaningful related to economics, and as I said a few posts back:

It doesn’t measure personal happiness. 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?

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You wrote:

<< My "support" for GDP, as you describe it, is limited to its ability to accurately track our national prosperity. Which it has done, perfectly competently, for a long while. >>

But it doesn’t do anything of the sort! It misleads us terribly in that regard.

Lets have a closer look at that…

It doesn’t measure personal happiness, quality of life, standard of living, productivity, prosperity, environmental health, non-renewable resource draw-down, recycling, value-adding, the ever-increasing demand for everything, the amount of economic activity that it includes which is clearly not taking us forward in economic terms, our ability to maintain ever-increasing economic activity into the future, etc, etc.

In other words, it is indeed an extremely bodgy indicator or measure, which tells us sweet stuff-all about our real national economic situation, and which does indeed mislead us terribly.

It is manipulation at its worst. It leaves out factors that would cause it to be lower number. And much worse than that: it includes stuff which simply obviously and blatantly should not be included!

Give it up Pericles! It’s rotten to the core!

You really still don't get it Ludwig, do you.

>>So then, we have established that the predictive use of GDP is extremely limited,<<

No, we haven't.

We have established that the predictive use of GDP is non-existent.

You have it right when you say...

>>...it is indeed a very highly misleading entity to try and use as an indicator of future wellbeing, productivity, prosperity, quality of life or anything else<<

Which is exactly the reason why it is not used in this manner.

>>But alas, there is no shortage of people who will use it as an indicator of future economics... or at least as one factor in amongst a bunch of other indicators.<<

Only in your imagination. No sane economist, or even politician, would risk their reputation on such a pointless exercise. Have you any examples of this? If not, please stop pretending that GDP is used, in any way, shape or form, as a predictor of anything whatsoever. Deal?

>>It is highly misleading as a present indicator of economics or of anything meaningful related to economics<<

Wrong again. You want it to say something other than what it does say, for your own personal reasons. That does not invalidate it as a realistic measure in anyone else's calculations.

>>It doesn’t measure personal happiness.<<

Correct. Do you happen to know a measurement that achieves this feat? I doubt it. So why single out GDP?

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

Just this:

"The monetary value of all the finished goods and services produced within a country's borders in a specific time period".

>>In other words, it is indeed an extremely bodgy indicator or measure, which tells us sweet stuff-all about our real national economic situation, and which does indeed mislead us terribly.<<

Wrong again. It tells us "our real national economic situation", with some level of precision.

But that is all it does. It cannot mislead, because it is inanimate. If you choose to use it for a purpose for which it was not designed, that's your problem.

Very entertaining Pericles…

I wrote:

>> So then, we have established that the predictive use of GDP is extremely limited <<

You replied:

<< No, we haven't. >>

Yes we have. Me and every other sensible and logical-thinking person on the planet, that is!

<< We have established that the predictive use of GDP is non-existent. >>

No we haven’t. We’ve established that it has predictive value, to the same extent as any other number of any sort that is arrived at via a set of contributing factors, for as long as those factors remain much the same or vary in a manner that is reasonably well understood, in the following twelve month period. This is the case with various other indicators, which you acknowledge do have some future-indicative value.

Again, it makes no sense for you to single out GDP as being somehow different in this regard.

Yes it does. No it doesn’t. Yes it DOES. NO it DOESN’T. Hehehe!

<< You have it right when you say... ...it is indeed a very highly misleading entity to try and use as an indicator of future wellbeing, productivity, prosperity, quality of life or anything else >>

Heeey woohoo! We have agreement!!

I wrote:

>> But alas, there is no shortage of people who will use it as an indicator of future economics... or at least as one factor in amongst a bunch of other indicators. <<

You replied:

<< No sane economist, or even politician, would risk their reputation on such a pointless exercise. >>

Wonderful. More agreement!

However, many insane people do indeed use it in this way.

You can surely see that there is no shortage of insane people who simply see that GDP is growing and think that that is just marvellous, and that all else being equal it should keep on growing, and being marvellous. They see the current situation as an indicator of what we should expect in the near future.

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