And Ludwig, for someone who insists that they "rooly, rooly do" understand GDP, this is a major faux pas.

>>It is very interesting that imports are the only thing that is excluded from GDP, and yet imports generate a whole lot of economic activity. I wonder how that really works. Obviously lots of businesses sell imported goods. Their profits get counted within GDP, do they not? So, exactly what is it about imports that doesn’t get included in GDP?<<

I'll try to keep it very simple for you: exports are things that we produce but don’t buy and imports are things that we buy but didn’t produce. So we include in GDP the net of exports minus imports.

>>Phoowey! The concept of prosperity is pretty clear<<

Ok, I'm game. Give me a workable definition. Then tell me how you would measure it.

>>I have made it patently clear that I agree with you that disasters reduce economic activity overall, via loss of crops, businesses, etc.
We are talking about the economic activity they generate in the rebuilding process<<

There, you've done it again. GDP sees no difference between activity caused by slum clearance or new road building, nursing victims of road accidents or sufferers of lung cancer, firemen clearing firebreaks or fighting bushfires etc. etc.

The minute you see the light on this fundamentally simple fact, you will understand why I keep telling you that you do not yet understand GDP.

Pericles, you know that really loud honking goose that just keeps on and on and on about the virtues of GDP… you just cooked it!! ( :>)

Firstly: you say that GDP has absolutely no predictive value whatsoever.

I wrote:

>> There is a great deal of economic activity which is simply serving the community in a neutral manner, not in a manner that is advancing our quality of life <<

You replied:

<< This has absolutely nothing to do with GDP >>

Yes, correct!

So secondly: GDP does not differentiate between these very different types of economic growth.

And thankyou for accepting that there is indeed much economic activity that is neutral.

<< All economic activity is equally counted as part of GDP. >>

YES!!

I wrote:

>> What sort of an incredibly blunt tool is GDP in that it does not differentiate the types of economic activity that contribute to it <<

You replied:

<< It is GDP. Nothing more, nothing less. >>

YES!!

GDP is indeed an incredibly blunt tool.

I wrote:

>> What an incredibly misleading thing it is regarding high population growth, demand/supply balance, resource base security, quality of life, national prosperity, etc, etc. <<

You replied:

<< None of these is a component of GDP >>

Absolutely!

So thirdly: GDP has got nothing to do with these all-important parameters.

I wrote:

>> There are no differentiated "good" or "bad" components, or prosperity-generating and prosperity-neutral components, within GDP, which of course is its fundamental flaw. <<

You replied:

<< Once again, you are looking for something that isn't there. >>

CORRECT. Those components aren’t there. They’re not anywhere to be seen, neither within the formula for calculating GDP, nor in any way connected to it.

continued

To summarise:

1. You say that GDP has absolutely no predictive value whatsoever.

2. GDP does not differentiate between very different types of economic growth.

3. GDP has got nothing to do with these all-important parameters: population growth, demand/supply balance, resource base security, quality of life, national prosperity, etc.

So then… … ……. …….. ………… what on Earth is GDP all about??

You will presumably say that it is about giving us a number each financial year, which can be compared over time, and with other countries.

But what on earth are we actually comparing?

Pericles, I really think it is time that you conceded that GDP is pretty damn useless, and terrible as an economic indicator or measurement.

Then after you’ve done that, we can start working on the next level:- that it really is a whole worse than useless, and is actually very highly misleading and counterintuitive for a future healthy economy and society.

.
And that’s just my reply to your first post of 9 July. My response to your other post is pending….

At least you appear to have stopped associating GDP with all sorts of irrelevancies, Ludwig. That's a start.

As a result of which, you obviously now regret that blithely ignorant comment of yours that started this little conversation...

>>GDP. It is a most terribly flawed economic indicator, which adds all sorts of negative factors to the positive side of the ledger, such as increased economic turnover as a result of fires, floods, cyclones, illnesses due to smoking or alcohol<<

We can now put that furphy to bed, at least.

>>So then… what on Earth is GDP all about??<<

GDP is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. I thought that we had finally agreed that.

>>...giving us a number each financial year, which can be compared over time, and with other countries. But what on earth are we actually comparing?<<

GDP. What would you like to compare?

>>Pericles, I really think it is time that you conceded that GDP is pretty damn useless, and terrible as an economic indicator or measurement.<<

No, I disagree. It is a pretty good indicator of what has worked, and what has not, in fiscal policy terms. It is a pretty good measure of the impact of a downturn, e.g. the GFC, and the need for remedial action. When used on a per capita basis, it also tells you how much the economy has improved along with any population change.

The problem you have is that you want it to measure your personal happiness too. Which it is not qualified to do, unfortunately.

Rightio then, now where was I before the latest round of computer problems….

Oh yes, I was going to reply to Pericles’ other post….

<< …Ludwig, for someone who insists that they "rooly, rooly do" understand GDP, this is a major faux pas. >>

Fascinating comment, given that you have in no way demonstrated this and that there is no ‘faux pas’ there whatsoever….

I wrote:

>> It is very interesting that imports are the only thing that is excluded from GDP, and yet imports generate a whole lot of economic activity. I wonder how that really works. Obviously lots of businesses sell imported goods. Their profits get counted within GDP, do they not? So, exactly what is it about imports that doesn’t get included in GDP? <<

You replied:

<< I'll try to keep it very simple for you: exports are things that we produce but don’t buy and imports are things that we buy but didn’t produce. So we include in GDP the net of exports minus imports. >>

Well, you kept it simple alright: you simply didn’t answer my question. You AVOIDED it…. which strongly suggests that you don’t know the answer. Seems like yoo rooly rooly doont oonderstand the basics of GDP very well at all!

Clearly, economic revenue is gained from the selling of imports by retailers. So can you tell me, oh great GDP gooroo, if economic growth derived directly from imports is added to GDP or not? And what about all the secondary economic activity associated with imports – the transport, the money that importers and retailers of imported goods spend when they buy other goods and services, etc?

continued

>> Phoowey! The concept of prosperity is pretty clear <<

You retorted:

<< Give me a workable definition…. …how you would measure it. >>

For goodness sake, the concept is clear enough. It encompasses quality of life and future wellbeing, including sustainability. We would measure it by determining which sorts of economic growth contribute to it and which don’t and only counting those that do. We’d also take into account resource draw-down, environmental damage and whole bunch of other things.

I’ll leave it to the experts to concisely define it and devise a formula for measuring it most effectively.

<< GDP sees no difference between activity caused by slum clearance or new road building, nursing victims of road accidents or sufferers of lung cancer, firemen clearing firebreaks or fighting bushfires etc… >>

Der…. you don’t say!

And then you say in direct relationship to that statement:

<< The minute you see the light on this fundamentally simple fact, you will understand why I keep telling you that you do not yet understand GDP. >>

You have said something that has never been in dispute. So then, are you now willing to accept that I do indeed understand GDP?

.
Crikey, there’s a whole nuther post I’ve still got reply to. ( :>(

Stay tuned…

[Oh and that's 142 posts on this thread, which is a new record for me, and probably a record for all of OLO!!]