Pericles: >>You will undoubtedly fail to understand the answer, in the same way that you have failed to understand every other aspect of GDP to date.<<

Ludwig: >>So, on one hand, imports are subtracted from exports to give a net figure to add to… oow, I mean; include in, GDP!. And on the other hand, they are treated completely separately and do actually contribute to our GDP when they are sold or consumed and when the profits of this activity is used for secondary purchases. It would appear that you agree with this. So you must agree then that imports are treated in a totally duplicitous and contradictory manner as it concerns GDP…. and that this yet another glaring flaw in the way in which GDP is formulated, yes?<<

QED

Pericles, with respect you are not furthering my knowledge of GDP here. What you are doing is confirming my suspicion that there is a glaring anomaly in the way GDP is formulated.

It is also apparent that the real QED here is my previous assertion that you cannot answer this query.

I’ll try asking it in different words:

How can it be that imports which are subtracted from exports as part of the GDP calculation, then contribute to GDP when they are sold or consumed?

Isn’t it true that everything that is imported actually adds to our GDP by way of this process?

For heaven's sake Ludwig. I am getting the strong view that you are arguing for the sake of arguing - much as you appear to be doing on the Rolf Harris thread.

>>It is also apparent that the real QED here is my previous assertion that you cannot answer this query. I’ll try asking it in different words: How can it be that imports which are subtracted from exports as part of the GDP calculation, then contribute to GDP when they are sold or consumed?<<

It is such a blindingly simple issue, I cannot imagine that you genuinely cannot see it, and must therefore be wilfully feigning ignorance. Nevertheless, just in case...

As I pointed out earlier, in order to understand its rationale, you need to separate the value of the goods and services themselves from the economic activities that are caused by them. This is because those activities are entirely indifferent to the source - someone filling a supermarket shelf with tins of pineapple performs the same work whether the product was canned in Northgate or Bangpakong. Similarly, the Golden Circle cannery in Northgate and the Star Cannery in Bangpakong will perform the same work whether their product is sold in Woolworths Neutral Bay or Hock Choon in Jalan Ampang.

In fact, if all Golden Circle's tinned pineapple was sold in Neutral Bay, and all Star Cannery's tinned pineapple was sold in Jalan Ampang, the GDP of both Malaysia and Australia would remain unchanged. So the only GDP variable in the equation is the amount of product that is imported and exported between the two countries.

Now translate that individual example to the economy as a whole, and you have your answer.

<< For heaven's sake Ludwig. I am getting the strong view that you are arguing for the sake of arguing… >>

Oh Pericles, for heaven’s sake, why do you have to insist on seeing everything I write with a negative connotation?

OBVIOUSLY, I have a perfectly LEGITIMATE query here. I don’t know why you would have a problem with that.

Thankyou for your explanation. It is exactly as I have presumed it to be.

Imports are indeed viewed totally differently when subtracted from exports to what they are when they are sold or consumed.

<< It is such a blindingly simple issue… >>

Yes! Blindingly simple in its duplicity!

Those bad little imports get subtracted from exports, but then they magically become good little imports and all contribute directly to GDP!!

This weird GDP character wants us strive to maximise exports and minimise imports. But then he brazenly welcomes all imports with open arms!

Surely you can see a fundamental ‘blindingly simple’ contradiction in terms here!?

This is just the same sort of thing as Mr GDP telling us that disasters, illness and injury is all bad for him, but then brazenly accepting ALL the economic activity that is generated as a result of these things as being good for him!

Ok, let's try again

>>Those bad little imports get subtracted from exports, but then they magically become good little imports and all contribute directly to GDP!! This weird GDP character wants us strive to maximise exports and minimise imports. But then he brazenly welcomes all imports with open arms!<<

Imports are subtracted from GDP. Which directly contradicts your assertion that "they magically become good little imports and all contribute directly to GDP!!"

That is precisely what they do NOT do.

They do however create economic activity, indirectly. And in doing so, they do contribute to GDP. Indirectly.

So, what exactly is the manner in which they create this indirect economic activity? Take a plasma TV Screen from Taiwan as an example. It makes work for customs officials, transport companies and their drivers, clerks, marketing staff, personnel managers etc., wholesale companies and their warehouse staff, more transport companies and their truck drivers, retail stores and their warehouse grunts, clerks, shop assistants and sundry management.

Would this economic activity occur without the importation of the plasma screen? No, it wouldn't. Because we don't produce them here. But it is incontrovertible that part of the end-price paid by the consumer goes to support the lifestyles of all these worker bees along the supply chain.

>>Surely you can see a fundamental ‘blindingly simple’ contradiction in terms here!?<<

Absolutely not. Because there is no contradiction, whatsoever.

And precisely the same applies here:

>>...disasters, illness and injury is all bad for [GDP], but then brazenly accepting ALL the economic activity that is generated as a result of these things as being good for [GDP]!<<

The ingredient that you have ignored in all of this, is that someone, somewhere, actually has to pay the price. If the money isn't there, the plasma screens stay unsold, the flooded buildings stay flooded, and the sick will remain untended and die.

Which, in low-GDP economies, is exactly what happens.

<< “…they magically become good little imports and all contribute directly to GDP!!"

That is precisely what they do NOT do.

They do however create economic activity, indirectly. And in doing so, they do contribute to GDP. Indirectly. >>

Oh puleease. Such pedanticism! Directly or indirectly, they do indeed contribute to GDP.

So…. what is it about imports that actually gets subtracted from exports? It is simply the total monetary income that we get from exports in a given financial year minus the total monetary cost of all imports?

And what is it about imports that then contributes to GDP? Is it the total cost of items such as a Taiwanese plasma screen TV? Or is it the retailer’s (and wholesaler’s and transporter’s ?) profit margin over and above the import price? Or is it only the secondary (indirect) economic activity by way of retailers (and others ?) spending their profits on other goods and services?