I need to remind you, Ludwig, of your earlier protestation:

>>You know full well that I understand GDP pretty damn well, and when I find something that I don’t understand, I seek to learn.<<

This latest outburst, for example, demonstrates perfectly that you are making no attempt whatsoever to "seek to learn":

>>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?<<

Why the question mark at the end? You already know this to be the case. I even went to the trouble of finding the simplest possible explanation for you:

http://www.infoplease.com/cig/economics/imports-exports.html

I then summarized it for you:

>>This refers only, repeat only, to the monetary value of the goods and services themselves.<<

So, why the question mark? Either you did not believe me, in which case you need to explain what is wrong with the definition, or you don't understand it. Which is it?

And I also spent a great deal of care describing this to you:

>>And what is it about imports that then contributes to GDP?<<

It is the sum total of economic activity created by the product in its journey from its source (our plasma screen f.o.b. Pyrmont, for example) to its destination. Its status on the dockside has fulfilled the "import value is subtracted from GDP" part of the equation. From that point on, it creates the same type and amount of economic activity as it would, if it had just left a factory here in Australia.

Because once it is on the dockside, paid for, it behaves no differently within the economy than a home-made product. Which is why you need to separate the value of the goods or services themselves, from their source - refer to my previous canned pineapple example for more detail.

http://forum.onlineopinion.com.au/thread.asp?discussion=6365#193279

I need some evidence that you understand at least a part of this, Ludwig, if you are interested in learning more.

Some more detail, Ludwig, in case you want to suggest that I am avoiding your questions.

I'll use them as a starting point.

>>And what is it about imports that then contributes to GDP?<<

It is the sum total of economic activity that results from their existence. But remember, this activity is identical to the activity created by a home-grown product - it is entirely agnostic to the source.

>>Is it the total cost of items such as a Taiwanese plasma screen TV?<<

No. The amount that is paid to the Taiwanese manufacturer is already taken care of in the "import cost" column. The importer has paid this, usually on a "free on board" (f.o.b.) basis.

http://www.investopedia.com/terms/f/fob.asp

From that point on, as I said, the economy is indifferent to its point of manufacture.

>>Or is it the retailer’s (and wholesaler’s and transporter’s ?) profit margin over and above the import price?<<

Gross margin is (largely) the difference between the price paid, and the price received (Sale price minus cost-of-sale). This differential is used to fund the worker bees, and the resources they use such as warehouse space, trucks etc. Part of the net profit gets released into the economy via dividends, the rest retained to grow the business.

>>Or is it only the secondary (indirect) economic activity by way of retailers (and others ?) spending their profits on other goods and services?<<

By now you should be able to see the full money trail. So you can see that it is not "only" the spending of net profits that we are looking at here, but the utilization of gross margin to fund the everyday activities of the business - paying salaries, paying the mechanic to service the trucks, paying for the advertisements etc.

But again, the key message to understand imports and exports in relation to GDP is to isolate the product itself from the activities that a) go into producing it for export or b) go into realizing the value created within the economy following its importation.

<< This latest outburst, for example, demonstrates perfectly that you are making no attempt whatsoever to "seek to learn": >>

( :>|

This statement of mine:

>>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?<<

…is an ‘outburst” ?!?!?

It is an entirely neutral question simply seeking clarification on an important point directly related to the matter at hand, without ANY negative connotations attached to it whatsoever!

Crikey Pericles, is it any wonder that I take EVERYTHING you say with a very large grain of salt!

You are enormously enigmatic. You are willing to continue this conversation and to put a fair whack of time into it, and yet you seem incapable of doing it without constant parade of put-downs. This just seems to sit at stark odds with your willingness to continue the debate.

<< Why the question mark at the end? You already know this to be the case. >>

I wouldn’t have asked if I’d categorically known. Even if I am pretty sure about something, it is still well asking in order to become certain, is it not?

But hey, you have gone to considerable lengths to address my queries. So I thank you for that. I will study your comments and respond in full later.

You're welcome, Ludwig.

>>You are willing to continue this conversation and to put a fair whack of time into it, and yet you seem incapable of doing it without constant parade of put-downs.<<

The time it takes to rattle out (yet another) explanation for you is minimal, but thanks for the thought.

As for the "put-downs", they would not happen if you gave any of the previous answers even the most cursory attention.

>>This statement of mine:<<

Look again. It was a friggin' question:

>>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?<<

Two friggin' questions, in fact.

>>It is an entirely neutral question simply seeking clarification on an important point directly related to the matter at hand, without ANY negative connotations attached to it whatsoever!<<

This is a classic example. I had already explained the situation, in great detail and very clear English. Yet you insist that repeating the question, as if it were some bone of contention that required further explanation.

That's what gets you the impatient response from me.

(Total answering time: 1m 56s)

So what am I supposed to say to you Pericles?

It seems that anything other than complete agreement with you would just be completely unacceptable.

.

Your explanation is just as I would have believed it to be. It makes perfect sense. And thankyou again for going to the trouble of laying it all out.

So then, the fact remains that imports are on the one hand subtracted from exports and hence are a negative factor in the GDP equation, and on the other hand do indeed contribute (indirectly if you like) to GDP.

Alright, let’s accept this as being a valid state of affairs rather it seeing it as being contradictory. As I said, it does make sense for it to be set up in this manner.

Using similar reasoning then; why can’t economic activity that is clearly of a remedial nature following a flood be excluded from the GDP calculation and only the secondary indirect activity included?

Surely if this was to happen, it would be one significant step closer to developing a more accurate and meaningful GDP measure, yes?

We are still working with facts here, right Ludwig?

>>Using similar reasoning then; why can’t economic activity that is clearly of a remedial nature following a flood be excluded from the GDP calculation and only the secondary indirect activity included?<<

Because all the economic activity takes place within the borders of Australia, therefore it needs to be counted as belonging to GDP. The exception being, of course, if for example we hired one of those firefighting aircraft from Canada, that would count as an import.

The remedial work required after a flood employs many people, and consumes a great deal of material. Again, all this economic activity is simply business-as-usual for SES personnel, builders etc., and is part of the GDP calculation - again, with the exception of imports.

The cost is just one of the many factors involved in national "housekeeping". You presumably have your car maintained at the local garage. If some of the work is remedial in nature - wiping the blood of unfortunate cyclists off your bull-bar, for example - it still makes work for the mechanic.

And if you don't have the cash to have your car serviced, then it doesn't get serviced. Similarly, if the country cannot afford to rebuild after a flood, or a bushfire, then it simply doesn't do it. If it does, it is counted in GDP; if it doesn't, it isn't.

Leaving facts behind for a moment, what exactly is it that you would like GDP to achieve? If you want to separate it into "good" GDP and "bad" GDP, then all you have to do is draw up a list of each, drop the expenditures in their appropriate categories, and off you go. You have a "Ludwig index of happiness" that meets your need to measure good stuff versus bad stuff.

You will still have a problem when it comes to measuring the impact of immigration though. Would you count their contribution to the nations's economy as only "bad" GDP?

That might be a little tricky, given that they tend on the whole to be productive little buggers.