Is GDP the correct way to measure nation wealth?

Discussion in 'Economics' started by nitro, Jan 1, 2013.

Should GDP be replaced with something more comprehensive?

  1. Yes. It is terribly lacking

    5 vote(s)
  2. No. It captures the essence of economic wealth

    1 vote(s)
  3. I don't know.

    2 vote(s)
  4. I don't care.

    1 vote(s)
  1. nitro


  2. GDP includes a MUCH larger inflation component than the government reports and is a manipulated stat much like unemployment.
  3. This....
    The government inflates those GDP numbers. No growth, just inflation.
  4. GDP contains government spending and currently government spends mostly money printed by the Fed

    so probably recessions will never happen again, in case of any business downturn government can increase spending at their will with free money or they can target any growth number - 3%, 5% even 20%
  5. nitro


    <iframe width="640" height="360" src="" frameborder="0" allowfullscreen></iframe>

    I could have made this into its own thread, but I like the way it ties the argument to GDP. I do not know if the zeitgeist movement is founded in sound logic, but it sure rings true to me:
  6. nitro


    <iframe width="640" height="360" src="" frameborder="0" allowfullscreen></iframe>
  7. I think GDP should not be the center of attention, instead, indices such as UN's HDI should be what nations focus on. So the answer the question, no.
  8. Ed Breen

    Ed Breen

    GDP is not a measure of a nations 'wealth.' GDP is a tortured measure of spending. It was created by an FDR socialist working at NBER who wanted to conflate the private sector and the government sector in one metric. He himself did not believe it
    should be used as a measure of wealth.

    Think about what the GDP metric is made up of...C+I+G + net imports/exports.

    The first part is consumption....consumption is not wealth. Consumption can only take place by spending surplus production....either present production that is not reinvested, past production that has been 'saved,' or future production by borrowing against future surplus production.

    The second part is Investment...this tries to measure how much production is reinvested in maintaining levels of production and creating new we have some measure of wealth creation because assets are being created or maintained in this action.

    The third part is Government Spending...well that is almost all consumption so it is based on surplus production, presently, saved or borrowed against the future just like Consumption.

    Then there is the net of imports/exports...that isn't measured well and it is not clear what it means in terms of wealth anyway, it certainly does not measure asset investment.

    The only part of GDP that can measure anything like wealth of a nation is the investment component.

    A better measure of 'wealth' would be to aggregate a nation's assets...but we don't have metrics for that because all of our government produced metrics were created by Keynesian socialists eighty years ago and they did not see the difference between production and consumption.

    Consider dividing GDP by I (investment) much of a nation's GDP is being reinvested for wealth creation? in the U.S. today we are talking about something like 12% to China we are seeing investment of something like 55% of GDP...which country is getting wealthier?
  9. hear hear, you don't have to know much about this stuff, just a little common sense to know consumption isn't wealth

    especially when you see it happening all around you

    a lot of consumption

    but no wealth creation
  10. we work with some incredibly poor people in Mali

    the most depressing thing was setting them up with a chicken farm. There's almost nothing a chicken can eat that a human being in Mali can't also eat
    #10     Jan 18, 2013