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Comments on: Some issues with GDP http://www.tvhe.co.nz/2009/06/04/some-issues-with-gdp/ The Visible Hand in Economics Sun, 07 Jun 2009 21:54:52 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: rauparaha http://www.tvhe.co.nz/2009/06/04/some-issues-with-gdp/#comment-20017 Sun, 07 Jun 2009 21:54:52 +0000 http://www.tvhe.co.nz/?p=3913#comment-20017 @swan
Ah, but crushing it generates GDP which holding on to it wouldn’t! Isn’t that the beauty of measuring welfare via production rather than consumption: you can always make it bigger by breaking stuff 😛

]]> By: swan http://www.tvhe.co.nz/2009/06/04/some-issues-with-gdp/#comment-20013 Sat, 06 Jun 2009 15:39:42 +0000 http://www.tvhe.co.nz/?p=3913#comment-20013 Regarding the example of motor vehicles in point 1. In Europe there are car ‘scrappage’ schemes at the moment in order to help the car industry. This is where you trade in a car and that car gets crushed, and the government gives you a subsidy on the purchase of a new car.

Whilst the value in a subsidy to encourage consumption is arguably a good thing in a recession*, the idea of crushing a perfectly good car seems absolute madness – the ongoing value of the car is not being taken into account.

*For the avoidance of doubt, I think the subsidies are a bad idea as well!

]]> By: Matt Nolan http://www.tvhe.co.nz/2009/06/04/some-issues-with-gdp/#comment-19986 Wed, 03 Jun 2009 23:06:09 +0000 http://www.tvhe.co.nz/?p=3913#comment-19986 @rauparaha

Indeed, good point in so far as the price of goods does not represent the full satisfaction gained from the trade of a product.

However, at least with this we know that (as long as relative prices are unchanged) the two measures move in the same direction.

]]> By: rauparaha http://www.tvhe.co.nz/2009/06/04/some-issues-with-gdp/#comment-19985 Wed, 03 Jun 2009 22:49:07 +0000 http://www.tvhe.co.nz/?p=3913#comment-19985 Regarding bullet point (2), couldn’t you go further. Even for consumption in the current period, GDP doesn’t include consumer surplus. Thus it undervalues the benefits of current consumption. Obviously it’s not intended to value surplus, but that’s another reason why it is a poor measure of welfare.

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