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Can someone who’s good with economics explain to me, as you would a child, is “global GDP” a useful measure of human productivity, or of anything at all for that matter?
My understanding GDP is a measure of productivity (via total value goods/services), but it’s measured in dollars, which are a self-referential measure of people’s willingness to work or pay for a service. All of these goods and services also have differing values to consumers based on their circumstances. If I’m trying to conceptualize a “fundamental unit of productivity” I feel like no matter how I do it I end up in a recursion loop. What am I missing?
Secondarily, I was recently in a fast food place and realized what I thought was a police officer taking a break was actually a full-time security guard employed by the restaurant. This guard is presumably paid some amount X per year, which is rolled into the national GDP. If we compare to another country where low crime rates mean they don’t need a security guard at every McDonald’s, it seems in this instance that GDP has captured a societal drag on productivity and is treating it as a gain. True, the guard is producing a service, but the fact that the service is needed at all when in other countries it is not seems like there should also be some factor captured as a negative that is being missed. Are similar warping effects (e.g., make-work projects or services that are created to compensate for a societal failure) a major contributor to variations in GDP values? And if so, how useful can GDP be really?
Not an economist, but you can find this lots of places.
My wife is a full-time homemaker. We could increase GDP if she went to work outside the home and then we paid others to care for our children and DoorDashed our meals etc. Our children are still cared for and fed but there would be a countable number to describe the economic activity that is now uncounted.
Goodhart's Law: When a measure becomes a target, it ceases to be a good measure.
Yes, there are all kinds of ways you could distort GDP if you really wanted to, but because nobody is particularly invested in maximizing measured GDP, it's not that big of an issue.
Sure, we could come up with am alternative measure that includes an estimate of the value of home production, but what problem would this solve?
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