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Date: 2024-06-30 Page is: DBtxt001.php L0500-GDP

Gross Domestic Product (GDP)

A listing of files associated with Gross Domestic Product (GDP)

Gross Domestic Product (GDP)

TPB Observation
Why is it that GDP is still one of the dominant metrics in modern economics? The fundamental flaws in GDP as a meaningful measure for economic performance were recognised many decades ago. Kuznets who developed the measure in the United States and Keynes understood the limitations before the Second World War! Kuznets and Robert Kennedy both spoke out about the flaws in the GDP metric in the 1960s. Sowhy did nothing get changed.
My experience as a corporate CFO may be helpful. It was so much easier to increase profts for stockholders in an environment of economic growth ... that is GDP growth ... than in one where the economy was stagnant ... that is no growth! In the late 1960s there was a lot of growth, but in the early 1970s the bubble burst and then worse, the OPEC oil shock that resulted in massive increase in energy costs for US companies that had become incredibly sloppy with their use of really cheap energy. Many companies got into serious financial difficulties and the Nixon / Ford / Carter series of administations in Washington were unable to make much difference.
It is my view that corporate thought leaders have had some role in promulgating the myth that economic growth is essential for profit growth. This has been copied by economists and political leaders who then conflate GDP growth with the potential for job growth.

L0700-MR-GDP	Open L0700-MR-GDP
n9-GDP-ByCountry-2016	Open n9-GDP-ByCountry-2016
SLIDESET ... S0500-TVM-pres-GDP-is-a-wrong-measure-of-performance-140517	Open S0500-TVM-pres-GDP-is-a-wrong-measure-of-performance-140517

Economic Metrics ... If the GDP is Up, Why is America Down? This Monthly Atlantic Magazine essay written in 1995 explains how the GDP metric measures the wrong things	Open file 0452
Economics ... Dysfunctional Metrics Harpers ... READINGS — From the June 2008 issue ... Our Phony Economy	Open file 10909
Metrics ... GDP ... A dysfunctional metric Edoardo Campanella ... Is It Time to Abandon GDP? ... Economist Edoardo Campanella examines the conceptual and technical flaws of the world’s most important metric, and asks whether and how it could be reformed.	Open file 12167
ons/dcp171766_365274 'http://www.ons.gov.uk/ons/dcp171766_365274.pdf'	Open PDF ... ons/dcp171766_365274
GDP/UK-SNA-illegalactivitiesarticlefinalf_tcm77-365319 'http://www.truevaluemetrics.org/DBpdfs/Metrics/GDP/UK-SNA-illegalactivitiesarticlefinalf_tcm77-365319.pdf'	Open PDF ... GDP/UK-SNA-illegalactivitiesarticlefinalf_tcm77-365319
GDP/UK-SNA-dcp171766_365274 'http://www.truevaluemetrics.org/DBpdfs/Metrics/GDP/UK-SNA-dcp171766_365274.pdf'	Open PDF ... GDP/UK-SNA-dcp171766_365274
GDP/EricZenceyNYT_GDP_RIP 'http://www.truevaluemetrics.org/DBpdfs/Metrics/GDP/EricZenceyNYT_GDP_RIP.pdf'	Open PDF ... GDP-Eric-Zencey-NYT-GDP-RIP
GDP-Bradford-De-Long-Estimates-1998-Paper 'http://truevaluemetrics.org/DBpdfs/Economics/GDP/GDP-Bradford-De-Long-Estimates-1998-Paper.pdf'	Open PDF ... GDP-Bradford-De-Long-Estimates-1998-Paper
Our-Phony-Economy-HarpersMagazine-2008-06-0082042 'http://truevaluemetrics.org/DBpdfs/Economics/GDP/Our-Phony-Economy-HarpersMagazine-2008-06-0082042.pdf'	Open PDF ... Our-Phony-Economy-HarpersMagazine-2008-06-0082042
Economics ... Dysfunctional Metrics Harpers ... READINGS — From the June 2008 issue ... Our Phony Economy	Open file 10909
GDP-NSF-GOV-RandD-Recognized-as-Investment-in-US 'http://truevaluemetrics.org/DBpdfs/Metrics/GDP/GDP-NSF-GOV-RandD-Recognized-as-Investment-in-US.pdf'	Open PDF ... GDP-NSF-GOV-RandD-Recognized-as-Investment-in-US
Kitov-and-Kitov-on-GDP.pdf 'http://truevaluemetrics.org/DBpdfs/Metrics/GDP/Kitov-and-Kitov-on-GDP.pdf'	Open PDF ... Kitov-and-Kitov-on-GDP.pdf
GDP-NSF-GOV-RandD-Recognized-as-Investment-in-US 'http://truevaluemetrics.org/DBpdfs/Metrics/GDP/GDP-NSF-GOV-RandD-Recognized-as-Investment-in-US.pdf'	Open PDF ... GDP-NSF-GOV-RandD-Recognized-as-Investment-in-US
Eric Zencey NYT GDP RIP 'http://truevaluemetrics.org/DBpdfs/Metrics/GDP/EricZenceyNYT_GDP_RIP.pdf'	Open PDF ... Eric-Zencey-NYT-GDP-RIP

Metrics ... BeyondGDP

Interesting Facts 'http://truevaluemetrics.org/DBpdfs/Metrics/BeyondGDP/InterestingFacts.pdf'	Open PDF ... InterestingFacts
Stiglitz-Sen-Fitoussi-Report-Reflections 'http://truevaluemetrics.org/DBpdfs/Metrics/BeyondGDP/Stiglitz-Sen-Fitoussi-Report-Reflections.pdf'	Open PDF ... Stiglitz-Sen-Fitoussi-Report-Reflections
US Economy ... Boondoggle What role government? Delaware’s very own Solyndra Will Delaware and US citizens get stuck with a Bloom Energy fuel cell boondoggle?	Open file 616
Ideas ... Metrics Sean McElwee ...Moving Beyond GDP	Open file 9232
Demos-Beyond-GDP-2012 January 26, 2012 ... Lew Daly, Stephen Posner 'http://truevaluemetrics.org/DBpdfs/Initiatives/Demos/Demos-Beyond-GDP-2012.pdf'	Open PDF ... Demos-Beyond-GDP-2012

TPB note: These words were penned around 2000

Gross Domestic Product (GDP) is a dangerously flawed metric. The way the GDP is compiled makes very little sense ... like most indexes the GDP is a measure, but what is being measured is far from clear.
Cost is NOT a Product
There needs to be clarity about the critical difference between product and cost. Much of the confusion in economic analysis and policy formulation would be avoided if there was a clear distinction about what is a product and what is a cost.
What belongs in the Gross Domestic Product?
Gross domestic product should be the output of the economy ... what the economy produces ... the product. Over time, more and more of the product is expressed as the cost of the product at the transaction level and over time the measure has become more and more inflated so as to become meaningless. Rather, it is much worse ... it has resulted in the wrong signals being sent about the prosperity of the nation!
Producers, consumers and prosumers
It is widely recognised that affluent consumers have been part of the success of the US economy ... good wages were part of this.
Henry Ford
Henry Ford is meant to have realized that a prosperous working class would eventually be the consumers of the automobiles that his company was manufacturing ... those that were producing were the same as those that were consuming. I associate Henry Ford's insight as being something of the origin of the idea of a prosumer.

The Keynesian Dynamic
Keynes was also very clear about the way wages fed into the success of the economy by expanding aggregate demand.
Keynes was clear about the dynamic of economic activity in a society ... but the Keysian clarity seems to be submerged in most modern economic analysts and policy dialog by ideas that are ideological more than anything else. Though there are powerful analytical tools available to process data ... most of the data are studied with a severe lack of transparency.
What is GDP used for?
GDP is one of those macro-economic indicators that has leverage over the economy because of its role in moving the capital markets ... but has little to no use as a tool to understand socio-economic performance.
16% of US economy is healthcare!
The statement is made over and over again that healthcare makes up 16% of the US Gross Domestic Product (GDP). At the same time the observation is made that the proportion is the highest among the top developed countries and the health state of the US population is lowest of the group. Clearly one metric is insufficient to describe the economic characteristic of the health sector.
In TrueValueMetrics (TVM) it is clear that quality of health is a valid product of the health sector, and the cost of this health care should appear in something that might be called the Gross National Cost. At the moment this does not exist as a national macro-economic indicator ... but it does feature as an element of the TVM system.

Issue
GDP

Basic observation
Gross Domestic Product is a commonly used macro-economic indicator that measures the size of an economy

Prevailing response
It is a useful measure, but not very powerful for the analysis of complex relationships in the economy and the complex interactions that make up both the local situation and the world situation.

A better response
In addition to macro economic measures, there needs to be a lot of management metrics so that the how and why can be answered. GDP is just one measure or hundreds that are possible, and most more specifically useful for analysis.

The text being discussed is available at

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