GDP, a (totally) useless indicator?

[ekrem]

Hi everybody,


I wonder why everybody is always using that indicator which is absolutely non-sense, when we think about it?
Let me explain:

1) It doesn't take into account THE NUMBER OF PEOPLE living in a country...
I mean, that totally doesn't make sense right? The more there are people, the more they have the chance to create value and produce things (if they a smart enough).

If you pick a country with 5 habitants, and a country with 20 habitants, and if you need at least 5 people to build a car, then the next happens:
In country 1 everybody is working to produce one car,while in country 2 everybody is working to produce either 4 cars or 1 car and 1 plane.

How can you possible compare these 2 countries?

Then you understand how unproductive are the Chinese, when everybody is saying "OMG China they're sooo good"... Man, come on, China is 1,3 Billion people. US is 250 million. There are 5 times more people in China than in US. And US still has a GDP 3 times higher.
So that's the opposite, actually. Chinese suck.

People are like "Damn, China became the 2nd economy in the world... wow..." Yeah. They've done a little bit more than Japan, with a population 7 times bigger.

And what about EU? Do we count EU as one signle area, or country by country? Etc. etc.

This is why I think every GDP indicator should be brought down to a base denominator of population.

2) It doesn't take into account where the production comes from:
Take for example Saoudi Arabia, Russia, and Libya... of course you've all understood what they have in common: oil.
And that's all what they have and what they can do: pump oil. They are unable to build something from scratch and sell it. They have the chance to have such a resource on their lands but we all know that it will soon be over, firstly because of the green energies, and secondly because by 2050 the oil resources will end anyway.

Then what will these countries do? Their GDP will sink and the whole countries with it.

This brings us to the 3rd point.

3) In doesn't take into account the distribution of this value among the population.
Taking the same examples as in point 2, those who pump oil and possess the lands have looooots of money, while the populations are still in mid-misery.

With China you have to take GDP-PPP, which stands at 10 Trillion $.
If war breaks out, and China is hindered to trade with the world, China is fully capable to compensate it's foreign trade imports with in-country production. Without much transition period.

If a country is highly dependent on Imports, you have to take nominal GDP values of the trading countries which reside in different currency-zones.
For example:
If Iran buys an oil rig on world-market or components for oil-refineries, which Iranian companies can't produce, the International supplier gives a shit about Iran's GDP-PPP values. Iranians have to pay with $.

GDP-PPP is only of interest for truly self-sufficient and independent countries, which procure or have the ability to procure all goods from within their own currency-zone. This is exactly what China is capable of, if tomorrow war breaks out.

GDP per Capita is not really a factor in International politics. Look at Luxembourg and Qatar. It only becomes relevant if the citizens use their wealth to engage in philanthropic work outside of the country.

 

[ekrem]

Chinese suck.

China produces 10 times the steel the USA produces.
List of countries by steel production - Wikipedia, the free encyclopedia

GDP per capita has no influence on China's ability to produce steel.
And steel is what those Tanks and bullets are made of.
In free-market that steel goes to private economy and construction business.
In war-times the steel goes to the Army and weapons-production.

China will have almost equaled US's GDP-PPP by 2015.
List of countries by future GDP (PPP) estimates - Wikipedia, the free encyclopedia

Plus, China enjoys the advantages of a manufacturing economy (steel example).
I don't think, that there will be ever 'total-war' again in this world like in WW2, but the world would be in deep trouble if China utilizes it's economy to prepare for 'total-war'.
The only disadvantage the Chinese really have is Oil, but Central Asia is nearby.

 

[william the wie]

Pinqy nailed it most stats are based on out of date definitions because everyone in and out of government games the stats. For example I am gaming the unique visitor stats right now because I am listening to music and therefore ignoring all audio and video links.

 

[pinqy]

Pinqy nailed it most stats are based on out of date definitions because everyone in and out of government games the stats.

I said nothing of the sort.

 

[psikeyhackr]

You know, ever single time I read someone's complaint about an economic indicator, it boils down to the indicator not measuring what someone wants it to measure and not it's validity for what it measures.

What if what it measures ain't worth a damn and they fail to mention that?

But there is such a thing as NET Domestic Product.

Many times the question is not what is wrong with what you do hear but what is it that you NEVER HEAR.

The Devil is in the hidden information.

The purchase of durable consumer goods gets added to GROSS Domestic Product but only the depreciation of Capital Goods gets subtracted to compute NET Domestic Product. Don't durable consumer goods depreciate? But then consumers buy more and they get added to GDP. THAT'S IT! GDP is a measure of how DUMB consumers are. Yeah, buy a $2000 laptop and lose $1500 in depreciation in 3 years and then buy another $2000 laptop. Both purchases get added to GDP but the depreciation never gets subtracted.

7,000,000,000 people on the planet, 40 years after the Moon landing and the economists can't do algebra.

And we argue about the validity of the number they shove in our faces the most.

Maybe that is intended to keep us from seeing other things. When did the economists last suggest mandatory accounting in the schools. Double-entry accounting is ONLY 700 years old.

Economic Wargames

There Ain't No Such Thing As Free Depreciation

psik

 

[uscitizen]

Chinese suck.

China produces 10 times the steel the USA produces.
List of countries by steel production - Wikipedia, the free encyclopedia

GDP per capita has no influence on China's ability to produce steel.
And steel is what those Tanks and bullets are made of.
In free-market that steel goes to private economy and construction business.
In war-times the steel goes to the Army and weapons-production.

China will have almost equaled US's GDP-PPP by 2015.
List of countries by future GDP (PPP) estimates - Wikipedia, the free encyclopedia

Plus, China enjoys the advantages of a manufacturing economy (steel example).
I don't think, that there will be ever 'total-war' again in this world like in WW2, but the world would be in deep trouble if China utilizes it's economy to prepare for 'total-war'.
The only disadvantage the Chinese really have is Oil, but Central Asia is nearby.

And Siberia has vast untapped oil reserves.

 

[sallyliao]

Trying to use it as anything more is just abusing the whole purpose.

 

[editec]

It's a useful measure of economy , but it is NOT the only measure of the economy that matters.

 

[william the wie]

You know, ever single time I read someone's complaint about an economic indicator, it boils down to the indicator not measuring what someone wants it to measure and not it's validity for what it measures.

What if what it measures ain't worth a damn and they fail to mention that?

But there is such a thing as NET Domestic Product.

Many times the question is not what is wrong with what you do hear but what is it that you NEVER HEAR.

The Devil is in the hidden information.

The purchase of durable consumer goods gets added to GROSS Domestic Product but only the depreciation of Capital Goods gets subtracted to compute NET Domestic Product. Don't durable consumer goods depreciate? But then consumers buy more and they get added to GDP. THAT'S IT! GDP is a measure of how DUMB consumers are. Yeah, buy a $2000 laptop and lose $1500 in depreciation in 3 years and then buy another $2000 laptop. Both purchases get added to GDP but the depreciation never gets subtracted.

7,000,000,000 people on the planet, 40 years after the Moon landing and the economists can't do algebra.

And we argue about the validity of the number they shove in our faces the most.

Maybe that is intended to keep us from seeing other things. When did the economists last suggest mandatory accounting in the schools. Double-entry accounting is ONLY 700 years old.

Economic Wargames

There Ain't No Such Thing As Free Depreciation

psik

Because of Moore's law this does not necessarily apply to laptops but a much bigger problem with net domestic product is not adjusting depreciation for inflation. Buy a truck for your business in 2000 and try to get a comparable replacement in 2010 for the same price. That price differential is not reflected on taxes.