Saturday, October 13, 2012


In 2004, I took an economics class in community college.  I got an A in it.  It was easy to memorize the definitions, and that's pretty much all it was.  But the book for the class talked about GDP (gross domestic product) at one point, and it said that there can never be a full account of the GDP because you can't count when a mechanic fixes his own car, etc.  So, that would mean that the GDP is really everything anyone does in the country.  Me typing this right now is adding to the GDP.  It won't get counted, because I'm not paying anyone, I'm not paying myself, to do it for me.  But it is part of the GDP.  If fixing your own car counts, then typing something up yourself, when you could have hired someone to do it for you, counts.

Right now I'm taking a class called "intro to political science".  The book for it, called Power & Choice, talks about the GDP's of different countries, specifically the per-person PPPGDP, where PPP means "purchasing power parity", which means that if they say the per-person GDP of a country is $40000, that means that the average person in that country can buy all the same stuff that a USAer could buy in USA if they had $40000.  And then the book claims that the ppPPPGDP of some country (I forget which) is $800.  No.  That's not possible.  You said, book, YOU SAID that it would be as if I, a USAer, had to live on $800 for a whole year.  There's no way I can do that.  I can't even buy food for less than $1200 a year.  Even $1200 is just theoretical.  But I've looked into what you would need to eat to not die of malnutrition, I've looked for the cheapest prices at different stores, and there's no way in hell you can eat for less $1200 a year, where I live.  And then on top of that there's clothes, and a place to live, and medical care.  You might say, oh, well, they're all just starving and sick.  But no, they would be dead.  Which would make the ppPPPGDP go up.  And $800 is the average, and I'll eat my hat if there aren't some relatively rich people in that country, which means there are also some people who are making way below $800 a year, so they, according to the book's reasoning, should be dead.  But they're not, and we know they're not because of how low the ppPPPGDP is in that country.

So why aren't they?  I asked a friend about it and they came up with a possible explanation.  It could be that all the poor people in that country, and other countries with "low GDP's", live in huts with 40 other people, and they repair the huts themselves with stuff they find outside, and they have a goat or something, and they have a garden or they gather food from the woods or whatever, and none of this gets counted in the GDP.

GDP only counts when money gets traded.  And it even counts when money is traded but there's nothing new being produced.  Like, the same shirt being sold at walmart and then later at goodwill or something.  I don't know.  Money changing hands doesn't mean that anything is being produced, though.  And things being produced doesn't mean that money is changing hands.

Conclusion:  GDP tells us nothing important.

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