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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?
Others have given good answers but you seem to be trending in this direction for a question of fundamental assumptions or what productivity or gain really makes. Try this:
https://www.stlouisfed.org/publications/page-one-economics/2020/11/02/examining-the-lump-of-labor-fallacy-using-a-simple-economic-model
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Addressing your second point, as someone who knows next to nothing about economics [^1]: your question seems to be answered by the parable of the broken window.
Applying this to your question about the security guard: any society in which stores (and in particularly bad cases, individual families) must spend on hiring security guards is a society where this money is not being spent on research and development, or on education, or on infrastructure, or on other investments that generally raise the GDP of that society (and often make life better in that society too). We should thus expect to see this opportunity cost of hiring security guards to be reflected in GDP figures, as societies that hire them are more likely to be beset with lower GDP. This is borne out in reality: there are many developing countries where elites live behind expensive walled compounds staffed by large security details, but no one particularly thinks that they’re major players in the world economy.
[^1] That is to say, don’t put too much stock in what I’ve written here.
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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, but because nobody is particularly invested in maximizing measured GDP, it's not that big of an issue.
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