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Thursday, 4 September 2014

Exceedingly Gross Domestic Products

I have never been a great fan of using GDP to measure economic activity, and as a result the media hype that revolves around a recession.  The latter depends on so many extraneous factors that as an indicator of economic performance it is quite meaningless - a small variation can mean the difference between a clean bill of health and a diagnosis of decrepitude.  And as I often point out, it is subject to manipulation by politicians in the style of Balls/Brown: viz, if I get you to cut my lawn for £75 billion and you pay me to wash your car for £75billion, we won't have achieved much but apart from boosting GDP by 10%. Well it's not quite that simple but you get my drift.

Now it seems that we were measuring (guessing) the wrong values.  According to the EU, we should be including the turnover of charities, drug dealers, prostitutes and money spent on R&D to get a figure comparable with other European countries.  Well I can see the logic of including R&D, and there are going to be some mafia dominated countries where the drugs trade and prostitution. Including the wholesale as well as the retail business makes sense, but it seems perverse to exclude the related business of people trafficking. And charities are certainly a business these days with CEOs earning big six gigure salaries they must be doing some economic activity.

Adding in all the new factors increases GDP by about £10 billion, and apparently means that the revised GDP started rising earlier than previously reported, so that the recession actually stopped in 2013.

1 comment:

Demetrius said...

As someone who called on the nation's drivers to make many extra journeys up and down motorways during the Crash to boost GDP I can only agree. The trouble is similar issues arise with many other figures. Some are garbage at best. And to think future state planning is based on these, never mind expensive schemes etc.