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Elon Musk is wrong about GDP

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Re: Elon Musk is wrong about GDP

#51

Post by 9rx »

braiamp wrote: post #24
chollida1 wrote: post #5

I've talked to a few economists about this and non agree with Elon on this. The biggest issue one person raised is how do you separate out government spending form GDP? If a US town has a big military base, does that mean the entire towns' GDP is just government spending so ignore it? The government essentially pays for everyone's salary in the town. Where do you draw the line at what is government spending and priva…

I don't know why people are entertaining this. The Gross Domestic Product by definition measures every expenditure, income or production of a specific territory. If you exclude government effects in the economy, you get into so many troubles.

Presumably for the same reason you hear people say things like "How can inflation only be 2%? I am spending 10% more. We need to redefine inflation!"

In other words, people want the data to speak to the government on their behalf so they don't have to. Musk is playing into that same idea.

Re: Elon Musk is wrong about GDP

#52

Post by smeeth »

Elon is definitely wrong. The author seems to be advocating running the economy on vibes, however.

> The real problem with GDP ... is that it tempts us to view all human progress as an amorphous score, which we can start maximising just as soon as we fix whatever we think is wrong with how that score is calculated.

No! The problem with GDP isn't that it's a score, it's that it's a BAD score. We know whats wrong with it. It's fixable, it doesn't ignore very many things! The main issues are totally tractable. In addition to ignoring utility:

1) GDP doesn't account for changes in net wealth.

If I take out a loan to buy candy, GDP goes up. After I eat the candy, the loan remains. I'm financially worse off. GDP still went up! Economy is doing well!

GDP also ignores depreciation. Machinery/infrastructure decay doesn't affect GDP at all.

2) GDP doesn't account for externalities or zero-cost innovation/value.

If I pollute the water supply to make an additional $10, GDP went up.

The inverse is also true. If I make Wikipedia freely available, the value provided to humanity does not affect GDP.

Re: Elon Musk is wrong about GDP

#53

Post by vonzepp »

rahimnathwani wrote: post #13

GDP counts government dollars at face value. But is a government dollar really as productive as a private sector dollar? $1b billion for the local school district. Compare that to $1 billion spent by a private operator? Standard GDP might overstate. Maybe you need a 50% haircut on government spending in the calculation.

Another note worth considering is that state and companies have different roles. Take NASA vs SpaceX. SpaceX launches cheaper rockets. But NASA for example does alot of its work in Alabama, which is supporting a poor regions econonmy and its communities. It might be more optimal to do this in Silicon Valley, or even China but as a government organisation this is part of it's remit. Like wise space science for the purpose of knowledge. SpaceX only remit is cheap rockets. Comparing the two on launch costs which I see alot, misses alot of the purpose of the spending.

Re: Elon Musk is wrong about GDP

#54

Post by reverendsteveii »

axegon_ wrote: post #21

> "elon is wrong about {X}" People are (very) slowly waking up. The number of X-es is large to say the least.

The billionaire cult is slowly dismantling itself. I came to adulthood in the early 2000s and I remember the presumption basically being that they must be very smart because they're very rich and if they're very smart about the thing that made them very rich then they must be very smart about everything else as well. There are cases where that has borne out. It's hard to argue that Bill Gates and Jeff Bezos aren't shrewd businesspeople who know how to use the levers of power to get what they want. But as a counterargument against that is Elon Musk, supposedly based on the mythos of the capitalist meritocracy the greatest among us (because, if not, how could he have become the richest?) who has revealed himself to be cruel, petty, awkward, desperate and has very publicly mismanaged several companies to the point of being sued by shareholders who've found his behavior to be so detrimental to the value of their holdings that it's inseparable from malice. A lot of people are realizing that it's a crap shoot. Being smart is certainly an advantage, but it's one of many and being rich or having access to powerful people seem to be just as influential.

One of the most revealing things about Musk came from Walter Isaacson's biography on him. According to the book, Musk once joined a poker game at a table full of card sharps, odds savants and the kind of people you expect would play a lot of poker and would also eat alive anyone who wasn't on their level. He bulldozed them. His strategy? Bet everything he has on every hand and, when he loses, just buy more chips. Isaacson seems to think this proves Musk to be an outside-the-box-thinking risk-taker but there's another, less generous interpretation: capitalism tends to elevate those who have enough resources that they can get their asses kicked 10 times and still come back for an 11th, but the odds are against you if you're playing with all you have no matter how gifted a player you actually are.

Re: Elon Musk is wrong about GDP

#55

Post by mamonster »

mapt wrote: post #8
robertlagrant wrote: post #2

I am not an expert, but this was noted elsewhere as being the reason why Russia's economy looked to be doing relatively well even after years of sanctions: the government was spending as a wartime economy, and so any loans, any sovereign wealth, and other measures to fund that spending all prop up an economy that might in future have many problems. (Not that they're really propping it up, but that GDP is a common pro…

Russia has been selling large amounts of long-term sovereign bonds, going into debt, at an annualized interest rate in the mid 20%'s (!). While under a looming demographic crisis featuring very large numbers of elderly pensioners being supported per young worker. A non-negligible fraction of those young workers are fleeing the country or dying in Ukraine, which further deepens demographic issues. This is destabilizin…

>It's also effectively a burden placed on the other oligarchs behind Putin, who would love to control a large chunk of a functional economy rather than controlling a large chunk of a banana republic undergoing stagflation and being heavily taxed for the privilege.

Russian oligarchs now have close to 0 political power. Those that do are related to army/secret services anyway and will have more to lose if the system goes away. All those oligarchs just ate massive drops in wealth and didn't do anything.

This is by far the biggest misunderstanding that people in the West have: The Russian/Putinist system is now MORE stable than before 24 February 2022, not less.

Re: Elon Musk is wrong about GDP

#56

Post by orwin »

smeeth wrote: post #52

Elon is definitely wrong. The author seems to be advocating running the economy on vibes, however. > The real problem with GDP ... is that it tempts us to view all human progress as an amorphous score, which we can start maximising just as soon as we fix whatever we think is wrong with how that score is calculated. No! The problem with GDP isn't that it's a score, it's that it's a BAD score. We know whats wrong with…

> GDP also ignores depreciation. Machinery/infrastructure decay doesn't affect GDP at all.

This is true, but it used to measure (or at least try to account for) decay in private companies. Changes in accounting techniques make this a challenge nowadays (especially since our beloved MBAs invented 'future accounting', where expected ROI is added to the value of machinery in the books, truly a genius move by true sociopaths)

Re: Elon Musk is wrong about GDP

#57

Post by emseetech »

aaronbaugher wrote: post #9
chollida1 wrote: post #5

I've talked to a few economists about this and non agree with Elon on this. The biggest issue one person raised is how do you separate out government spending form GDP? If a US town has a big military base, does that mean the entire towns' GDP is just government spending so ignore it? The government essentially pays for everyone's salary in the town. Where do you draw the line at what is government spending and priva…

Maybe the problem is that it's called Gross Domestic Product but we're talking about spending. Spending isn't producing. Sometimes spending promotes production, but may times it doesn't, and a lot of the stuff that gets counted as GDP is just moving dollars from one entity to another.

Do we not consider the multiplier effect?

Re: Elon Musk is wrong about GDP

#58

Post by rahimnathwani »

mempko wrote: post #43
rahimnathwani wrote: post #13

GDP counts government dollars at face value. But is a government dollar really as productive as a private sector dollar? $1b billion for the local school district. Compare that to $1 billion spent by a private operator? Standard GDP might overstate. Maybe you need a 50% haircut on government spending in the calculation.

There are plenty of examples where government is vastly more efficient than private sector. Medicare is vastly more efficient than private insurance. USPS is more efficient than private carriers. Another example is government pay. Usually much lower than the equivalent job at a private sector company. That's because private sector companies fail ALL THE TIME, and the COST of that inefficiency (waste of a failed compa…

  Usually much lower than the equivalent job at a private sector company.
People often state this, without acknowledging that:

- many government employees would not meet the bar for an equivalent job in the private sector

- the environment and red tape means that even an equally skilled employee would be less productive than they would be in a private sector firm that's subject to competitive pressures

- for many government employees, headline salary is only about a two thirds of total compensation (look up San Francisco employees' total comp on the Transparent California web site).

Re: Elon Musk is wrong about GDP

#59

Post by rahimnathwani »

ajross wrote: post #20
rahimnathwani wrote: post #13

GDP counts government dollars at face value. But is a government dollar really as productive as a private sector dollar? $1b billion for the local school district. Compare that to $1 billion spent by a private operator? Standard GDP might overstate. Maybe you need a 50% haircut on government spending in the calculation.

> But is a government dollar really as productive as a private sector dollar? Yes. What? A dollar is a dollar, duh. If you want to claim otherwise, you're the one who needs to show evidence. Why should the government selling a $1000 bond and spending it on a free gadget for a craven bureaucrat behave any differently than me putting a $1000 iPhone on a credit card? Money is money.

Because when you're spending your own money, you are forced to decide whether something is worth it.

When you're spending other people's money, you can spend $2m on a single toilet and think it's fine. (Real example from near where I live.)

Re: Elon Musk is wrong about GDP

#60

Post by Anechoic »

chollida1 wrote: post #5

I've talked to a few economists about this and non agree with Elon on this. The biggest issue one person raised is how do you separate out government spending form GDP? If a US town has a big military base, does that mean the entire towns' GDP is just government spending so ignore it? The government essentially pays for everyone's salary in the town. Where do you draw the line at what is government spending and priva…

The biggest issue one person raised is how do you separate out government spending form GDP?

(Note that I agree with your larger point)

One discussion of this point can be found in an Indicator podcast[0] from a couple of months ago.

[0] https://www.npr.org/transcripts/1237470062

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