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Elon Musk is wrong about GDP

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Re: Elon Musk is wrong about GDP

#61

Post by rahimnathwani »

vonzepp wrote: post #53
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 pur…

  which I see alot, misses alot of the purpose of the spending
NASA's remit isn't to be a jobs program or to provide a social safety net.

Re: Elon Musk is wrong about GDP

#62

Post by incomingpain »

GDP = buying/selling things and investment. Government spending is almost always buying something. How could you extract this from GDP?

Elon is saying government spending should not be included in GDP. In reality GDP is what it is; find a new metric to use.

the quality of using GDP as a metric is low because of this. Also why GDP growth matters so much. Recessions are defined as negative GDP growth by 2 quarters. So government can deficit spend to hide a recession, that's the problem.

What you have to look at isnt GDP at all. find a new metric to use to determine recession. Here's mine.

Real GDP minus government deficit(all levels of government combined) per capita.

When you look at this metric. Canada, Germany, UK, France, Italy, Japan, spain, and estonia are in hidden recessions. Also why they all pretty much need to be negative bank rates and high inflation right now. Obviously this is a WW2 consequences that were put off until now.

Other ways to see the problem is 2030 worker shortage or the inverted population pyramids.

Re: Elon Musk is wrong about GDP

#63

Post by rahimnathwani »

ave_b_2011 wrote: post #27
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.

Productivity in what sense? Education is literally a long term investment. As you stated, a local school district which may mean Pre-K through 12th grade (in the US) means that the children won’t be participating “productively” in the economy for potentially decades. I cannot even fathom how hard the economy would crash if large swaths of the workforce were illiterate.

  Productivity in what sense?
If I told you I would give you either $27k to spend as you wish on education, or let your kid go to a SF public school (which would spend the $27k as it seems fit), which would you choose? I'd pick the former.

  if large swaths of the workforce were illiterate
I live in one of the richest cities in the US. Here, about 50% of 11th graders attending public schools can read and write at a level that meets the minimum state standards (which is a low bar).

Re: Elon Musk is wrong about GDP

#64

Post by kgwxd »

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.

He spent a ton of money just to be able to present all those X-es and force people to see them. Even bought the domain explicitly for it.

Re: Elon Musk is wrong about GDP

#65

Post by smeeth »

orwin wrote: post #56
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 sociop…

I'm not going to argue that accounting is all kinds of messed up (totally is), but your comment isn't factually accurate.

> This is true, but it used to measure (or at least try to account for) decay in private companies.

No, the "G" in GDP stands for "Gross," which means before depreciation. Depreciation has long been estimated in NIPAs, but that's a separate slate of measures.

> (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)

This isn't true either. You're describing valuation models, e.g. DCF, but these aren't used for accounting. GAAP doesn't have a concept of adding ROI to asset value.

It is very true that games are played with depreciation. For example, you're allowed to depreciate some assets like real estate even if they INCREASE in value over time. All of that depreciation is tax-deductible.

Re: Elon Musk is wrong about GDP

#66

Post by mschuster91 »

9rx wrote: post #51
braiamp wrote: post #24

Earlier quoted context omitted.

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.

> 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!"

The question if the goods basket that is used to define inflation actually reflects reality is valid though!

For example, the explosion of rents in urban areas is offset by shockingly low rents in "flyover states" and rural areas, leading to a complete neglect of the problems of urban people because it simply doesn't show up in the statistics. For many poor people, they don't have the money to buy new clothes anyway, much less expensive goods such as new cars or luxury goods - and yet these products are all in goods baskets, offsetting the cost explosion in basic staples (and not just eggs).

IMHO, "inflation" as a simple percentage metric is not a KPI that can be used - at the very least, socioeconomic strata and urban/rural differences need to be taken into account because over the last decades, thanks to rural flight the realities have separated way too hard.

The problem that the Democrats faced in the last election campaign is that they only focused on KPIs useful for rich people: stock market indices, employment counts, GDP. But that mis-focus completely alienated the wide masses who felt they're being fed lies as their reality (exploding expenses but stagnant wages) was markedly different from what the Democrats pushed.

Re: Elon Musk is wrong about GDP

#67

Post by ajross »

rahimnathwani wrote: post #59
ajross wrote: post #20

Earlier quoted context omitted.

> 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.)

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

Define "worth it" macroeconomically. There is no "value" idea at scale with a meaning separate from "money". Every transaction happens, definitionally, because the two parties think it's "worth it".

Edit: to focus a bit and extend the metaphor above: if the government buys an iPhone for the notional corrupt IRS agent who doesn't need it, you'd say it's not "worth it". But Apple Computer books that revenue either way. The world you're imagining where "less productive" government spending doesn't happen is a smaller economy. And that's bad, because it means that Apple hires fewer geeks and those of us who can't get those FAANG jobs see less upward wage pressure.

Money is money, at scale. The Economy can't tell what you're using it for, it just cares that you trade it for stuff.

Re: Elon Musk is wrong about GDP

#68

Post by orwin »

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.

Yes. Let's compare SwissLife, a private healthcare insurance, to French 'securité sociale' healthcare bit.

For every 100€ put in french national healthcare, 89 to 93 (depending on the year) are spent on healthcare. The rest is used for distribution and administrative tasks (and during a short time, debt repayment).

What do you think SwissLife give it's insured back for ever 100€ they are paid? Between 12 an 15% are administrative costs (they have more expensive lawyers and contest more claims), 2% R&D (??for some reason, probably to claim tax rebates), and between 5 and 12% are dividends. So between 81 and 71 euros are given back. Do that seem more efficient?

But that won't last, each time private companies compete with public one, the EU commission had to create new rules, like ARENH for electricity, or worse, the separation between SNCF, SNCF reseau, SNCF fret/geodis to prevent economies of scale and local optimisation (that killed small train stations and most french fret). Now that SNCF fret managed to come back (under a new name) and outcompete everyone, again (mostly because train fret died), they just broke it again for spurious reasons. Liberalist fuckers just don't want exception to their rules, and since they can't economically bully state companies like they bullied Lip and probably any worker cooperative that became too big or too well-known, they use their political weight to send them to the ground instead.

Re: Elon Musk is wrong about GDP

#69

Post by cjoelrun »

heisgone wrote: post #10

There is certainly a usefulness in separating government spending and private spending in our economic health measures. For one, measures like GDP are often used to evaluate the confidence and the general well-being of our economy. High Government spending tend to indicate the opposite, as Keynesian economics would mandate. More so, it invite manupulation of those measures by politicians, who can increase deficits to…

Given that we print dollars and other countries demand on dollars make that ok for now -> We can make bricks out of the paper money and call that GDP. More money brick factory jobs!

Re: Elon Musk is wrong about GDP

#70

Post by rahimnathwani »

ajross wrote: post #67
rahimnathwani wrote: post #59

Earlier quoted context omitted.

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.)

> Because when you're spending your own money, you are forced to decide whether something is worth it. Define "worth it" macroeconomically. There is no "value" idea at scale with a meaning separate from "money". Every transaction happens, definitionally, because the two parties think it's "worth it". Edit: to focus a bit and extend the metaphor above: if the government buys an iPhone for the notional corrupt IRS agen…

Yes, "worth it" implies a voluntary trade.

When the government spends your money, you don't get to decide whether a particular transaction is good value.

Do you think government bureaucrats are as careful with taxpayers' money as they are with their personal funds?

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