Is massive production of weapons for Israel a part of GDP???? Is that really a benefit to citizens of Zilchville County USA, especially if there's no weapons plant in that county??...(WAIT!!!!!! HOW DARE ME!!!!! hey, at least I didn;t say sheckles..????.....:)
Nobody said that everyone would benefit from everything d i r e c t l y. Zilchville benefits indirectly bc you elected a government that thinks I. has a right to defend itself. So you agree. Yes? :) Every production leads to income ( wages and profits) and taxes thereupon. Now your government can spend a part of that tax „income“ ( of the state) to employ a teacher in Zilchville who teaches your child reading and writing.
@@lowersaxon The amount of money collected from taxes on weapons manufacturer employees is less than the amount of money spent to purchase weapons. Unless I am missing something important this is a bad argument.
But if you buy alcohol, housing, cars, health care, electricity, water, food, hotels or insurance, you also are paying a higher premium due to government meddling and making those prices higher than they would otherwise be. Also, GDP is measured in dollars, and they are fully counterfeit.
Is massive production of weapons for Ukraine a part of GDP???? Is that really a benefit to citizens of Zilchville County USA, especially if there's no weapons plant in that county??
@lowersaxon Duh, stating the bleeding obvious. But it still does not directly answer a very pertinent question that the bugger asked as to how it enhanced their beneficial welfare. I answered, warm, nice & fuzzy. What yours.
From a purely Austrian perspective, can you say any of these two societies is better: 1) A society that due to religious beliefs has focused on low tech living and manual labor 2) A society that due to complete freedom of choice (ie. no social pressure to inhibit any behavior) has focused on producing luxury goods: higher resolution displays, VRs, more potent drugs, more addictive video games, etc. The better it feels, the more demand it generates. Note: Assume the initiation of violence is prohibited in both societies.
Well, I guess my first question would be what you mean by "better" which is too broad a term. I would count myself an Austrian and can see merit and fault in either scenario. Aside from that and correct me if I'm wrong, but you're actually asking about traditionalism vs. decadence, for lack of better terms. Basically one being more long term happiness and the other more short term. Family and accomplishment vs. "drugs and alcohol" style happiness. An Austrian perspective isn't to assign "better" in either case and would only be concerned with them both being voluntary while ensuring that any other society is not on the hook to bail out the other should any of them fail.
@ Well that doesn't really answer the question. At that point, the answer is that an Austrian perspective is agnostic to which is "better" so long as each are voluntary and no one is plundered to bail them out for any failings.
@billmelater6470 it does answer the question. You said it very clearly in both your responses. Austrians are agnostic and can't say which society is better. I agree that GDP is a misleading way to account for our society, but even more fundamental than that, if we use an Austrian framework, we are left only with "Well, as long as the NAP is not violated, then it's doesn't matter if we all live for VR p*rn. This way to measure a society is not that much better.
@@AncientMarinerNY Well not not really since I was asking YOU what YOU meant by "better" and you never actually did that. As in, what kind of "better" are you asking about? It's too broad. Especially when your example is between being Amish and never advancing, or having advancements but then gooning all the time as if I'm actually supposed to like either of them. And then you ask someone to tell which is "better"? In all honesty you seem like you have a preconceived bias against Austrian Economics if you're already leaping to the idea that we would think everyone ought to live for VR porn which is not at all what I said. I mean, what's your argument here? I really don't get how you're trying to conflate the idea of GDP being a bad measure of economic success and then trying to bring up pr0n. Hell, on a personal level I'm a very socially conservative Christian and I'm not okay with porn at all nor do I think it is good for society but I would still logically have to agree with the Austrian framework.
I believe that the calculation should be BTUs/Capita, this would only be the energy produced within the country. Because the ability to project energy per person is a measure of true wealth. Also, if the gov wants to put their tombs on the scale by producing more energy per person then it should make all within the system more wealthy. Any thoughts?
That's the issue though. It can't produce more energy per person. It can't make people more productive. All it can do is print more money and distribute it, in the hope that the goods and services to be bought with that money will be produced by someone somewhere. The idea that spending drives growth and wealth creation is so simply and demonstrably false that it's actually quite funny how Keynesian ideas have lasted so long. The reason is that the incentives are stacked for the Governments, the bureaucrats, and the academics.
Shouldn't in principle GDP also include the available capital of a country? (Notwithstanding the availability of the data). It could occur that the GDP number "go up" while capital consumption takes place. I'm Greek, I'm aware that the Greek GDP peaked just before the lack of credit revealed a ton of producers (notably house builders) in deep red. The way it is, the GDP chart paints a deeply misleading picture. But if it included net capital change (with capital loss being able to retroactively impute it to previous years, vs the year that it was first seen), the fake "productivity" peak right before the bust would disappear.
Indeed, that is another set of problems with GDP, both that it inherently does not have a longitudinal component (e.g., that savings imply future consumption, or that capital investment implies future production) and that it does not adjust for capital consumption and expenditures (that would be Net Domestic Product (NDP)). Basically, if you spend 100k on a truck for your business, and then, over the years, you spend about 5k a year just to keep that truck in good condition, those 5k amounts get added to the GDP each year even though it doesn't really add anything to your business, it just keeps it running as it was (that's capital expenditure). Similarly, if you didn't maintain your truck, the GDP wouldn't account for the fact that you're essentially drawing down (consuming) your capital. The NDP is meant to adjust for that. The reason we don't hear much about the NDP, or haven't since about the 70s, is that it shows a much bleaker picture (i.e., it's been pretty much stagnant or decreasing for decades now), and it largely the reason for the stagnant real wages (because the "pie" from which wages can be drawn is proportional to the NDP, not the GDP, the mises institute has a really good talk up on their channel about this from years ago). In a very real sense, this GDP focus has led to policies that emphasize short-term spending, discourages savings and durable or wise capital investments.
I think the broader point is about how muddled the picture can be. If you over-produce and accumulate inventory, then the GDP will be relatively higher compared to consumption. Conversely, if you under-produce and draw down inventory (consume it) to meet demand, then the GDP will be relatively lower compared to consumption. This is technically OK, since the GDP is measuring "production". Where it gets distorted is that it is often implied to be measuring something like people's "standard of living", which really is more about consumption. In other words, this inventory issue (among many other problems) is one way in which there can be a disconnect between how "productive" the economy is and how well people are living. I think what Bob was trying to get at with this is that this aggregation is a tautology that doesn't really tell you what is happening. In that artificial example, the GDP figures indicate a wild down-and-up swing in the economy, but the breakdown of the numbers show (1) that consumption (and thus, people's standard of living) had been the same throughout, and (2) that 2011 was either a bad production year that drew down inventory or some sort of correction for over-stocking from prior years. I think that a more interesting picture (and more relevant to today's situation) is the reverse situation where people's consumption is going down (in real terms) while the GDP appears to be healthy. A common criticism of Keynesian policies is that there are a number of ways that governments can incentivize or "stimulate" over-production or malinvestments which lead to an increase in inventory and capital that temporarily appear as a better GDP without having much impact on people's economic well-being, but eventually the chickens come home to roost when companies are left with inventory that has to be sold at a discount or have worthless capital that was only geared towards what the government mandated (in the past) rather than what people actually wanted (e.g., the EV mandates).
Thanks Bob- Great stuff as always. Would be great if you could do a similar episode discussing the pitfalls of CPI and 2% inflation narrative. I think that's another god-of-the-formula equation that people latch on to without much thought.
No modern production without overhead, and: the state forces you to have a department of accounting, which is of course overhead. Note: you could argue to leave G out of consideration ( which would lead to a grotesque underestimation of production) , but you never could subtract it ( from C+I+NX), that makes no sense.
@ The cost of accounting is not included in the production measurements of a company. It is merely recorded as an expense. Most of the government expenditure included in “G” is to procure unnecessary or grossly over-priced products. And the ostensible purpose of those expenditures is to protect the freedom of individuals to produce useful products - ie it is an expense. At a minimum, it should be omitted from GDP; however, there is a reasonable argument for subtracting it as an expense
@@gregdaugherty6065All the cost, each and every cost component is calculated into prices. Therefore, all overhead cost is part of price. If not you will quickly be bankrupt.
Everything flows from the obsession over growth. It should only happen organically, and it will; but political and Fed and media irrational OBSESSION over growth, and the artificial efforts taken, are ruinous. First, bleeding the dry turnip (in a year where we're dipping) means printing, which means stealing from savers. That only goes so far; then inflation steals from the less prosperous. GROWTH OBSESSION is the root of every economic problem.
This doesn't sound like an academic podcast, unless you're presenting to a group of disinterested teenagers...I don't think anybody here needs endless rabbit hole examples of what spending is.
This is an educational institution....the videos are geared toward the general public. The "endless rabbit holes" are there to explain the differences between various economic metrics, precisely because they DON'T all measure spending the same way, so you would likely be wrong if you just tried to apply a plain English understanding of spending.
Discussing GDP - CPI - M2 - Fed interest rate, is akin to discussing the color and length and the size of the ball at the end of your chain. Better get bitcoin
@@lowersaxon And precious metals? Spent energy (mining minting moving) Slow, Over promised, undeliverable speculative purposes. It's all speculative. BTC is working to store value. Thats a fact. It's market cap exceeds silver at this point.
The flaw of GDP is that it will always increase as the size of government increases, no matter how wasteful and inflated the government becomes.
Is massive production of weapons for Israel a part of GDP???? Is that really a benefit to citizens of Zilchville County USA, especially if there's no weapons plant in that county??...(WAIT!!!!!! HOW DARE ME!!!!! hey, at least I didn;t say sheckles..????.....:)
Nobody said that everyone would benefit from everything d i r e c t l y. Zilchville benefits indirectly bc you elected a government that thinks I. has a right to defend itself. So you agree. Yes? :)
Every production leads to income ( wages and profits) and taxes thereupon. Now your government can spend a part of that tax „income“ ( of the state) to employ a teacher in Zilchville who teaches your child reading and writing.
@@lowersaxon The amount of money collected from taxes on weapons manufacturer employees is less than the amount of money spent to purchase weapons. Unless I am missing something important this is a bad argument.
But if you buy alcohol, housing, cars, health care, electricity, water, food, hotels or insurance, you also are paying a higher premium due to government meddling and making those prices higher than they would otherwise be. Also, GDP is measured in dollars, and they are fully counterfeit.
Is massive production of weapons for Ukraine a part of GDP???? Is that really a benefit to citizens of Zilchville County USA, especially if there's no weapons plant in that county??
Yes, they can feel good, warm & fuzzy. 😊
@@KevinYau-v7i And cluster bombs!!!
Weapons are consumption goods like the fire department or police cars. You consume safety.
@@lowersaxon We are being made safer by the Israel war...or the Ukrainian war???
@lowersaxon Duh, stating the bleeding obvious. But it still does not directly answer a very pertinent question that the bugger asked as to how it enhanced their beneficial welfare. I answered, warm, nice & fuzzy. What yours.
From a purely Austrian perspective, can you say any of these two societies is better:
1) A society that due to religious beliefs has focused on low tech living and manual labor
2) A society that due to complete freedom of choice (ie. no social pressure to inhibit any behavior) has focused on producing luxury goods: higher resolution displays, VRs, more potent drugs, more addictive video games, etc. The better it feels, the more demand it generates.
Note: Assume the initiation of violence is prohibited in both societies.
Well, I guess my first question would be what you mean by "better" which is too broad a term. I would count myself an Austrian and can see merit and fault in either scenario.
Aside from that and correct me if I'm wrong, but you're actually asking about traditionalism vs. decadence, for lack of better terms. Basically one being more long term happiness and the other more short term. Family and accomplishment vs. "drugs and alcohol" style happiness.
An Austrian perspective isn't to assign "better" in either case and would only be concerned with them both being voluntary while ensuring that any other society is not on the hook to bail out the other should any of them fail.
@billmelater6470 better from a purely Austrian perspective. This question is to both understand the standard and the application of the standard.
@ Well that doesn't really answer the question.
At that point, the answer is that an Austrian perspective is agnostic to which is "better" so long as each are voluntary and no one is plundered to bail them out for any failings.
@billmelater6470 it does answer the question. You said it very clearly in both your responses. Austrians are agnostic and can't say which society is better.
I agree that GDP is a misleading way to account for our society, but even more fundamental than that, if we use an Austrian framework, we are left only with "Well, as long as the NAP is not violated, then it's doesn't matter if we all live for VR p*rn.
This way to measure a society is not that much better.
@@AncientMarinerNY Well not not really since I was asking YOU what YOU meant by "better" and you never actually did that. As in, what kind of "better" are you asking about? It's too broad. Especially when your example is between being Amish and never advancing, or having advancements but then gooning all the time as if I'm actually supposed to like either of them. And then you ask someone to tell which is "better"?
In all honesty you seem like you have a preconceived bias against Austrian Economics if you're already leaping to the idea that we would think everyone ought to live for VR porn which is not at all what I said. I mean, what's your argument here? I really don't get how you're trying to conflate the idea of GDP being a bad measure of economic success and then trying to bring up pr0n.
Hell, on a personal level I'm a very socially conservative Christian and I'm not okay with porn at all nor do I think it is good for society but I would still logically have to agree with the Austrian framework.
So Keynesian economists assume that each term is independent because that would make the world simple and grand - just wishful thinking.
I believe that the calculation should be BTUs/Capita, this would only be the energy produced within the country. Because the ability to project energy per person is a measure of true wealth. Also, if the gov wants to put their tombs on the scale by producing more energy per person then it should make all within the system more wealthy. Any thoughts?
That's the issue though. It can't produce more energy per person. It can't make people more productive. All it can do is print more money and distribute it, in the hope that the goods and services to be bought with that money will be produced by someone somewhere. The idea that spending drives growth and wealth creation is so simply and demonstrably false that it's actually quite funny how Keynesian ideas have lasted so long. The reason is that the incentives are stacked for the Governments, the bureaucrats, and the academics.
The line must go up bob
Number go up
but gdp and job reports indicate my quality of life is excellent.
It isnt?
Best comment 🤣
Shouldn't in principle GDP also include the available capital of a country? (Notwithstanding the availability of the data). It could occur that the GDP number "go up" while capital consumption takes place.
I'm Greek, I'm aware that the Greek GDP peaked just before the lack of credit revealed a ton of producers (notably house builders) in deep red. The way it is, the GDP chart paints a deeply misleading picture. But if it included net capital change (with capital loss being able to retroactively impute it to previous years, vs the year that it was first seen), the fake "productivity" peak right before the bust would disappear.
It's gross for a reason
Indeed, that is another set of problems with GDP, both that it inherently does not have a longitudinal component (e.g., that savings imply future consumption, or that capital investment implies future production) and that it does not adjust for capital consumption and expenditures (that would be Net Domestic Product (NDP)). Basically, if you spend 100k on a truck for your business, and then, over the years, you spend about 5k a year just to keep that truck in good condition, those 5k amounts get added to the GDP each year even though it doesn't really add anything to your business, it just keeps it running as it was (that's capital expenditure). Similarly, if you didn't maintain your truck, the GDP wouldn't account for the fact that you're essentially drawing down (consuming) your capital. The NDP is meant to adjust for that. The reason we don't hear much about the NDP, or haven't since about the 70s, is that it shows a much bleaker picture (i.e., it's been pretty much stagnant or decreasing for decades now), and it largely the reason for the stagnant real wages (because the "pie" from which wages can be drawn is proportional to the NDP, not the GDP, the mises institute has a really good talk up on their channel about this from years ago).
In a very real sense, this GDP focus has led to policies that emphasize short-term spending, discourages savings and durable or wise capital investments.
I dont understand the last slide, isnt it saying something in terms of that they „Consumed“ their inventory? Pls help
Yes, the inventory was consumed in 2011 but was produced in 2010
I think the broader point is about how muddled the picture can be. If you over-produce and accumulate inventory, then the GDP will be relatively higher compared to consumption. Conversely, if you under-produce and draw down inventory (consume it) to meet demand, then the GDP will be relatively lower compared to consumption. This is technically OK, since the GDP is measuring "production". Where it gets distorted is that it is often implied to be measuring something like people's "standard of living", which really is more about consumption. In other words, this inventory issue (among many other problems) is one way in which there can be a disconnect between how "productive" the economy is and how well people are living.
I think what Bob was trying to get at with this is that this aggregation is a tautology that doesn't really tell you what is happening. In that artificial example, the GDP figures indicate a wild down-and-up swing in the economy, but the breakdown of the numbers show (1) that consumption (and thus, people's standard of living) had been the same throughout, and (2) that 2011 was either a bad production year that drew down inventory or some sort of correction for over-stocking from prior years. I think that a more interesting picture (and more relevant to today's situation) is the reverse situation where people's consumption is going down (in real terms) while the GDP appears to be healthy.
A common criticism of Keynesian policies is that there are a number of ways that governments can incentivize or "stimulate" over-production or malinvestments which lead to an increase in inventory and capital that temporarily appear as a better GDP without having much impact on people's economic well-being, but eventually the chickens come home to roost when companies are left with inventory that has to be sold at a discount or have worthless capital that was only geared towards what the government mandated (in the past) rather than what people actually wanted (e.g., the EV mandates).
@@mike200017thanks 😊
How about that GDH?!?!
Thanks Bob- Great stuff as always. Would be great if you could do a similar episode discussing the pitfalls of CPI and 2% inflation narrative. I think that's another god-of-the-formula equation that people latch on to without much thought.
Seems like it would make more sense to SUBTRACT “G” from GDP - it is more like overhead than production
No modern production without overhead, and: the state forces you to have a department of accounting, which is of course overhead.
Note: you could argue to leave G out of consideration ( which would lead to a grotesque underestimation of production) , but you never could subtract it ( from C+I+NX), that makes no sense.
@ The cost of accounting is not included in the production measurements of a company. It is merely recorded as an expense. Most of the government expenditure included in “G” is to procure unnecessary or grossly over-priced products. And the ostensible purpose of those expenditures is to protect the freedom of individuals to produce useful products - ie it is an expense. At a minimum, it should be omitted from GDP; however, there is a reasonable argument for subtracting it as an expense
@@gregdaugherty6065All the cost, each and every cost component is calculated into prices. Therefore, all overhead cost is part of price. If not you will quickly be bankrupt.
@@gregdaugherty6065 To state "there is a reasonable argument" is not itself a reasonable argument.
I love Bob, he is such a cool guy
I was blessed to have had dinner with him after a conference. He is a genuinely good dude in my estimation!!
Hope to see you at RCL again Bob
im going to get flamed by this unnecessary and trivial remark, but i do not like the guitar riff for the intro..
Everything flows from the obsession over growth. It should only happen organically, and it will; but political and Fed and media irrational OBSESSION over growth, and the artificial efforts taken, are ruinous. First, bleeding the dry turnip (in a year where we're dipping) means printing, which means stealing from savers. That only goes so far; then inflation steals from the less prosperous. GROWTH OBSESSION is the root of every economic problem.
This doesn't sound like an academic podcast, unless you're presenting to a group of disinterested teenagers...I don't think anybody here needs endless rabbit hole examples of what spending is.
This is an educational institution....the videos are geared toward the general public.
The "endless rabbit holes" are there to explain the differences between various economic metrics, precisely because they DON'T all measure spending the same way, so you would likely be wrong if you just tried to apply a plain English understanding of spending.
surely you mean UNinterested teenagers
Discussing GDP - CPI - M2 - Fed interest rate, is akin to discussing the color and length and the size of the ball at the end of your chain. Better get bitcoin
Bitcoin is spent electricity for speculation purposes. Its a cult, one of the digital cults.
Bitcoin is spent electricity/energy for speculative purposes. Thats it.
@@lowersaxon And precious metals? Spent energy (mining minting moving) Slow, Over promised, undeliverable speculative purposes. It's all speculative. BTC is working to store value. Thats a fact. It's market cap exceeds silver at this point.
Can you eat BTC or precious metals?
@@427votsilver has multiple industrial uses. What is BTC used for? I own crypto myself
Great points Bob!!
Horrible video. Bob get to the point.😂
It needs a lot of background because most people don't bother to learn these terms because macroeconomics is bullshit state propaganda
That really cleared up a lot, especially about the differences between GNP and GDP and how they are counted--and I liked the examples 👍👍
Nice profile picture 😂
@The1peagle 🙏