GDP?

[lehighguy]

What is a point of GDP worth?
Why is it that big a deal if we have 2.5% or 3.5% growth YoY?


I did a simple little numbers game to get some perspective.

If two economies start with the same GDP per capita, how would big a difference would that one point make.

After 10 years the high growth economy is 10.2% better off.
25 years: 27.5%
50 years: 62.4%
100 years: 164%

Or on a per capita basis. A 2% growth in per capita GDP (price adjusted) from 1900 to today brings us to roughly were we are.

Now let's cut that down to 1%.

The per capita income in the US goes from $36,672 to $13,161. So if we had endorsed policies that lead to even a 1% decrease in GDP growth per year, that's where we'd be at right now.

[Il_Mostro]

Congratulations. You have just discovered the eplosive properties of exponential growth.

Now think about what this means when we have exponential growth in the use of many natural resources.

"The greatest shortcoming of the human race is our inability to understand the exponential function".
Dr. Bartlett

[adios]

I've been mostly out of town the last two weeks and without the internet for the past 6 days or so. Time to wade back in I guess.

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Now think about what this means when we have exponential growth in the use of many natural resources.

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My understanding is that horse dung was a major problem in urban areas around the turn of the century. Think about what exponenential growth would mean to the amount of horse dung to clean up if the US economy was supported by buggy whip companies.

[Il_Mostro]

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My understanding is that horse dung was a major problem in urban areas around the turn of the century. Think about what exponenential growth would mean to the amount of horse dung to clean up if the US economy was supported by buggy whip companies.

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It most certainly might have been. But horse dung is not iron, copper, fresh water, grain, oil, NG or any other commodity we seems to be risking shortage of in a not-to-distant future. Ok, ok, we don't risk shortage of iron, just yet.

Or do you still belive that given enough money God will provide with enough raw materials?

[sam h]

Economic growth is like interest, it adds up.

With GDP, though, perhaps the more interesting thing is to think about how it is measured and whether it is very reasonable to think that anybody (especially outside the developed world but also in the developed world too) could accurately estimate the total value of goods and services produced in an economy. Since, as you point out, even percentage point can have very important substantive meanings, the margin of error in estimating GDP doesn't have to be too high in order to make the statistic kind of crappy. For example, should anybody have any confidence in Chinese estimates of GDP growth right now?

[lehighguy]

Similair claims have been made for centuries. Pick a resource. This is not to say that depletion is not possible, but it is also not inevitable.

[Cyrus]

After commenting on the power of cumulativeness, I believe you should comment also on the inadequacies of the arithmetic average. The per capita GDP of Brunei must be quite high, if I recall correctly.

[tylerdurden]

http://www.cia.gov/cia/publications/factbook/rankorder/2004rank.html

The populations and more importantly birth rates of most 1st world countries who consume most of the resources seems to be coming to a grinding halt.

[Il_Mostro]

That of course is a good thing. However, there seems to be quite a lot of evidence that even current usage of many resources (such as fresh water and fish) is unsustainable.

And then of course we have China and India. You don't think they'd like to raise their level of use a bit?

[Il_Mostro]

[ QUOTE ]
Similair claims have been made for centuries. Pick a resource. This is not to say that depletion is not possible, but it is also not inevitable.

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Depletion is inevitable. What is not inevitable is any form of catastrophic result from said depletion.

[lehighguy]

Use of all oil reserves is not inevitable, an alternative fuel could be discovered tommorrow.

[Il_Mostro]

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Use of all oil reserves is not inevitable, an alternative fuel could be discovered tommorrow.

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I'm not talking about oil specifically. But of course you are correct. There is a non-zero chanse that tomorrow someone finds an alternative fuel that beats oil in all ways and especially in price. It's non-zero, but it's darn close to zero.

But even so, of course we will not use up all oil in the ground, we simply can't get to it. So if by "depletion" you mean using up every last bit, then no, that won't happen. But that's not really what's interesting, is it.

[MtSmalls]

Wow. What a huge leap from GDP to per capita GDP to income and back again. GDP literally has nothing to do with income. Its simply an estimate (and others have commented on how bad these estimates have been over time) of the market value of all the final goods and services produced (in this case) U.S companies and individuals inside the U.S (not to be confused with the sub-set: GNP, just those goods and services produced by US companies around the world).

Per Capita Income, though related generally, has little or nothing to do with GDP. Look at the most recent 'productivity' numbers released, which showed the American worker being more "productive" than ever. Why? The major increase in productivity wasn't the number of 'units' produced, but that the average wage paid for labor went down 1% on a real basis, making the COST of producing the same number of units lower.

The power of compounding is a wonderous thing. It can be applied to almost everything. Including our national debt. If a policy were enacted that lowered GDP by 1%, but lowered our deficit by MORE than 1%, wouldn't that be a positive increase in our overall economy??

[Jedi Flopper]

[ QUOTE ]
That of course is a good thing. However, there seems to be quite a lot of evidence that even current usage of many resources (such as fresh water and fish) is unsustainable.

And then of course we have China and India. You don't think they'd like to raise their level of use a bit?

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The human race will become extinct looooong before we run out of fresh water. It is not even close. I will let others elaborate.

[lehighguy]

Per capita income and per capita production are closely correlated. Almost identical, especially over long periods of time. If you do a regression, I'm sure you'll find this to be true.

As for the last paragraph, not sure what you are smoking. Only a crazy liberal could think of economic welfare in terms of its effect on the federal budget.

[Il_Mostro]

I belive you need to read up on things.

Or else you know about a nuclear war I havn't heard of yet.

[peritonlogon]

[ QUOTE ]
[ QUOTE ]
That of course is a good thing. However, there seems to be quite a lot of evidence that even current usage of many resources (such as fresh water and fish) is unsustainable.

And then of course we have China and India. You don't think they'd like to raise their level of use a bit?

[/ QUOTE ]

The human race will become extinct looooong before we run out of fresh water. It is not even close. I will let others elaborate.

[/ QUOTE ]

I think they may well happen at the same time.

[MtSmalls]

I suppose being an economist by training, I look at the entire picture, rather than the part that fits my worldview.

How in the world does the Federal Budget NOT affect economic welfare?? Particularly in light of the massive debt, being added to on a daily basis? Put into microeconomic terms, is YOUR personal economic welfare NOT better off when you lower your monthly debt payments??

Does Federal spending, such as highway funds, building projects, military bases and welfare not ADD to the overall economy (at least in the areas that the $ are spent?

[Jedi Flopper]

Do you even know where fresh water comes from? I believe YOU need to research the hydrological cycle then come back here and tell me how we are running out of water on the planet.

[lehighguy]

"The power of compounding is a wonderous thing. It can be applied to almost everything. Including our national debt. If a policy were enacted that lowered GDP by 1%, but lowered our deficit by MORE than 1%, wouldn't that be a positive increase in our overall economy?? "

Clearly, negative GDP growth, even if accompanied by a lower budget deficiet, is bad for the overall economy. I don't even understand where you were going with that statement. Until you clarify where you came up with that, and how the hell it has any context to the discussion, we can't proceed.

[Borodog]

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I suppose being an economist by training, I look at the entire picture, rather than the part that fits my worldview.

[/ QUOTE ]

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Does Federal spending, such as highway funds, building projects, military bases and welfare not ADD to the overall economy (at least in the areas that the $ are spent?

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Your parenthetical clause is in direct contradiction with the statement it follows. Of course government spending doesn't add to the overall economy. How could it? Furthermore, any benefit that an individual business or industry gains from government spending can only come at the expense of other businesses and industries.

You're an economist?

http://photos1.blogger.com/hello/243/2888/640/GDPMEW.jpg
doesn't look to good...

[Il_Mostro]

It's not as much running out as it is not having enough for what we want to do. Many of the worlds fresh water aquafiers are used in unsustainable manners, that should hardly come as a surprise.

Ground water depletion (http://ga.water.usgs.gov/edu/gwdepletion.html)

google "fresh water depletion" as needed