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/.../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?