Wednesday, Oct 25, 2006

GDP and Wealth ?????

Daily Reckoning: Big holes, big GDP, more wealth?

An interesting and amusing view of GDP and the falseness of modern housing wealth. "We mentioned yesterday what happens when a man pays someone to cut his lawn for him. If he did it himself, the GDP would remain the same. If he pays a neighbour to do it, the GDP goes up."

Posted by sovietuk @ 01:14 PM (1922 views)
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4 Comments

1. paul said...

Euuuw.

The broken window fallacy.

This - incidentally is why raising rent or having buy-to-let landlords owning property instead of FTBs owning property only actually damages the economy in the long run.

The man getting his lawn cut could have spent the money on something else, and possibly even his new business. That's why its a fallacy.

Wednesday, October 25, 2006 01:40PM Report Comment
 

2. Chillilizard said...

Brilliant article: We should force all politicians to read this; and perhaps there should be an exam afterwards??

Lets see, things we can get rid of as not contributing to real wealth:
Parking attendants!!!!!
Council tax (surely the admin costs of collecting this are a waste, how about just tax more)
savings on waste removal (recently in Reading they have implemented a fortnightly schedule for garbage pickup, they seem to be spinning this as encouraging recycling)

Wednesday, October 25, 2006 02:05PM Report Comment
 

3. Boarder said...

Paul,

Perhaps the man started a business whilst he got someone else to cut his lawn? These sort of exchanges normally mean that the person is doing something more productive with his time, so GDP is a useful indicator (especially the change in GDP) of course you have to factor inflation, debt and M4 into your equation to work out what the change in the economies "wealth" really has been.

Wednesday, October 25, 2006 05:17PM Report Comment
 

4. Nohpc said...

The man who paid the other man to cut his lawn was out earning 3 times what the lawn mower was making at the same time. The man who mowed the lawn is otherwise unemployed and would have had no money to spend otherwise. So man who makes money mows his own lawn therefore the other man has no work and has to get goverment benefits and goverment has to tax man who cruelly cut his own grass more tax? This arguement is complete nonsense. If you buy a house for 200000 and sell it for 400000 and then don't buy again you have wealth of 200000 pounds. It is only false wealth if you have to upscale to a bigger more expensive house as most people do but it can easily be made into real wealth should you so desire.

Wednesday, October 25, 2006 11:54PM Report Comment
 

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