Confused.
I thought Austrians DEFINED inflation as monetary expansion. How are YOU defining price inflation? If you say ‘by the CPI’, I’m going to have to slap you. 
Do you have a basket of goods and services you track or what? How do YOU know that inflation was 7%? What is your formula for quantifying it thusly?
OK, here too you seem to be rejecting fundamental tenets of Austrian economics - at least as I (admittedly poorly) understand them. You are not considernig ‘what is not seen’ - the central point of Bastiat, Hazlitt, et.al. What government spends does not appear from thin air - it would have been spent elsewhere - and more efficiently, per free market economics. Including public sector spending in ‘the economoy’ lays one wide open to vast manipulation - as Higgs showed in his proof that the Great Depression was NOT ended by WW2 due to just exactly these sorts of accounting shenanigans.
The whole point of this thread is to understand how to measure the economy absent these sorts of shenangians. I hardly think the answer is ‘well, we need to include the shenanigans’!
As for gold, what?? It is NOTHING like wheat or barley - which can be grown every year! It certainly is NOT “just one commodity”. For millenia it has been a store of value as well as used for things of value like jewelry. The fact that gold prices are subject to manipulation - like virtually everything else in our utterly corrupt financial and monetary regimes - is not proof that it has suddenly morphed into something different that it has been for over 10,000 years. I think it far more likely that it was manipulation and money flows that moved gold’s price in 80s and 90s.
How does the drug war improve livelihood? The DEA is a drain on the economy.
Look at it this way. I don’t care if you smoke marijuana or not. What right does Congress have to steal from me and use the proceeds to terrorize people and enforce illegitimate laws?
The concept of “victimless crimes” is one huge scam.
Well I usually use the more “orthodox” definition of inflation as to not confuse non-Austrians. This also makes it easier to distinguish between secular price deflation and credit deflation aka monetary contraction when the question of the gold standard, population growth, and price deflation come up.
See above.
No, you’re clearly not understanding basic economics here. Money being spent by the government is money that’s being spent. A is a. That’s what GDP measures: the total money value of goods and services being exchanged in a society. If you leave out government spending, the GDP will be much lower than in actuality.
AND IF YOU WOULD’VE READ WHAT I WROTE YOU WOULD HAVE SEEN THAT I SPECIFICALLY STATED THAT GOVERNMENT SPENDING IS NOT THE MOST EFFICIENT METHOD OF SPENDING.
So please, stop with the straw men.
So you will discount the fact that silver, palladium, rhodium, and platinum all fell in the 80s and 90s as well? Will you also discount the positive growing M2 and M3 money supply statistics as well as positively growing CPI and PPI statistics during the early 80s and early 90s?
DEA agents get paid. Police officers get paid. Construction workers and firms get paid to build prisons. Companies get paid to ship food to prisons. You get the point?
Even though the DEA attempts to destroy an entire sector of our economy, it doesn’t mean that the money that goes into or out of the DEA should be discounted from government statistics. Since GDP is defined as the total market value of all final goods and services produced in a nation at a given time, it makes sense to factor in government spending considering that it purchases goods and services. If you don’t do that, you won’t get a full picture of GDP.
Huh? We’re not debating the drug war, I’m pretty sure everyone here is against it.
He was bringing it up because he was trying to show an example where government spending shouldn’t be included in GDP.
Bank robbers get paid. They too are a drain on the economy.
The GDP measures economic activity in nominal or real terms, both good and bad. So yes, I guess in that sense government activity should be measured too, as it certainly results in a lot of the latter.
-Jon
Exactly! Include all of the criminals, including the ones who aren’t lucky enough to be in government!
I do not think I am misunderstanding basic economics. Or if I am, I have not seen anything from you in this post that leads me to believe you have a better grasp than I or are credibly able to instruct me. For example, you said GDP is:
“the total money value of goods and services being exchanged in a society”
What about household economies (article here)? The black market? Gifts? Services delivered by volunteers? None of those exchanges of goods and services are incorporated into GDP. And there are many other examples (like, say, government transfer payments!). Meanwhile, financial manipulations which create illusory wealth ARE factored in.
Further, and more directly to your point about how government spending (which as far as I can tell you have not anywhere defined specifically) “should be factored into GDP”, some government spending already IS factored in when the Commerce Department calculates the GDP - including government expenditures in schools, roads, etc - exactly the sort of thing you are talking about, at least, the based on my reading of what you wrote.
The fact that you don’t seem to understand the details of what you are talking about seems to indicate to me that you are not a credible source of instuction when it comes to economics, at least in this area. Further, I don’t feel that I can learn much from people who resort to shouting and condescension in place of logic to make their points.
Final point: the GDP calculation is based largely on SURVEYS that the Commerce Department sends out (to carefully selected companies of course). As an agency of the State, no matter its purported function, it’s true function is, of course, to serve as just one cog in the machine of exploitation and subjugation. As such, any numbers it releases - just like the BLS’s CPI - is thoroughly tainted, and should be expected to reflect whatever reality the State wishes it to reflect (i.e. shenanigans). Obviously, using surveys is an approach rife with uncertainty - just the sort of environment in which manipulation can thrive. So any suggestion that we rely on government statistics and not bother looking for non-governmental stats is part of the problem, not part of the solution.
Are there not any other metrics from independent sources for things like investment spending and personal consumption? That was what the OP was asking for when he said “Since GDP isn’t that qualified to tell this then how?” - and your response was: no, stupid, just use the lies the government puts out and be sure to add in govt spending. Not helpful in my view.
It already IS measured in the GDP numbers the govt puts out. Of course the geniuses at the Commerce Department can basically put most any set of selcted data from selected companies and selected areas of industry that they want to, within certain fuzzy limitations, so it hardly matters what the final number is: it will only reflect what the govt wants it to reflect that they think the genius analysts will swallow. I have been following financial news pretty rigorously for a long time, and I do not think I have EVER heard a single analyst think to question the GDP number - it’s yet another of those myths upon which contemporary American society rests. Thankfully, the CPI number is - at long last - being questioned, primarily thanks to Bill Gross.
Great point guys - there is every bit as much reason to include economic effects and activities of non-governmental criminals as the governmental type. The exact same logic holds. And the data we get from both would be so skewed, incomplete and incoherent that it would likely invalidate the whole premise.
I am aware. That is a major problem with using GDP as a measure of economic prosperity (aside from it being a government statistic.) All it is really meant to measure is economic activity, to the extent that it even does that well.
-Jon
If you want an accurate measure, you’d have to subtract government spending and add valid counter-economic spending. You should subtract military spending from GDP and add back in marijuana farming, prostitution, and other counter-economic activity.
On the other hand, it’s correct to exclude counter-economic activity from GDP, because that wealth isn’t as easily available for State confiscation.
Again, quite good points being made here - and I suppose at this point, we need to reflect back to the original question, which was: how to tell if the current economy is growing. What exactly is meant here by ‘the economy’? I am coming to the conclusion that ‘the economy’ as we tend to think of it is an illusion. It is more, but it is also less.
I think Stranger may have said it best, and most concisely, so far:
Here is another example. Instead of staying at home with children, women enter the workforce. Instead of working for free and being untaxed, now women’s wages are taxed. They pay for child care, which is not as good as that the mother would directly provide. Instead of cooking dinner, which is untaxed, pre-prepared food is purchased.
The size of the economy has increased, but it’s unclear if their quality of life has increased.
A lot of tasks have moved from the volunteer/untaxed part of the economy to the taxed part of the economy. This is a gain for GDP, but a net loss for individuals.