If production for the sake of production was all that truly mattered, and if simply producing the largest sum of goods and services possible truly made a society wealthy, and constituted a vibrant and functional economy, then the GDP measure would indeed serve as a fairly useful tool. Unfortunately, true wealth is contingent upon economic coordination along with production. You cannot simply produce; you must produce what is actually demanded by the masses in the most efficient way imaginable. After all, the Soviet Union’s GDP figure was rather enormous and yet the people were very poor (they were able to produce a lot of steel but only at the expense of food, textiles, etc).
In other words, the GDP measure doesn’t distinguish between actual, warranted investment and malinvestment. In short, it entirely ignores economic coordination altogether.
[EDIT] Also, and this has been mentioned already, you can arbitrarily and temporarily increase the GDP figure by pursuing some very destructive policies.
A lot of these studies on public infrastructure focus on reducing costs to manufacturers and how infrastructure simply allows them to make the same thing more cheaply. If that’s bad in some way, please go into detail.
I see you don’t like it when someone poses a question that offends your sensibilities. Perhaps we don’t like it when you pose false dilemmas and commit logical fallacies. There’s this thing called intellectual honesty that you should probably go find.
First of all, we’re talking about GDP and how useful it is as a measure of economic performance. My initial claim was that the Soviet Union had a very high GDP figure (in relative terms), and it did (I believe it had the 3rd highest GDP at the time). I don’t know why you’re suddenly talking about GDP per capita. Either way, its GDP per capita was much higher than global averages (and their GDP growth figure was enormous).
Also, you should think about the core issue I raised in my initial response to you regarding economic coordination.
Here, I’ll make it easier for you to see why your statement is the post hoc fallacy. You are making the claim that when the government spends money on public infrastructure, it necessarily increases economic growth. You have to show that there is a necessary causative link. Well, to be honest, you can’t, because there isn’t one. Here are some examples:
I was in Ireland last summer. I was driving around on their highways, and guess what I noticed? There were almost no other cars on the road. Granted that it’s a smaller country, but I see more traffic in Massachusetts than I did in Ireland. Anyway, Ireland has been having a tough time lately in their economy. Hmmmm. But I thought that if they had public infrastructure they would have economic growth? Hmmmm.
What about all the “bridge to nowhere” type projects in America. Do those lead to more economic growth? For whom?
What about the Big Dig in Boston? HAHAHAHAHAHAHAHAHAHAHAHAHAHA!
Okay. Look, there is no necessary causative link between your two statements. Just because there is public infrastructure built does not mean that there will be an increase in economic growth. In many cases, there is actually a decrease. This is where the free market really shines. People invest in things that will make them money. When the government does it, the government can do it at a loss, so we have no way of knowing beforehand if it will actually be beneficial to the economy (though it may benefit a certain precious few). And that loss is borne by the taxpayers instead of investors. Everyone suffers when it goes wrong, and because it is subsidized, people don’t feel it as badly right away, though they will feel it eventually.
Provisioning public infrastructure does run into coordination problems, but empirically it still increases economic growth.
As measured by GDP, which is very much an iffy statistic that only gets iffier as government attempts to manipulate it increase.
Going by GDP, a nation in recession could simply spend billions of dollars building a ten square kilometre gold statue of the resident head of state in the middle of nowhere and discover that this activity has, in fact created incredible growth! Except all that’s really happened is that resources that would have gone to something useful have instead gone to making a giant statue, meaning the net long term effect is about the same as had you just tossed the equivalent in consumer goods into a volcano.
Look. There is no necessary link between increasing government spending on public infrastructure and an increase in economic growth. Do you understand what “necessary” means? It means that it must be the case that if the government increases spending on public infrastructure that there will be increased economic growth. Do you know what a counterexample is? If there is even one example that shows that this is false, then there is no necessary link between the two statements. Period. Now, you could modify your claim that there is a correlation between the two statements, or that most of the time it is true. But I’d still dispute that. There are many more qualified members of this forum that could debate on that particular point.
I will direct you to the financial cost of the War on Terror. Yes, the link is to the page on the Iraq War, but I will quote a very relevant passage:
So, yeah. It has happened in real life. And that of course we should not forget such monstrosities as the Big Dig:
Maybe the amount of waste is small on an individual level, but all of these projects add up.
Mustang, did you notice that the paper talks about the governor or president, but does not mention legislators? It looks like you choose to ignore one third of the governing forces. If you really want to conclude anything of significance, you should ignore such papers.
You’ve just ceded the argument here. You’ve just admitted that while this is perfectly true: that a ridicilous expenditure could be registered as legitimate GDP growth (were that to actually happen which, the fact that Keynes would have suported this idea himself aside, is ludicrous given the example but remains, nevertheless quite an astute counter)–you maintain that GDP remains an adequate tool to register genuine growth and that your original argument thus stands. But if the GDP formula cannot effectively distinguish between the two in practice (that is, between genuine growth and wasteful expenditures) and, furthermore, cannot counter-calculate the benefits that would have accrued had the money not been taxed away from private citizens to effect those expenditures in the first place, then it really isn’t evidence of the viability of your argument, is it? The confidence you demonstrate in your conclusions isn’t matched by the integrity of your supporting evidence.
If, however, you’re simply suggesting that Leftist governments spend more and that that therefore registers as higher economic growth as measured by GDP, then yes, you’re absolutely right. But who cares? If a Leftist government wants to re-pave and rationalize all the roads with a new ultra-durable concrete at a cost of $10 trillion in order to lower private transportation costs etc, then the GDP growth figure for that period will balloon long before anyone can actually demonstrate whether this is a good idea. And even if it fails miserably to bring transportation costs down because the construction costs keep rising (as is usual for budgets), well look, more GDP growth. Next, it turns out that the roads will only last half as long as expected because of the volume of traffic (the exuberance of people wanting to drive on these new roads) and the unpredictable wear of the elements. Maintenance costs have now doubled. More GDP growth!
No, it wouldn’t, at least not in the timescale covered. The studies cover several decades, more than enough time for negative effects to occur if they ever will.