I know that GDP is bad number. It is really the total spending of the country including government… as if spending is an indicator of economic growth.
So, I wonder what would be optimal.
I thought about two measures. one - standart of living - average income/basket of products (how much you earn, relates to what you can buy with it. but of course, something reliable, not the government false figures, and something simple)
two - total savings, and production. total savings - understood.
total production →
In my opinion, the way to calculate a production, is to add the total salaries plus companies profits (before tax and further investment), since they indicate a valuable work that the market appreciates.
Moreover, the difference between the value it cost the market to produce the product (resources used) and the market value (sell price), are indicating the exact amount of value that produced, that express itself in profits (real value produced).
So the “production formula” is:
Total salaries + companies/businesses profits - companies/businesses losses + investment gains → which are not “on the paper capital gain” (only dividends, rents collected, etc)
hmm… i don’t think mises would approve of your use of “irrational.” see human action, or chapter 1 of man, economy, and state for rothbard’s disapproval.
First, it must be emphasized that whatever role “rationality” may play
in Professor Machlup’s theory, it plays no role whatever for Professor
Mises. Hutchison charges that Mises claims “all economic action was (or
must be) rational.“ This is flatly incorrect. Mises assumes nothing whatever
about the rationality of human action (in fact, Mises does not use the concept
at all). He assumes nothing about the wisdom of man’s ends or about the
correctness of his means. He “assumes” only that men act, that is, that they
have some ends, and use some means to try to attain them. This is Mises’s
Fundamental Axiom, and it is this axiom that gives the whole praxeological
structure of economic theory built upon it its absolute and apodictic
certainty.
Using number of items owned as an indicator in comparisons still assumes similar values across the board. GDP is always better for comparisonthan things like that because you can at least compare incomes.
You mean “basket of products”? I mean… standart of living is a MUST in measuring (ok… you can’t exactly measure… this is not mathematics… but get as close as you can) economic health.
So how are you going to measure that? you have to use a basket that will be your “buying power” measure. no way around.
Besides, if you have any better ideas on how to do the whole thing, I’d be glad to hear.
I don’t think GDP is a good number. for example, what if americans have no savings, they borrow a lot, and consume a lot? and what if the government spends a lot? the GDP will skyrocket, as it goes in U.S. today (sounds like a newpaper).
Well, that doesn’t really say a lot about the economy.
Look what had happened in U.S. in the last years - that because of the artificial low interest rate, they were many “investors” in . In fact, in any assets boom, there are a lot of investments.
By the way… I’ve not studied in the institude itself. What people like Mises and Rothbard are saying? (said)
Where can one find the figures for total private investment in a country? And where can one find a kind of “Austrian” analysis, or index of state intervention in the economy? The Index of Economic Freedom is one measure, but it is deeply flawed, as Stefan Karlsson showed.
Standard of living of a sample and comparison between samples are categorically different. We can’t just add up utilities for a person. We can compare incomes and say that one person has higher utility than the other within the realm of buyable things, assuming only that he prefers the option of more rather than less.