GDP. median wage and standards of living

[I'm Supposn]

A nation’s annual gross domestic product, (GDP), is a statistical description of total annual production of goods and services within the borders of the nation. It’s used to compare the nation’s production of wealth within different years. The global community of economists and statisticians have not yet devised and agreed upon any superior method to accomplish such comparisons.

GDP values goods and service products objectively by their monetary cost. It makes no subjective judgment as to their comparative benefit to the nation’s society.

Heart surgery and lap dances, cosmetics and dialysis machines are all gauged by the expenditures to produce or obtain the products. You may regret the expenditures for government? I regret the money spent for TV prescription drug advertisements.

The median wage divided by the per capita GDP would indicate the extent that nation’s production is distributed among its population. I can’t conceive a superior method to describe that. If that statistic were modified to reflect the U.S. dollar’s purchasing power, it would be an excellent method to describe and compare USA’s standards of living between different years.

Respectfully, Supposn

 

[Civil1z@tion]

I know a superior standard. Its called the Human Development Index. This measures not only how rich the population is, but how healthy it is, and how well educated the population is thus giving a much fuller view of what a country's standard of living is than GDP, Gini, or real wages.

 

[jking948]

I know a superior standard. Its called the Human Development Index. This measures not only how rich the population is, but how healthy it is, and how well educated the population is thus giving a much fuller view of what a country's standard of living is than GDP, Gini, or real wages.

There are two issues with this(don't get me wrong if we had too choose one way to measure living standards I agree this would be the best choice): One issue is it doesn't evaluate economic inequality and the other is it doesn't evaluate the amount of political and/or economic freedoms citizens of each country have.

Overall, I think the goal of finding one perfect system is overrated. For example, why can't we just look at HDI, Gini, and GDP and then figure out for ourselves how well a nation is doing. Why is it that we need one "perfect" system?

 

[Civil1z@tion]

There are two issues with this(don't get me wrong if we had too choose one way to measure living standards I agree this would be the best choice): One issue is it doesn't evaluate economic inequality and the other is it doesn't evaluate the amount of political and/or economic freedoms citizens of each country have.

Overall, I think the goal of finding one perfect system is overrated. For example, why can't we just look at HDI, Gini, and GDP and then figure out for ourselves how well a nation is doing. Why is it that we need one "perfect" system?

I agree a range of measures are needed. After all, Qatar is one of the very high development countries but is counted as one of the "not free" countires by Freedom House. But if you want to look at standard of living divorced from political, economic, or social freedoms HDI is the single best instrument for doing so. As for not including the Gini ratings, that's true but not necessarily all that big a deal. A poor person living in the US is still living in a very high development situation even given the US's relatively high Gini rating. Taking into account Gini as well tends to be more important to the economic left wing but its not horrible to do so.

 

[Real Korimyr #9]

There are two issues with this(don't get me wrong if we had too choose one way to measure living standards I agree this would be the best choice): One issue is it doesn't evaluate economic inequality and the other is it doesn't evaluate the amount of political and/or economic freedoms citizens of each country have.

If the poor in a country are healthy and well-educated, it matters little that there is high inequality. Likewise, I would argue that if the citizens of a country are healthy and well-educated, it matters little whether they have "political and economic freedom" or not.

 

[HeresToThePoint]

Thanks for making a new thread to address this issue.

My original thoughts:

I disagree. The GDP calculation, although widely used, is not a valuable measurement of economic performance. For example, government spending in terms of value is a net loss investment; therefore is not economically productive. The spending is included in the GDP calculation, even though it qualifies as a transfer of wealth. This results in the government ramping up spending and saying, "look the GDP says its okay," but in reality we just committed more money in a bad investment. With respect to market investments, the initial investment is a wealth transfer, but the return on investment is the economic value created. These returns should receive preferential treatment because are beneficial to the economy. By advocating an increase capital gains taxes, you are deterring investment.

Your response:

In response to your “With respect to market investments”; the initial investment is when goods and service products are purchased and dedicated to (hopefully) produce additional products. That's included and is why transfers of wealth are excluded from the calculation of GDP.

I did not say that transfers of wealth should be included in the GDP. I said that transfers of wealth are already included in the GDP so it does not accurately reflect productivity, there fore not a valuable measurement - despite its wide use. How is government spending, by default, economically productive? I used the investment as an analogy in that, costs of materials are not economically beneficial, only a transfer of wealth. An individual needs to do something effective with it to make a profit, that profit being the measurement of productivity. Likewise, government spending is a transfer of wealth and since the government doesn't make a profit (much less break even), how is it productive? That's not to say that government services aren't essential. And perhaps some portion of government services (such as the labor cost) could be considered economically productive, but being able to spend money to increase GDP isn't productive.

When we consider that in 2009, 45% of GDP was government spending (US Government Spending As Percent Of GDP in United States 1903-2010 - Federal State Local), isn't this a gross manipulation of a measurement of productivity?

I know a superior standard. Its called the Human Development Index. This measures not only how rich the population is, but how healthy it is, and how well educated the population is thus giving a much fuller view of what a country's standard of living is than GDP, Gini, or real wages.

I agree that the HDI is a superior statistic as a general measurement of living standards, but it does include the GDP in its caculation.
Respectfully, HTTP

 

[jking948]

I agree a range of measures are needed. After all, Qatar is one of the very high development countries but is counted as one of the "not free" countires by Freedom House. But if you want to look at standard of living divorced from political, economic, or social freedoms HDI is the single best instrument for doing so. As for not including the Gini ratings, that's true but not necessarily all that big a deal. A poor person living in the US is still living in a very high development situation even given the US's relatively high Gini rating. Taking into account Gini as well tends to be more important to the economic left wing but its not horrible to do so.

I definitely agree, but I do think completely disregarding Gini and Political/social inequalities is a mistake. Don't get me wrong, again, I believe that HDI is probably the best single way to measure economic stature/living standards. However I see no issue with not having one perfect system. Why is it that we can't view a nation and look at them from 2 or 3 different perspectives?

To the point it isn't that big a deal if the poor are poor as long as they are healthy and well-educated as well as the same point to do with freedom... I mean don't necessarily disagree. But I also don't want to live in a country with a complete separation from wealthy and poor(I am not saying this is what we are, I am saying that I would never want to live somewhere like that). I believe that without political/economic/social freedoms, what is the point in being well-educated? How could you make your voice heard? I realize this isn't the case everywhere but it is still an issue.

 

[Real Korimyr #9]

I believe that without political/economic/social freedoms, what is the point in being well-educated? How could you make your voice heard? I realize this isn't the case everywhere but it is still an issue.

It isn't as important that every voice is heard as it is that the right voices are heard. I agree with you that some measure of social freedom is desirable, but that is secondary to societal prosperity.

 

[jking948]

It isn't as important that every voice is heard as it is that the right voices are heard. I agree with you that some measure of social freedom is desirable, but that is secondary to societal prosperity.

I completely agree, but I don't think you can say(I know you are not saying this but I hear this all the time) "Well because HDI is better than both Gini and Freedom House(Just using that because that was a link posted in this thread before) then lets just use HDI." Just because something is better than the other two(+) doesn't make the others irrelevant.

 

[I'm Supposn]

It isn't as important that every voice is heard as it is that the right voices are heard. I agree with you that some measure of social freedom is desirable, but that is secondary to societal prosperity.

Korimyr & J King, if I were imprisoned in paradise, I’d still be imprisoned.

I hopefully waited and expected someone else to have posted this message by now. Many of us have desires but no great expectations. I had no idea that that I was being over optimistic.

Respectfully, Supposn

 

[Real Korimyr #9]

Korimyr & J King, if I were imprisoned in paradise, I’d still be imprisoned.

Is it better to be free in Hell? Freedom is an illusion; we only believe that we are free once we have accepted our chains.

 

[I'm Supposn]

Is it better to be free in Hell? Freedom is an illusion; we only believe that we are free once we have accepted our chains.

Korimyr, denying personal liberty is creation of a hell. Respectively, Supposn

 

[Real Korimyr #9]

Korimyr, denying personal liberty is creation of a hell. Respectively, Supposn

We are always free to do anything we are capable of and are willing to accept the consequences of. Liberty is the illusion created by the belief that one's limitations are acceptable. Only the power to decide and to act is real.

 

[I'm Supposn]

We are always free to do anything we are capable of and are willing to accept the consequences of. Liberty is the illusion created by the belief that one's limitations are acceptable. Only the power to decide and to act is real.

Korimyr, there’s a difference between our own limitations and those forced upon us by others. We’re discussing positions over a spectrum that extends from individual’s determinations to absolute dictatorships.

Respectfully, Supposn

 

[Real Korimyr #9]

Korimyr, there's a difference between our own limitations and those forced upon us by others.

Not really. Our limitations are imposed upon us by the universe. Other people are just another part of that universe.

We're discussing positions over a spectrum that extends from individual's determinations to absolute dictatorships.

It doesn't matter. In either scenario, at any position along that spectrum, the difference between what we can do and what we cannot is power.

 

[Civil1z@tion]

Is it better to be free in Hell? Freedom is an illusion; we only believe that we are free once we have accepted our chains.

I think about it this way, would I rather live in Somalia or East Germany during the Cold War (I choose them for being moderately wealthy while having a more extensive spy network than either Nazi Germany or the Stalinist Russia)? My choice would be Somalia. Yes life is poor, unpredictable, and often rather precarious, but it is also free (well at least it was until the Islamists started taking over). And in that freedom you can forge your own path and way of living and if you fail, better to have tried and failed than to have never tried at all. In East Germany on the other hand, your basic needs are all taken care of. You are safe, secure, and feed, but your life is completely controlled. You are told what job you will work, how you will work, who you will like, who you will hate, and what you will think. And if you slip off the straight and narrow path punishment will be swift and severe. The ultimate problem here is that you aren't living your own life, you're living the life someone thinks is good. In Somalia, for whatever other problems you face, your life is your own. Its better to have your own crappy life than somebody else's perfect one.

 

[tacomancer]

I think about it this way, would I rather live in Somalia or East Germany during the Cold War (I choose them for being moderately wealthy while having a more extensive spy network than either Nazi Germany or the Stalinist Russia)? My choice would be Somalia. Yes life is poor, unpredictable, and often rather precarious, but it is also free (well at least it was until the Islamists started taking over). And in that freedom you can forge your own path and way of living and if you fail, better to have tried and failed than to have never tried at all. In East Germany on the other hand, your basic needs are all taken care of. You are safe, secure, and feed, but your life is completely controlled. You are told what job you will work, how you will work, who you will like, who you will hate, and what you will think. And if you slip off the straight and narrow path punishment will be swift and severe. The ultimate problem here is that you aren't living your own life, you're living the life someone thinks is good. In Somalia, for whatever other problems you face, your life is your own. Its better to have your own crappy life than somebody else's perfect one.

In either scenerio, your life is free, as long as you don't piss off the wrong people. In the case of Germany, it is the government and in the case of Somolia, it is the local gang. In both cases, the end result is pretty much the same. Punishment.

I really see both situations as very much alike. In either case, you have no real freedom, either from a lack of resources in an underdeveloped country or a lack of control. In both cases, they are limits on what you can do and ultimately that is all that matters.

 

[Civil1z@tion]

In either scenerio, your life is free, as long as you don't piss off the wrong people. In the case of Germany, it is the government and in the case of Somolia, it is the local gang. In both cases, the end result is pretty much the same. Punishment.

I really see both situations as very much alike. In either case, you have no real freedom, either from a lack of resources in an underdeveloped country or a lack of control. In both cases, they are limits on what you can do and ultimately that is all that matters.

A) the local gang doesn't have the spies watching your every move, that takes real resources. B) its possible to beat the local gang (often by getting the help of a rival) while there is no rival to the state (that's the whole point of the state). You have a chance against a local gang, you have no chance the Stazi.

 

[RDS]

GDP in absolute figures do not covey any meaning. More accurate is GDP Per Capita for comparison. Checkout the rankings here:
List of countries by GDP (PPP) per capita - Wikipedia, the free encyclopedia

 

[imagep]

A) the local gang doesn't have the spies watching your every move, that takes real resources. B) its possible to beat the local gang (often by getting the help of a rival) while there is no rival to the state (that's the whole point of the state). You have a chance against a local gang, you have no chance the Stazi.

If you live in a tribe that is dominated by a particular tribe, you have better bet that they have spies watching you.

Your only chance to beat the state or to beat the local gang may very well be to leave.

 

[I'm Supposn]

Thanks for making a new thread to address this issue. ...............
........... I did not say that transfers of wealth should be included in the GDP. I said that transfers of wealth are already included in the GDP so it does not accurately reflect productivity, there fore not a valuable measurement - despite its wide use. How is government spending, by default, economically productive? I used the investment as an analogy in that, costs of materials are not economically beneficial, only a transfer of wealth. An individual needs to do something effective with it to make a profit, that profit being the measurement of productivity. Likewise, government spending is a transfer of wealth and since the government doesn't make a profit (much less break even), how is it productive? That's not to say that government services aren't essential. And perhaps some portion of government services (such as the labor cost) could be considered economically productive, but being able to spend money to increase GDP isn't productive.

When we consider that in 2009, 45% of GDP was government spending (US Government Spending As Percent Of GDP in United States 1903-2010 - Federal State Local), isn't this a gross manipulation of a measurement of productivity?

I agree that the HDI is a superior statistic as a general measurement of living standards, but it does include the GDP in its caculation.
Respectfully, HTTP

HTTP, I’m very much aware that the concept that the price of Gross domestic products’, (GDPs’) objectivity is the absence of moral or ethical considerations.

The concept of a human development index, (HDI) is interesting. I’m aware that the major attribute of GDP, possibly its only attribute is that it’s an objective statistic but I haven’t determined if I’m particularly comfortable with HDI.

The objectivity attributed of these statistics would not exist if their formulas were not consistently applied; you correctly point out that it’s of little meaning unless it’s described as per capita.

GDP/per capita describes nations’ per capita production of goods and services; median wage describes to what extent the GDP has been distributed among the nation’s population. Integral within the formula for HDI is the determination that education, life expectancy and income are all factors of equal importance. Other than that, HDI similar to GDP should also be considered per capita, but how could you judge the distribution of HDI throughout a nation’s population?

I suppose it’s contrary to your opinion but GDP makes no moral or ethical judgments and within the GDP formula governments’ spending equal (to any other expenditures), contributes to the GDP. The ultimate purchasers of goods and services all equally contribute to the GDP regardless of your opinion regarding individual items benefit to the economy. You incorrectly describe government spending as transfers of wealth. You are correct that certain government expenditures which do not purchase goods or services should not, (and hopefully are not) contributions to the GDP; (because they are transfers of wealth).

I don’t doubt that some transfers of wealth do get through the cracks and enter the GDP. The significance of such discrepancies is dependent upon their proportion of the entire GDP amounts. It’s not the amount of GDP that’s important but rather that it’s always calculated in a consistent manner so comparisons of GDP’s between differing nations or times have some valid meanings.

Respectfully, Supposn

 

[drz-400]

Since the standard of living probobly displays "marginal returns" to GDP, ie as GDP gets larger the standard of living increases by smaller and smaller amounts, an interesting way to use GDP to describe the well being of a nation might be a log-linear relationship. Perhaps the log of real GDP per capita.

 

[I'm Supposn]

GDP in absolute figures do not covey any meaning. More accurate is GDP Per Capita for comparison. Checkout the rankings here:
List of countries by GDP (PPP) per capita - Wikipedia, the free encyclopedia

RDS, we don’t often consider GDP per capita but you’re absolutely correct; GDP comparisons are less meaningful if they are not considered per capita.

Trade deficits and surpluses affect upon GDPs are understated. That’s due to the extent that production support of products not being entirely reflected within the prices of those products. Also a producer s can inadvertently induce or support production of other producers. (A factories increased payroll can promote greater production of local beauty parlor service products).

All of a nation’s production of goods and services contribute to the nation’s GDP but to the extent that production is not fully reflected within globally traded products, that production is not attributed to global trade.

USA’s trade deficit’s always detrimental to our GDP and the extent of that detriment far exceeds the amount of that deficit.

Respectfully, Supposn

 

[imagep]

I think about it this way, would I rather live in Somalia or East Germany during the Cold War (I choose them for being moderately wealthy while having a more extensive spy network than either Nazi Germany or the Stalinist Russia)? My choice would be Somalia. Yes life is poor, unpredictable, and often rather precarious, but it is also free (well at least it was until the Islamists started taking over). And in that freedom you can forge your own path and way of living and if you fail, better to have tried and failed than to have never tried at all. In East Germany on the other hand, your basic needs are all taken care of. You are safe, secure, and feed, but your life is completely controlled. You are told what job you will work, how you will work, who you will like, who you will hate, and what you will think. And if you slip off the straight and narrow path punishment will be swift and severe. The ultimate problem here is that you aren't living your own life, you're living the life someone thinks is good. In Somalia, for whatever other problems you face, your life is your own. Its better to have your own crappy life than somebody else's perfect one.

I don't believe that living in fear for your life that the local warlord or an opposing war lord my choose to take your life at any time is "freedom". From what I have read about Somolia, if members of the general population dare to speak poorly about a war lord, their life is in danger and can be terminated at any time by the war lord.

I'd much rather live under the restrictions of laws that tend to protect individual citizens than to live in a constant state of fear. Fear is not freedom.

 

[imagep]

So if I took the reported GDP and divided it between the number of working Americans I get a figure of something like $130,000 each. Is that not a fair representation of the average productivity of citizens?

Would a more fair representation of the productivity of our citizens be the total value of consumer goods produced (valued at retail prices)? Is there a statistic available for total consumer purchases?