Look at median, and not mean GDP per capita
medianism.org
medianism.org
> For example, when economists think about how “the economy” is doing, they have traditionally focused on total income (GDP) or per-capita income (mean GDP) as the most important measure.
No, they don't. GDP isn't income at all, they're completely different metrics.
And in fact the article never mentions "median GDP" like the posted title suggests, it switches to "median income" because median GDP isn't even a thing that you can calculate since it's not a metric that exists for each individual person (therefore no median).
How did this get to the front page?
Velocity of money affects GDP. e.g. you spend a dollar, how quickly does that other person spend that same dollar.
Business to business spending is in GDP. Leveraged buying such as real estate is in GDP. Government spending is in GDP. Trade imbalances affect GDP.
People can save rather than spend their income, etc. Pretty clear
Every transaction necessarily has a buyer and a seller
And real income/GDP is what matters more in the end anyway. E.g. nominal wage increases aren't beneficial to people if their spending power is in decline
And yes even income of producers is not GDP, because you have to factor in imports/exports
A dollar changing hands only once contributes $1 to the national GDP.
1) Regarding velocity: if the other person quickly spends that same dollar, unless they spend it abroad, wouldn't it end up as someone else's income, domestically? So why should velocity matter?
2) Request you to elaborate your explanation using the example of a real country whose per capita GDP and per capita Income differ substantially.
These are basic concepts with clear definitions. Why so many argumentative comments trying to dispute a textbook definition? Look it up first and stop spreading false information
The income has already contributed to US GDP, by definition. The person has already produced goods or services and someone else has spent money on them, which becomes the income of the person in question. If the US person then buys Chinese goods, their expenditure does not contribute to US GDP.
How people elect to spend their income affects GDP, thus income does not equal GDP.
Have you figured it out yet?
If someone buys Chinese goods, they contribute to Chinese production, expenditure, and income.
We're talking about a very straightforward and obvious definition here. No need to confuse people
If you receive an income, someone had to spend money (in this case your employer). So it does in fact contribute to GDP, as your employer spent money buying your service/finished work.
So income you received already contributed to GDP, even if it just sits in your bank account. Now if you go onto spend it, it will further increase GDP, as you spending it will yield an income for someone else. If you leave it in the bank account, it will not further increase GDP, as it won't yield anyone an income.
Additionally, when a US citizen buys a Chinese good, it does in fact contribute to GDP - namely China's GDP.
If it's not clear to you by now, GDP is almost the same exact thing as money velocity, just divide it by the money supply and you have the velocity of money.
GP wrote:
> If I earn a dollar and don't spend it, it results in a lower GDP than if I spent it.
You disagreed.
Here's the situation:
Today I earn $10. I then do one of two things:
1 I save it for a rainy day.
2 I buy something with all $10.
In scenario two, GDP went up $10 over scenario one.
GDP has multiple different calculations:
Y = C + I + G + NX
or
GDP = Consumption + Investment + Government Spending + Net Exports
Another calculation is
Y = C + S + T
GDP = Consumption + Saving + Net Taxes
Saving either through investment and cash hoarding both count toward GDP. The percentage of GDP that is Saving is the Gross National Savings or National Savings Rate.
tldr; In isolation, scenario 1, Investment is $10 as inventory and Savings is $10. Both add toward GDP
> Thus income can not be treated as equivalent to GDP.
GDP is defined as total income, calculated in a certain way. There are also other equivalent definitions.
Income is the endpoint of economic activity. Your income contributes to the GDP when you earn it.
Your spending is largely unrelated to your income. In any period of time, you can spend more than you earn or less than that. Spending creates new economic activity. That activity contributes to the GDP, which by definition means creating new income.
> If I earn a dollar and don't spend it, it results in a lower GDP than if I spent it. Thus income can not be treated as equivalent to GDP.
It's the second part that I don't understand. Those two sentences read to me like: "Spending decisions impact GDP, therefore income is not equivalent to GDP."
I don't think anyone is claiming that spending would fail to increase GDP. But I still don't see how income is disconnected from GDP, since that spending would be someone else's income.
If people in the US buy things made in China, it is accounted for in both the GDP and the GDI in China by exactly the same amount (and likewise for US GDP and GDI if people in China buy things in the US).
[1] https://en.wikipedia.org/wiki/Gross_domestic_product#Income_... [2] https://www.bankofengland.co.uk/knowledgebank/what-is-gdp [3] https://www.nber.org/system/files/working_papers/w17421/w174...
Not really. Building new houses contributes to GDP, as does renovating it, but if you're buying an existing house the only part that contributes to GDP is the realtor/lawyer fees.
https://www.nahb.org/news-and-economics/housing-economics/ho...
Yet you say "not really", which is obviously wrong. Leverage impacts GDP, yes, and in a big way.
Directly from your link:
"Because the two series are measured differently"
I forgot that two correlated series means they're the same thing. Huh
Measurements have errors, particularly with something as complicated as the economy. The series are correlated because they are different measurements of the same underlying quantity. The correlation is not perfect because they measure that quantity differently, and so have different errors.
There being 3 different ways of measuring GDP (income, expendeture, and production) is not controversial. I am struggling to find any source on GDP measuring methodologies that does not acknowledge all 3.
Put another way, what produced value does not end up as income on someone's balance sheet; and an expense on someone else's?
Yes, a nation's economy is not a closed system, so you need to account for imports and exports, and this accounting manifests differently depending on which methedology you use.
Then there is GNI, or gross national income, which is basically GDP with some adjustments for international situations. In most cases, GDP and GNI are within a few percent of each other.
Can all these uneducated commenters please stop misleading people about very clear economic concepts.
Lookup how the velocity of money is calculated in relation to GDP and it will be more clear to you and others
The velocity of money is the ratio of GNI to money supply. I don't see how it's relevant here.
It does, just not very much.
GDP is value added. So contribution of anything done in an economy is (selling price - sum of buying prices of components and services needed to make the thing). So if you buy stuff abroad for 80 USD and import it for 20 USD and sell it in US for 105 USD - you increased American GDP by 5 USD.
Dollars spent by one are earned by another. This is captured in the twin calculations of GDP: the expenditure approach and the income approach [1]. (NX and NFI being the border adjustment variables.)
[1] https://corporatefinanceinstitute.com/resources/knowledge/ec...
And dollars spent on imports do not increase local GDP
TNI is the sum of all "sum of all wages, rent, interest, and profits." Wages are in GDP because the purchase and sale of labour is a transaction. Even in the expenditure approach, G includes government employees' wages.
Did you click the CFI link? The "What is the GDP Formula?" section is less than 200 words.
> dollars spent on imports do not increase local GDP
No. Hence the NX/NFI border adjustment. (In the income approach we count foreigners' domestic incomes and citizens' foreign incomes instead of exports and imports.)
It’s Sunday.
Please explain where income comes from if not from the sum of goods and services produced?
but either way, he's fundamentally right.
US GDP in 2021 was $23 trillion. US GNI (national income) im 2021: was $23.3 trillion.
"monetary flows"
You're right, remittances and foreign aid are income but not GDP.
Since I implemented a median estimate while at Packeteer, I'm always amused by how many "educated" people don't even know the difference between mean and median.
Anyhow, "median income" and "median net worth" figures are quoted in the press all the time. There is not some conspiracy to suppress the median.
Usually the issue is collecting accurate income data. There are plenty of places where people do not necessarily report accurate pictures of their income, and so comparison is generally harder.
Not exactly, according to the OECD.
https://stats.oecd.org/glossary/detail.asp?ID=1163
> Gross domestic product is an aggregate measure of production equal to the sum of the gross values ... or the sum of primary incomes distributed by resident producer units.
I guess it's more nuanced, but I don't have a PhD in economics like the author.
English is funny. I knew exactly what you meant and I'm not saying it's wrong, but it would be read completely the opposite if you had said:
I guess it's more nuanced but, like the author, I don't have an PhD in economics.
Then you would say “unlike the author” - that’s what is confusing people.
English isn't funny, humans are funny, building all sorts of redundancy into their languages, but then reversing polarity on a dime.
Komm, wir essen Opa.
P => !Q
Can be rearranged to mean so many weird things.
Income is a measure of retained value after all exchanges have had place.
If I buy a truckload of ice cream for $1000, sell it for $2000, and pay the trucker $200, the GDP is increased by $1000 + $2000 + $200 = $3200, while my income is merely $1000, and the trucker's, $200. Our profits are even lower; mine is $800, and the trucker's is $200 minus fuel costs and road tolls.
https://www.scientificamerican.com/article/gdp-is-the-wrong-...
Taxation figures heavily into GDP - most taxes end up being measured as a share GDP (and why "financial circle jerks" and "made up increases in asset value" are counted as they eventually... but not always... end up being taxed). That is why "economic growth" is so good for the public sector. More GDP generally means more money to work with. Output that is out of reach of taxation (i.e. domestic labor, barters, charity) is also USUALLY not counted in GDP.
Finally, the Scientific American article is a really good read. GDP is not a measure of quality of life, and really never has been. It's just a measure of economic output.
That they are different in practice is sort-of a measurement error.
Maybe you are confused about gross domestic product vs gross national product?
But I think that the article's author suffers a fundamental failing of understanding of why people look at GDP per capita. It's not because they're trying to understand the experience of individuals within the country at all -- it's because they're trying to understand how rich the country is, normalized to its size.
If you care about the country as people, then median is better as you point out. But if you care about the country as country, then total is generally more interesting (to understand, say, military power).
China's a big deal despite not being particularly rich per capita. On the other hand, the leaders in per capita GDP, outliers like Macau and Luxembourg, are not usually countries people are interested in.
As one of many examples.
Or how much oil will gush out of the ground if you drill a hole in the right place.
>labor
I believe you are saying the same thing
There's a whole Disney movie that demonstrates not all holes are created equal.
As the grandparent post correctly stated, median GDP cannot be computed. In cannot even be defined!
GDP is not income.
Personal GDP is not defined.
OTOH, we can see that curve in a global context, of GDP per capita across countries. It's a boring curve, very power-law ish with slightly odd peak in the 30K-40K region.
A useful measure would be GPD per billionaire. Since they amass political power alongside the economic one, they are de facto political leaders.
So do a million other measurements. I'm pretty certain you could find some level of correlation with virtually any measurement and income levels. Thus, this is an irrelevant statement.
Well I'd say that GDP is much more like revenue than income. You're certainly correct that they are related, as income is typically some percentage of revenue (even negative) however the actual percentage is different for every entity, so it somewhat meaningless.
> But I think that the article's author suffers a fundamental failing of understanding of why people look at GDP per capita. It's not because they're trying to understand the experience of individuals within the country at all -- it's because they're trying to understand how rich the country is, normalized to its size.
Completely agree. Generally there are better metrics if you want to look at the income distribution for a country, e.g. the Gini index.
There isn't a great analogy for it on the individual or corporate level. GDP is a measure on transactions within a system. A person can't meaningfully transact within themselves.
I've closely compared my own standard of living with someone else in a developing country. And, my country's GDP per capita was over x20 her country's. And, I was surprised to find how closely our material standard of living was: it was pretty much even: (taking into account, number and type of appliances, living space, eating out frequency, quality of food, access to education, water and electricity).
> Look at median and not mean (GDP per capita) [to understand the way people live]
[brackets mine, of course]
Because it contains the magic words (tax the rich).
http://www.library.snls.org.sz/boundless/boundless/economics...
Except for the UK that has terrible windows and a proper upgrade would lead to serious reductions of gaz imports, that are likely to sting this winter.
I've noticed sometimes things get to the front page evidently because everyone hates it and wants to talk about how much it sucks.
(GDP is calculable via an "income method", differs from Gross National Income only in excluding net transfers of incomes overseas, and per capita GDP is routinely used as a yardstick for income comparisons)
(He also doesn't specifically say that median income = median salary, although taking sales tax revenues and profit incomes and depreciation of capital outcomes into account probably doesn't actually make much if any difference to the median income vs median salary)
though FWIW I don't think it would be impossible to estimate some measure of an individual's "income measure contribution to GDP" based on that individuals' earned income plus imputed contribution to company profits plus sales tax paid; I just don't think it'd be that useful
Theoretically, it should give the same result when measured in these different ways.
The author is confusing actual economists with armchair “economists” on Twitter.
A much better measure of “the economy” is median income because that is a more accurate reflection of the economic well being of most people.
A median or average has a measurement error (and just because one bar is higher than another it doesn't really mean it is actually higher).
The distribution is what is interesting and important.
Which gives, start publishing numbers as (x1,x2,x3,x4,x5) at 10,30,50,70,90th percentile or whatever. And give up pretending complex system are simple.
How are then the institutions going to sell us the narrative that all is well and growth is always good, once we realize poor people stay poor and rich people get richer?
The BBC website does something nice where they often have an "Analysis" section under the news. A sentence or two about how to interpret the number would be useful.
If they think we need analysis to understand what is happening in Ukraine, I think we probably need it for interpreting economics numbers. "We" being ... most people. And it wont always bet stats 101.
Income distribution is not that complex, but it’s also not normal - it’s a power law (zipfs law).
A combination of Total GDP (or income) and something like the Gini coefficient is more useful. And commonly used, as well
The problem is that many of these decisions are being made democratically, or by democratically elected representatives. They need to be able to explain the impact of their decisions to the average voter.
Having a single number that goes up or down makes communication and coordination a lot easier, and I think it's worth discussing what the best single number might be.
But instead they educate them in BS, both in schools, and through their government communication. It's more convenient to emphasize BS in curriculums than proper life/political skills...
No, not the “average” voter - messaging should be aimed at the marginal voter.
Some voters are more swing-able than others.
Some voters are in more marginal seats than others.
But all voters can swing given enough "force". If the force is negative force for who they normally vote for.
And this is why demagogues win. It’s much easier to seem competent by confidently shouting simple platitudes than by attempting a nuanced discussion.
Weath doesn't follow a normal distribution even approximately, so variations on the mean will often give counterintuitive results.
Are you kidding? It's the highest point on the histogram; a histogram places very heavy visual emphasis on the mode while obscuring the mean and median.
Histograms typically bucket data potentially hiding the true value of mode or adding error to it. It really should be given directly, with a count of occurences.
Mode is not the same as modal class - which is what you would get from a histogram.
I can't agree with that. It is true that histograms bucket data. But the width of the buckets is chosen to make sense in context. It just isn't relevant if people making $20,176 slightly outnumber people making $20,359. So we put them in the "$15,000 - $24,999" bucket, which preserves most of the information of interest while omitting the information that is of absolutely no interest.
In other contexts, you see other bucket widths. Chinese university entrance exam scores are published with a bucket width of one point. (Some things may be obscured. When I was looking into this, I found that it was very common for the top scores to be bucketed with each other, presumably for some kind of privacy reasons. Beijing was notable in putting low scores into buckets of width ten even in what was technically labeled an 一分一段表 (literally: "one point -- one section" table). Fujian was notable the other way, for preserving the bucket width of one point even for the highest scores; I have trouble believing it's a coincidence that Fujian is one of the academically highest-performing regions of China.)
> Mode is not the same as modal class - which is what you would get from a histogram.
For almost all purposes, modal class is more interesting, more useful, and more statistically valid than raw mode is.
Most people use life expectancy at birth to believe that everyone died in their 30s in ancient times, even though these numbers are skewed because of huge infant mortality.
Introducing something like life-expectancy at birth, 5, 10, 20, 40 years would paint a much better picture, but it takes hard work and a belief that your audience is not stupid.
Who Is This Medianist?
Jonathan Andreas is an Associate Professor at Bluffton University who received his Ph.D. in Economics from the University of Illinois at Chicago.
https://www.dummies.com/article/academics-the-arts/math/pre-...
Distributions give us richer data. But even distribution of incomes (in the article) or spending (GDP) aren't terribly rich. They don't answer why. So we can add dimensions to what we measure or fall back to just so stories. And that's why most people don't trust economists - oversimplified models and just so stories.
Sure. I am not arguing that a median is not a median.
By measurement error I really meant noise and disturbance, as defined in control theory. E.g. it is perfectly possible to have a value "average tax in county" with zero noise as in perfect value to the cent, but year to year variance due to disturbances.
But “median is better than arithmetic mean for knowing if a lot of people are struggling” should be uncontroversial.
We’ve rigged up a system that is a race to the bottom on wealth inequality. People have tried to run systems like this before and it always ends in tears.
The interesting question isn’t how to parse the maths, or even if we have a bad, bad problem. The question is, can we and/or will we do something about it soon enough that Western civilization lasts for climate change or whatever to even matter. Because we’re on pace to get into tennis courts and guillotines before much if any of Manhattan is below the water line.
I originally found it from the fascinating article on how using averages in the design of military plane cockpit resulted in many pilot deaths. That's the best introduction I've seen about uselessness of averages with multiple dimensions (with more than 3 dimensions it goes bananas). The article is actually is an excerpt from the book, so you can get the sense of the book level from it. [2]
[1] http://www.toddrose.com/endofaverage
[2] https://www.thestar.com/news/insight/2016/01/16/when-us-air-...
I think this problem is just a matter of degrees with any summary statistic.
You throwing away information in an attempt to synthesize an insight.
It's probably a fine book if education policy is your jam, and its fine for scholars to publish monographs on their research but I felt a bit mislead given the title and PR excerpts. For example, maybe an examination of Average Treatment Effect and Individual Treatment Effect in medicine, and followed by an adventure into causal reasoning. Or perhaps a treatment on diminishing returns of personalization.
And perhaps if the "how we succeed" portion investigated productivity instead of defining success as getting a degree from Harvard. As software designers we come to recognize that there's diminishing returns on customization in our software, and develop hierarchies of customization -- commonly adjusted settings are easily found, and others may be dotfile / envvar / registry only. There's probably a happy medium between Apple inspired "it just works" philosophy and Gentoo's 'every software custom built' approach.
[0] https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...
[1] Making some reasonable assumptions about wealth distributions.
Side A is the irritating number of amateur economics players (me!) and the desire to engage in this topic, because its both fascinating and important
Side B is the extent of "you're wrong" put downs from either other amateurs, or professionals, which is entirely understandable given that the Side A players make collossal mistakes, but which also masks the divides in economic theory: Some people are pretty partisan in the trench warfare across the battlezones here.
So it's foolish to bring maths to the table, because you will be faceplaned by anyone who prefers more complex maths, or who wants to nitpick your maths, or who wants to attack your school of philosophy because they stand on a different hilltop.
Does it mean "mistakes" are acceptable? No. But people can be a bit kind about it, because in the end, we're all talking about the same thing.
Well.. mostly. Not me. I'm stuck in the labour theory of value. all this money stuff is just nonsense.
That said I wouldn't discount that there is a very fine thesis in analysis of bullshit jobs. Particularly the extreme amount of organisationally justified middle management which inserts mindless beaurocracy into creative acts. Think not just lawyers, but the oceans and oceans of ink applied by junior law clerks to pad out the billable hours and get to the million dollars in costs, but for virtually everything we do now. You think all those 150,000 google employees are creating value?
As a position of quasi religious faith, I think the property of value latent in made things vests in the labour to make them not the priviledge of the capital invested. The alternatives are very ugly: slavery would be the highest form of profitable enterprise when in fact I believe the evidence is strong the other way: you need to pay workers to get value from them. Why? Because they create the value. Invest in slaves, it's less outcome for more expenditure.
Most economics is about the practical: if we adjust interest rates this way, what will people do with their money (value) and how does it alter the current balance? They don't much go to the moral side: should we do this. Some do, and typically its in public utility function because in times past, we funded this as tax and spend to common good, eg the build out of power, water but in times recent we've sold this capital investment off, to get short term money, in a belief somehow it will be "better" because "competition" which (again, in my opinion)_is just bogus.
There is a heap of economics in health. Pretty much all the worlds developed economies see that it's better done as a public good, except the USA, and now we have specialist health economists in the USA who work to maximise profit for medical investment. Everyone else can get to "tax is better" but thats not an acceptable truth in the USA.
Nothing to do with labour theory of value. If you think an iPhone is worth $1300 because Jony Ive said so, through Apple, then the cost of inputs come as a bit of a surprise. Why is the use function of a device like this so far removed from its actual input costs, labour included? "rational" economics goes to "it's not worth $1300" very fast because a $25 phone does most of "it" fine. Of course, thats a kindergarden level lie because even ignoring irrational desire, iPhones are a value beyond the cost of inputs, its a classic n-Squared proposition of being able to do iPhone-y things with your fellow iPhone holders. Yet apple stock is worth astronomically more than otherwise productive endevours in mining, engineering, housing. For what? How does apple increase or decrease US GDP in a meaningful way? How does Apple or Google add or subtract from the overall US economy, from CPI, from wages, and cost of housing. Great questions (if you ask me)
If you don't believe in the labour theory of value, then a good thought experiment is to send all the undocumented mexican labour home and see what happens to the US economy. I've read of 10% minimum drop in production across the board, and a massive rise in CPI to deal with food shortages. Thats a pretty high value on labour right there.
In your thought experiment, if the cost of labor rose due to stricter enforcement of immigration laws, we would see what luxuries people can cut back on and what essentials they won’t give up. But the pandemic showed some of this already. Lots of money is spent on luxuries like eating out and travel. (And, yes, iPhones.)
We depend on two or three mainly chinese sources of rare earths because the "price" of rare earth mining didn't justify the investment to exploit the other sources we know exist. It will take years to build around this.
In the end, we directed labour to try and solve some of this. (masks) The only people who can be directed these days are either prisoners, or troops. Nobody much likes depending on either to solve labour problems.
Interesting how you only seem to consider the owners of the means of production here.
What is the actual difference for a worker between slavery and wage work?
You can change all the "decorative" stuff but the core concept is still that a restricted elite owns the means of production and extracts more value from workers than it gives back to them. This is how things have always worked through serfdom, slavery and finally capitalism.
As a worker you can now change workplace and thankfully you don't risk physical punishments if you don't work well, but you must work for some capitalist in order to survive, no choice there but a few exceptions.
You must also follow the rules capitalists impose on you on the workplace or you'll lose your livelihood. No physical punishment if you don't follow the rules, but your family is gonna live on the streets.
Median and mean both compress n data points into one, which is only useful given some assumptions about the distribution. Quintiles (or similar) would work for that scenario, but I'm sure there are more complicated situations where they fall short.
With GDP per capita, a few oil billionaires and a very small class of well-paid oil workers make Equatorial Guinea look like a middle income country. Median GDP reveals that the average person there lives on less than $2 a day, because Equatorial Guinea is also the most unequal country in the world. But clearly it's more representative to class Equatorial Guinea as very poor (median income) than moderately wealthy (per capita GDP/mean income) or rich (per capita GDP PPP)
Median income isn't perfect because it can hide things like one country having 5% living in extreme poverty and one country having 25% but with typical real world income distributions, an average not massively skewed upwards by how rich the top 10% or 1% is gives you a much more accurate perspective on which country most people have higher incomes in.
He said, in a press conference, that the average wage was $75k, there was a wave of lukewarm takes on social media along the lines of "he's lying because I don't know anyone that earns that much". I got yelled at by friends about how much of a shill I was for saying he was 100% correct, but the median wage was around $45-50k.
I ended up explaining it by saying if Danny Devito wandered in a room of NBA players, the average height would still go down.
Assume the 297 million people all make $100k. That's $29.7 million. Now have the 33 million make an even $1 million. That's $33 million. That's 10% of the population making over 50% of the income. Altogether, that's $30.7 million income across 330 million people. Or about $190k per year.
Yes, that's almost double what the 297 makes, but it's far closer to them than to the 33 million.
> If a government regulation benefits Bill Gates $10 billion and every single American $20
I think he meant to say "costs every single American $20", because otherwise, it's technically an ok deal if it benefits everyone even if it benefits one person a whole bunch. And his following statements seem to indicate we should be subtracting $6bn from $10bn.
And I also have a problem with the hypothetical. It's set up in a way to give only one outcome. He couldn't even make it $40 dollars, because then it's $12bn to $10bn. And he has to work with billions because 300 million people are a fucking lot.
But arguing about whether we should be measuring averages one way or the other is kind of missing the real point. Are the people taking the bulk of the income deserving of that income? For the most part, the people taking the lion's share of the income are only doing so because they have put themselves in the position to determine how the profits of an enterprise are allotted. And it's clear that they are not allotting the profits based on the value the employees are bringing to the company.
they deserve what they can get, as long as it is legal and above board (aka, no bribery, corruption etc).
There's some level of morality being assigned to the idea of "deserve". I dont believe such morals exist, and that it stems from jealousy.
> And it's clear that they are not allotting the profits based on the value the employees are bringing to the company.
i dont think it's as clear as you make it out to be.
Also, define bribe. Define corruption. If my best friend is a lawmaker and I spend every weekend with them and I manage to persuade them due partly to the amount of time I get to push my point view, is that corruption? Is it corruption if I become friends with him solely because he's a lawmaker? If I didn't know before I became friends. If we were friends before? Why are any of these different, if any?
I like how you say it's not clear that they aren't allocating profits based on the value, but somehow it's very clear they deserve it, what corruption is, and what bribery is.
No. The only thing that is not clear is that maybe they don't deserve the sheer amount of wealth they've extracted from everyone else.
i take issue with the idea that an "arbitrary event" is the reason why such an allotment is considered undeserved. This isn't any different than a lottery winner being considered undeserving of their winnings.
If one traces far back enough, you could argue that the current western country's wealth is undeserved, because way far back, an "arbitrary event" (aka, conquest and dominion) gave them the kick-start that nobody else got.
I would instead argue that no event is arbitrary - the lottery winner chose to make their bet, the lobbyist deliberately attempt to influence the law to their favour, etc. If such actions are not considered illegal by the laws of society at the time, then it is fair game. The good thing about western society is that laws aren't set by a dictator, but instead can be changed via some sort of consensus procedure.
The only argument i hear that such wealth is undeserved is that "i couldn't have done the same, therefore it must be undeserved".
And I see you're getting it. There's way more luck involved than most people give credit for.
It's undeserved not because no one else could have done the same, is that because a lot of people could have done the same given the same circumstances.
Take your lottery example. If you buy one ticket, you have one chance. If you buy 50,000 tickets, you have 50,000 tickets. But you first need $100,000 to do that.
And the laws aren't being changed by some sort of consensus... of people who already have the most. And they change those laws to ensure they get to keep the most and anyone else who would like to get ahead have a hard time doing that. The large income inequality makes socioeconomic mobility more difficult.
Can you revisit this
Other than that, it should come out to about $190k
But like many tools, at some point they expire and we need to move on. imo GDP is past that point already because it encourages production beyond anything else, when we should instead focus on consuming less and producing enough, and the right things so that we can be satisfied in our lives, not just burning gas for the sake of it.
To illustrate the obsurdity of it, the production of oil contributes to GDP, the burning of that oil contributes to GDP and then using carbon capture to capture the gasses released by the oil also adds to GDP. What's the sense in encouraging all that without qualifying that it should be enhancing people's lives?
Fetishizing the GDP will only accelerate the climate problem.
Bread and circuses for everyone!
And GDP is a decent metric to track the economic aspect. It's not perfect, but nothing is, and the answer is to find and improve the metric instead of "throw away and ignore". And, the data clearly shows https://ourworldindata.org/grapher/gdp-vs-happiness GDP has a very strong correlation with happiness.
Economic policies should take GDP into account, and suggesting NOT to do so is simply stupid. The policy makers should also look at and incorporate climate issues, and many others.
> Fetishizing the GDP will only accelerate the climate problem.
I'm afraid this is not a useful framing, and mostly a straw man argument that makes the discussion unproductive. Most countries and their politicians are not pursuing "GDP at all cost" type of policies.
"What is love? What is creation? What is longing? What is a star?" -- so asks the Last Man, and blinks.
The earth has become small, and on it hops the Last Man, who makes everything small. His species is ineradicable as the flea; the Last Man lives longest.
"We have discovered happiness" -- say the Last Men, and they blink.
And for this, we need means, not medians. Sure vast majority of profits is made from consumption of the top 10%. Rest are just taken for a ride (not even exploited properly, and this is a big departure from things were 100 years ago when the rest were equally desperate, but at least necessary).
With barely over 50% of the population working in most countries [1] median based on population will be skewed too.
Then we have to agree on working age population.
Then we have to measure unmeasured income (ex. providing child care, teaching at a home school, preparing meals, cleaning, maintaining your own car, repairing or upgrading your residence, etc.) oe you lose all of this in the data.
The real challenge from my perspective is trying to boil down something as complex as a population into a single stat.
[1] https://en.m.wikipedia.org/wiki/Labor_force_in_the_United_St...
Democratic norms are what produced this recession.
“When the people find they can vote themselves money, that will herald the end of the republic.” -Benjamin Franklin
https://tradingeconomics.com/united-states/gdp-growth
The USA is in recession.
The US government increased debt by ~6 trillion since covid started: https://tradingeconomics.com/united-states/government-debt
~5 trillion was printed.: https://tradingeconomics.com/united-states/money-supply-m2
Which is causing 9.1% inflation: https://tradingeconomics.com/united-states/inflation-cpi
This recession the USA just entered is the same recession as the one which started in 2020. The government can print significant unexpected money to temporarily boost GDP.
https://tradingeconomics.com/united-states/gdp
Except only about 2 trillion made it to gdp. The US government's leaky bucket can be measured at about 28%. 72% of US tax money is going into the firepit.
It worked, they temporarily boosted the GDP numbers to pretend like there wasnt a recession. When they stopped printing money, gdp dropped because the recession never left.
You know what I really wish to see produced for all countries?
Real GDP adjusted for government debt.
I've actually had this running theory that all civil servants should be paid a fixed percentile of income. This would give them all an interest in ensuring that income/GDP goes up and that it goes up for those below them. (in percentile)
A better compensation mechanism would be to measure changes in outcomes such as wealth, crime, and health, then have bonuses for positive changes in those metrics. For example: If each member of congress got an extra $10 million if homicide rates went back to 2019 levels, I guarantee we'd fix the crime wave within a year. It'd only cost $5.4 billion, or $15 per US citizen. And it'd avoid approximately 5,000 murders per year.
One can imagine similar incentive strategies for health and wealth. Unfortunately, most people view governance as a sacred value, and are unwilling to introduce money as an incentive. So we're stuck with things like congress giving the FDA more power to restrict nicotine vaping products while 400,000 Americans die every year from smoking tobacco.
(I'm not sure it's _civil servants_ this sort of thing should be considered for. They don't make the decisions and there's little a civil servant can do that will change what the 20th-percentile person gets paid. It would make more sense for politicians.)
I suspect that if each member of Congress got a $10M reward for bringing homicide rates to 2019 levels, the result would be legislation that redefines homicide or changes how it's reported or something of the kind, rather than anything that actually involves fewer people killing one another.
I agree that GNH (gross national happiness) etc matter too, but I think that tying their income to lower percentiles would greatly increase the correlation between GDP growth GNH... the only reason it's broken in the US is because GDP goes to the upper ranks, in a rent seeking manner, from the lower ranks.
> Unless it was a very high percentile, that would incentivize competent people to flee to the private sector, or it would encourage competent but corrupt people to join the government.
I actually think there needs to be a return to the "service" mentality to civil service. IMO government shouldn't be a job you do because of the compensation, stability, union etc. It should be a service to your country. But that would require so many Americans to stop hating their nation as they seem to now.
To point out the obvious, the perfect information is the underlying data. If there are 10 people in the economy then just provide those 10 data points. If there is a million people, then provide all the statistics - the averages, percentiles, etc - as well as all the data.
An article can report the averages as well as point to the underlying data set.
The idea of pronouncing one average better than all the others is moronic.
I guess when Amazon sells an item the difference between the wholesale price they pay and the end price they charge including shipping is a service, retail.
But who has produced this service? The underpaid warehouse worker and delivery driver or Jeff Bezos?
For income it's clear, for GDP I don't see it.
So for example, if there is a village with two people, and they rent each other's home then this village has non-zero GDP, although no goods or services are produced.
Inflated education, medical or insurance prices also inflate GDP. So a teacher in one country could produce 2x more GDP per unit time as the same teacher in another country.
Another wrong thing to do is to adjust income or GDP for food prices (purchasing power parity). This is absolutely wrong. The idea of PPP is that if in your country potato is two times cheaper then it makes you two times richer. This is wrong because a MacBook or a car are not two times cheaper. Actually they are more expensive than in the West. And if you go abroad then there will be no cheap potato either. So PPP is a total lie. It can be applied only to poorest people who spend all of their income on potato.
So if you want to adjust the income for PPP, at least use MacBook or car prices instead of potato.
I think that a fair metric would be a percentile distribution of how much money a person has left after renting the cheapest apartment and buying the cheapest food.
Theoretically it would be possible to create a price index based on Macbooks or cars, but since most people in the world buy more food than Macbooks or cars this would obviously be misleading. When people living in developed countries move to a developing country they don't think "wow, the cost of living is high, the Macbook has a luxury tax on it" they think "wow, most things are incredibly cheap here". It is impossible to come up with a perfect PPP because people spend their money on different things, but it's a lot better than thinking a country which has inflated prices for everything is much more materially wealthy than one which has low prices for everything.
And the whole point of PPP adjustments is to get rid of the scenario where the same education contributes much more to GDP in a nation where wages and school buildings are expensive than one where they're not.
Because it measures all the goods and services produced in a country over the course of an year.
I know of a way to inflate it as much you want, but I don't think I will ever be in a position to use it.