GDP As A Measure of Economic Activity?

[grndexter]

It has occurred to me that the concept of GDP (Gross Domestic Product) is misunderstood.

It is touted by many as an ECONOMIC measurement. It is not. It is simply a measurement of the movement of money. Consider the recent spending by the US Government to "bail out" banks, or to waste on various worthless projects that create nothing and change

Comments

[jimkeller]

The challenge with a total exclusion of government spending is that it would artificially deflate the number, as there are a non-trivial number of individuals whose income comes directly from the government. Perhaps excluding non-payroll government spending would be a better measure of actual economic activity, or -- to go the other route -- excluding all payroll and investment from GDP and only counting spending (government and private) which results in the actual exchange of goods and services.

Just thinking out loud. I do, overall, agree that allowing an entity that has the power to print money at will to count its own spending in the only measure we have of our current economic health is highly problematic...

[grndexter]

I think the current number flying around is that 40% of the people in the country get checks from the Feds. So does that mean that we could adjust the GDP figure by lowering it 40%? Ummm... thinking that it wouldn't be that easy. You could probably provide full lifetime employment for that proverbial room full of monkeys with calculators to figure it out - and like the CBO they'd get there someday... maybe... kinda...