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What is the social well-being of a country in economics?
- Thread starter chelle712
- Start date
Be very careful with recent GDP numbers:
1. GDP is measured in FIAT currencies, and since we have been increasing the amount of paper in circulation, this number fluctuates in function of the amount of the amount of paper in circulation (and no, the CPI does NOT compute inflation, it is a price index which gives you an overview of how prices are affected by inflation)
2. GDP only gives you "half of the balance sheet". It tells you all you've spent you - but doesn't mention how much you've borrowed and still have as debt. If I live on an island and build out of my own labor 1 house, make 1 bread a day and grab a coconut a week, at the end of the year the equation gives (GDP = 365 bread + 52 coconuts + 1 house). However if I borrowed from the neighboring island 500 fish during that same year to feed me while I did all of that labor - that's something the GDP will not show. And you get Enron numbers just like for the USA today. Most of the GDP is financed by borrowed money which still needs to be reimbursed but which does not show on the documents, unless you go put your nose in the "federal" debt numbers.
Hoping this answers your question.
Besides - as to the "preferences" of how a GDP is "spent", yes, different cultures have different needs, some will enjoy beef more than fish, some will buy guns others will be rackets, some will build houses some will rent hotel rooms - but all in all if "that's what makes the society <happy>" then you have to let the people speak and it is always more dangerous to (i.e. you always get "worst" results if you) try to micro-manage your people's behavior through central-planning (government).
1. GDP is measured in FIAT currencies, and since we have been increasing the amount of paper in circulation, this number fluctuates in function of the amount of the amount of paper in circulation (and no, the CPI does NOT compute inflation, it is a price index which gives you an overview of how prices are affected by inflation)
2. GDP only gives you "half of the balance sheet". It tells you all you've spent you - but doesn't mention how much you've borrowed and still have as debt. If I live on an island and build out of my own labor 1 house, make 1 bread a day and grab a coconut a week, at the end of the year the equation gives (GDP = 365 bread + 52 coconuts + 1 house). However if I borrowed from the neighboring island 500 fish during that same year to feed me while I did all of that labor - that's something the GDP will not show. And you get Enron numbers just like for the USA today. Most of the GDP is financed by borrowed money which still needs to be reimbursed but which does not show on the documents, unless you go put your nose in the "federal" debt numbers.
Hoping this answers your question.
Besides - as to the "preferences" of how a GDP is "spent", yes, different cultures have different needs, some will enjoy beef more than fish, some will buy guns others will be rackets, some will build houses some will rent hotel rooms - but all in all if "that's what makes the society <happy>" then you have to let the people speak and it is always more dangerous to (i.e. you always get "worst" results if you) try to micro-manage your people's behavior through central-planning (government).