The Anti-Concepts of Money: What is GDP?

If you’ve read the Introduction from this Anti-Concepts of Money series we can now discuss the Anti-Concept: GDP

The Anti-Concept of GDP

Let’s discuss thet anti-concept, Gross Domestic Product or GDP for short. Armed with an understanding of anti-concepts, it should be obvious from one of the ways it’s calculated. From Wikipedia: 

Y = C + I + G + (X − M) 

Y GDP
C Consumption
I Investment
G Government expenditures
X Exports
M Imports 

As you read this, consider if consumption can be added to investment. They are treated as like terms. Isn’t this the hallmark of an anti-concept? 

These allegedly like terms are to be added into a single sum. And then there’s government spending! Consumer spending is certainly not investment. But government spending is another beast altogether. It is enabled by either taxing productive people or by borrowing (I will address this kind of borrowing, below). 

One is supposed to just accept that all of these things contribute to the economy. It’s like adding production + destruction. The sign is wrong, destruction should be subtracted. 

Good Growth vs Bad Growth

There can be only one purpose to presenting such a hash of different things as if they can be subsumed under a single concept. That purpose is to smuggle the idea that any increase in any one of them is equivalent to an increase in any other. If GDP goes up, well then, the economy grew. Growth is good, isn’t it? It is growth if the government borrows to dole out welfare. It is the same kind of growth if you borrow on your credit card to go on a bender to Las Vegas! 

GDP makes economists think that a debt-fueled spree is growth. It’s very hard to try to think, much less communicate to others, that some kinds of growth are good and some kinds are bad. Usually, it comes out as a muddle, reduced to the low-resolution position that some amount of growth is good, but if the economy grows faster than that magic threshold rate, then it’s bad. Or a more nuanced muddle is that some government policies lead to bad growth, and some are more efficient. 

Growth as defined by an increase in GDP is also an anti-concept. 

A Proper Measure of the Economy

A proper measure of the economy would be based on some kind of national balance sheet, not a statement of the gross revenue. It would look at how much additional capital was accumulated (or decumulated), not on how much people binged on consumer goods. 

Make sure to subscribe to our YouTube channel and weekly newsletter to stay up to date on the latest breaking news happening in the markets and how to protect yourself.

Want to talk with us about our Gold Fixed Income products? Schedule a call with a Relationship Manager today!