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GDP increases due to inefficiency because efficiency reduces need?


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According to Zeitgeist 2011, GDP increases due to inefficiency because efficiency reduces need and peoples need increases GDP. In other words the economy suffers when everything runs smoothly.

 

Zeitgeist has a bad track record with accuracy, exaggeration, seeing links where there are none etc..., but braudly speaking I think it gets things right.

 

Do we think this assertion about GDP by the Zeitgeist is correct?

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If someone takes very good care of their things in a way that causes them to last longer and require less maintenance, they end up spending less money for repairs and maintenance, which could reduce GDP growth. However, this lack of growth is compensated insofar as less money is needed to repair/replace well cared-for things. The problem, imo, is that someone who takes good care to live efficiently ends up putting a strain on those that live less efficiently but reducing the GDP-growth they need to pay for their low-efficiency lifestyles. On the other hand, bailouts and other redistribution that prevent bankruptcy of inefficient consumers and businesses unduly burden those who take the effort of consuming and managing businesses efficiently. So, generally, yes I think it does BUT no, I don't think this equates it with other GDP-killers such as, say, mass-death. This is because efficiency increases utility of existing productivity whereas mass-death, inefficient production resulting in lower productivity, etc. lower GDP while ALSO lowering utility. In other words, their is no economic metric for utility because it is so situational; whereas GDP can be measured in units of currency transfer. If utility per unit GDP-growth were measured, some economic situations with low revenue or GDP would be doing better than some with high revenue or GDP just because they are getting more out of the growth they have.

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Yes that seems to be somewhat accurate. GDP is a measure of what is produced and not a measure of wealth increase. So if things are lost or destroyed so that they must be replaced, then all the more GDP. This sort of thing has been suggested as one of the uses for war.

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According to Zeitgeist 2011, GDP increases due to inefficiency because efficiency reduces need and peoples need increases GDP. In other words the economy suffers when everything runs smoothly.

 

Zeitgeist has a bad track record with accuracy, exaggeration, seeing links where there are none etc..., but braudly speaking I think it gets things right.

 

Do we think this assertion about GDP by the Zeitgeist is correct?

It's important to understand that GDP is only one method of measuring "the economy". As a general measure of production it serves a purpose for quick comparisons, but fails to delivery any meaningful insight on the specifics. If anything, this is a primary example of the failings inherent in using GDP as a measurement of economic prosperity.

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US productivity has been rising at an average rate of between 2.5% and 3% annually for the last 5 years. (That's a 10-year average, so the actual recent increases have been even larger). All the while GDP rose, fell and is rising again. Looking at the longer view, average US productivity has been increasing since WWII. That's higher efficiency in the workplace. Where is the inefficiency that leads to growth? I would think that inefficiency is driven out of a capitalist market from competition. Isn't that the way it's supposed to work?

 

 

http://seekingalpha.com/article/204083-official-gdp-productivity-stats-tell-a-different-story-of-u-s-economy

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Good point Saryctos. GDP would suggest the broken window fallacy is great for economic growth.

 

However it is not true that the economy suffers when everything runs smoothly. When everything runs smoothly, we manage scarcity more efficienty and our opportunity costs would decrease. When I have to divert my economic energy from creating wealth to fixing broken windows, then I'm still contributing to GDP in both cases, but only one of those scenarios is less efficient than the other.

 

As long as humans demand things, and those things are scarce, I'm not sure how efficient production and allocation somehow reduce GDP.

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This is also the reason why the whole theory that the environmental movement won't hurt the economy because it will produce 'green jobs' is faulty. What will happen is that when an environmentally conscious economy produces things, it will have to do so with gross inefficiency, since it will have to waste an enormous amont of productive energy in cleaning up its by-products to preserve the environment, where before 100% of the productive energy could go directly into making more or better products. Part of this new inefficiency of the environmental economy will be measured in the number of new 'green jobs' created, since these jobs will not produce commodities which are valuable in themselves, but only produce cleaner processes for making the same products as used to be made much more cheaply before. More money will be handed around and more people will be employed, but the total production will remain the same. With more people employed in not only making things but also making them cleanly, while the total prodution remains the same, the cost of all commodities will increase relative to salaries, so we will all be poorer while at the same time the total amount of money being handed around to answer not only our productive needs but also the new environmental clean-up needs will be larger.

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Solar panels run themselves, a coal fuel power station requires constant feeding by people, so in many cases green energy requires less employment which is good. Also if being green is bad for the economy then perhaps the economy is a bad indicator of whats a good.

 

I completly agree with that more jobs for the same output = bad.

Edited by alan2here
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