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Old December 6th, 2016, 10:07 PM   #1

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Economics misconceptions


Which economics misconceptions annoy you? for me it's how people think GDP denotes the wealth of a country. It doesn't. China's GDP is bigger than Sweden's. Which country has better living standards? Which has better education, average salaries, or infrastructure? GDP is only about economic size, influence and structure, that's it.

And there is no inherent good in manufacturing industry. The only "good" industry for any country is its sustainability in many ways, for jobs, living standards, foreign trade issues like FOREX/FDI. Service industries can be "mundane" things, but then so can manufacturing industries. Making pet food is mundane, but people still value/demand it. As is making nails or paper cups. Many of the biggest industries in the world are service industries, entertainment, financial services, ICT, and retail are all service industries.

I have many more, but these two points annoy me a lot.
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Old December 6th, 2016, 11:30 PM   #2
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Originally Posted by notgivenaway View Post
Which economics misconceptions annoy you? for me it's how people think GDP denotes the wealth of a country. It doesn't. China's GDP is bigger than Sweden's. Which country has better living standards? Which has better education, average salaries, or infrastructure? GDP is only about economic size, influence and structure, that's it.

And there is no inherent good in manufacturing industry. The only "good" industry for any country is its sustainability in many ways, for jobs, living standards, foreign trade issues like FOREX/FDI. Service industries can be "mundane" things, but then so can manufacturing industries. Making pet food is mundane, but people still value/demand it. As is making nails or paper cups. Many of the biggest industries in the world are service industries, entertainment, financial services, ICT, and retail are all service industries.

I have many more, but these two points annoy me a lot.
First of all GDP makes sense in relation to the population size...Of course a country with a bigger population will tend to have a bigger GDP than a country with a smallish population..... That is why GDP/ capita is used

Second I am not sure that life is better in Sweden than in China... And as for infrastructure China has done awesome things lately... It may well be ahead of Sweden there... Though comparing China to Sweden is meaningless, since China is continent size and has almost twice more people than the whole of Europe while Sweden is 20 times smaller and has less than 10 mio people

This is another misconception btw... To treat countries as if they were all comparable.... Luxembourg and Australia, Malawi and the US, Antigua and Russia, Montenegro and Brazil are simply not comparable

"sustainability" is not an industry.... it is just a practice...

And yes manufacturing is good... You need to make "things".... Services dont exist otherwise, because services exploit those "things" that you need to make..... It was dreadful mistake starting in the 70s to believe that manufacturing was "not good".. That's how Europe and the US low millions of jobs and now are faced with chronic unemployment
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Old December 7th, 2016, 12:08 AM   #3

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Originally Posted by notgivenaway View Post
Which economics misconceptions annoy you? for me it's how people think GDP denotes the wealth of a country. It doesn't. China's GDP is bigger than Sweden's. Which country has better living standards? Which has better education, average salaries, or infrastructure? GDP is only about economic size, influence and structure, that's it.

And there is no inherent good in manufacturing industry. The only "good" industry for any country is its sustainability in many ways, for jobs, living standards, foreign trade issues like FOREX/FDI. Service industries can be "mundane" things, but then so can manufacturing industries. Making pet food is mundane, but people still value/demand it. As is making nails or paper cups. Many of the biggest industries in the world are service industries, entertainment, financial services, ICT, and retail are all service industries.

I have many more, but these two points annoy me a lot.
GDP is a measurement of dimension [quantity], not of quality. Actually, from a pure economical perspective also the GDP per capita is partially a measurement of dimension [quantity] and not properly a measurement of quality.

There are countries where richness is very concentrated in limited sectors of the population, so that the GDP can be remarkable and the GDP per capita good ... but a large part of the population can live in poor conditions.

Think to Saudi Arabia as a good example: the Kingdom records a GDP per capita really near to the American one and well better than the French one. But a good part of Saudi population doesn't enjoy the richness coming from oil industry. But it seems it's a taboo in Saudi Arabia to say something about poverty ... [Saudi Arabia Feature: Poverty in A Wealthy Land | EA WorldView].

So, let's use indicators for what they are.

If you use an indicator of quantity [GDP] and you relate it to something else [the population] you will still have an indicator of quantity.
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Old December 7th, 2016, 12:28 AM   #4

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Originally Posted by notgivenaway View Post
it's how people think GDP denotes the wealth of a country
It denotes the output of a country. Output doesn't always relate to wealth but it *is* a statistic that relates to the economy of a country. Those other things you're talking about, standards of education, salaries, infrastructure have nothing to do with "wealth". Salaries in particular do not denote wealth, and certainly not that of countries.
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Old December 7th, 2016, 08:25 AM   #5

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Originally Posted by tomar View Post
First of all GDP makes sense in relation to the population size...Of course a country with a bigger population will tend to have a bigger GDP than a country with a smallish population..... That is why GDP/ capita is used

Second I am not sure that life is better in Sweden than in China... And as for infrastructure China has done awesome things lately... It may well be ahead of Sweden there... Though comparing China to Sweden is meaningless, since China is continent size and has almost twice more people than the whole of Europe while Sweden is 20 times smaller and has less than 10 mio people

This is another misconception btw... To treat countries as if they were all comparable.... Luxembourg and Australia, Malawi and the US, Antigua and Russia, Montenegro and Brazil are simply not comparable

"sustainability" is not an industry.... it is just a practice...

And yes manufacturing is good... You need to make "things".... Services dont exist otherwise, because services exploit those "things" that you need to make..... It was dreadful mistake starting in the 70s to believe that manufacturing was "not good".. That's how Europe and the US low millions of jobs and now are faced with chronic unemployment
Because it's pretty obvious that Sweden is a more wealthier society. GDP alone doesn't and cannot denote that, nor can GDP per capita. It's even economists in the media who say nonsense like that, since it's pretty false.

This depends on the Eropean country. Not everywhere is Spain, and many EU countries now have full employment. Sustainability matters sicne all industry must serve an economic purpose. A country can be well off and have a good economy without having to make things.
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Old December 7th, 2016, 08:25 AM   #6

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Originally Posted by Naomasa298 View Post
It denotes the output of a country. Output doesn't always relate to wealth but it *is* a statistic that relates to the economy of a country. Those other things you're talking about, standards of education, salaries, infrastructure have nothing to do with "wealth". Salaries in particular do not denote wealth, and certainly not that of countries.
I never said that...haha.
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Old December 7th, 2016, 08:39 AM   #7

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Originally Posted by AlpinLuke View Post
GDP is a measurement of dimension [quantity], not of quality. Actually, from a pure economical perspective also the GDP per capita is partially a measurement of dimension [quantity] and not properly a measurement of quality.

There are countries where richness is very concentrated in limited sectors of the population, so that the GDP can be remarkable and the GDP per capita good ... but a large part of the population can live in poor conditions.

Think to Saudi Arabia as a good example: the Kingdom records a GDP per capita really near to the American one and well better than the French one. But a good part of Saudi population doesn't enjoy the richness coming from oil industry. But it seems it's a taboo in Saudi Arabia to say something about poverty ... [Saudi Arabia Feature: Poverty in A Wealthy Land | EA WorldView].

So, let's use indicators for what they are.

If you use an indicator of quantity [GDP] and you relate it to something else [the population] you will still have an indicator of quantity.
GDP per capita is silly too. It's surprising people still refer to it as a metric.
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Old December 7th, 2016, 07:40 PM   #8

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GDP per capita is silly too. It's surprising people still refer to it as a metric.
What metric would you prefer?

All metrics are imprecise and attempt to convey different types of information. GDP is useful on a national level while GDP per capita says something about productive average workers are. Neither statistic says much about wealth or the standard of living of most citizens. Some very wealthy countries have quite many poor while some poor countries still provide relatively high standard of living because costs for most things are quite low.

PPP is maybe a bit more useful to the type of comparison I think you are making but still misses alot.

https://en.wikipedia.org/wiki/List_o...PP)_per_capita
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Old December 7th, 2016, 09:26 PM   #9

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Originally Posted by Ichon View Post
What metric would you prefer?

All metrics are imprecise and attempt to convey different types of information. GDP is useful on a national level while GDP per capita says something about productive average workers are. Neither statistic says much about wealth or the standard of living of most citizens. Some very wealthy countries have quite many poor while some poor countries still provide relatively high standard of living because costs for most things are quite low.

PPP is maybe a bit more useful to the type of comparison I think you are making but still misses alot.

https://en.wikipedia.org/wiki/List_o...PP)_per_capita
When the wealth is concentrated in the hands of a few people, any metrics are largely useless.
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Old December 7th, 2016, 11:36 PM   #10
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PPP is maybe a bit more useful to the type of comparison I think you are making but still misses alot.
PPP is a sham... Its much worse than GDP
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