GOOD AND BAD GDP

DOES MURDER FOR HIRE BELONG IN THE GDP?

Absurd, but some criminal activity is counted in GDP. For example, extortion through private security services. Marijuana is criminalized in many countries, but somewhere it is a significant factor in GDP growth.

So obviously there is good and bad GDP, like good and bad cholesterol. Today, perhaps such a division makes no practical sense. But national tax policy shows otherwise. Some goods and services are taxed more, some less. But there is no professional classification of goods and services that reflects their contribution to society.

Such a classification will be necessary in the near future. It will be forced by the expected scarcity of resources. Society will be faced with the challenge of how to distribute resources fairly. Underestimation of this situation may trigger massive social protests and the rise of extremist politicians. The first signs can already be seen for a few years.

Economists must provide politicians with the tools to make the right decisions. It must be clear which industries to tax heavily and, conversely, which industries to shift government investment to. The question will not just be the social benefits or negative impacts of individual productions. Focusing on resource consumption will also be important.

The first criterion must be the amount of money spent by society to mitigate the impacts of the activities of firms or industries.

Thus, cigarettes can be counted among bad GDP - society finances the treatment of diseases caused by smoking. Also alcohol. Fossil fuels cause warming, so society has to spend money to mitigate the effects of warming. Car manufacturing causes casualties and injuries in accidents. Sugar causes obesity and other diseases that need to be treated. Perhaps even more harmful are sugar substitutes. And so on. These costs are not recognised by GDP. It is even the opposite today. If we promote smoking, GDP will be positively affected, because it will include not only cigarette consumption but also the increased costs of treatment. Does society need to be misled in this way?

And then there is the question of resources.

Is the construction of housing good for GDP? On the face of it, yes, but what about flats that are investment and no one occupies them? That is clearly bad GDP. Growing biofuels. It used to be considered a good GDP, unless its profitability displaced other crops that are now missing. How about home swimming pools? Surprisingly, in a drought, this is clearly bad GDP.

Here the criterion will be the share of scarce resources in the production cost of the product. First, scarce resources must be defined. Surely it will be land, water, minerals. Thus, the bad GDP will not include the whole product, but only a percentage of it.

We must not forget consumption. The product may not consume scarce resources, but the use of the product requires these resources. This is an example of a swimming pool. Here, the average lifetime of the product, its use and the consumption of scarce resources - water and energy for heating - will be taken into account. And the numbers can be many times higher than its price. This value will also have to be reflected in the bad GDP.

And then there is resource use. For example, housing. Products produced but not used will also affect bad GDP. They may not use scarce resources, but other resources have been expended quite unnecessarily and to no effect, and those resources will have to be included in bad GDP. Of course, also as a ratio of time not used versus the average life of the product.

It will be necessary to calculate resource consumption in each sector very objectively and carefully and to update it regularly.

The division of GDP into good and bad can be a stimulus for economic research. It will be very interesting to compare the ratio of good to bad GDP in different countries. Let us be surprised what all the research will yield.

belgof.com

UNCONDITIONAL INCOME - THE ONLY WAY TO INTRODUCE IT

NEW ECONOMY - more...