Have to admit, I didn\’t know this:
For example, while GDP is supposed to measure the value of output of goods and services, in one key sector – government – we typically have no way of doing it, so we often measure the output simply by the inputs. If government spends more – even if inefficiently – output goes up. In the last 60 years, the share of government output in GDP has increased from 21.4% to 38.6% in the US, from 27.6% to 52.7% in France, from 34.2% to 47.6% in the UK, and from 30.4% to 44.0% in Germany. So what was a relatively minor problem has now become a major one.
This does put something of a dent in the Keynesian prescription of course.
For we\’ve no way of measuring then whether government spending does indeed increase GDP, for we\’re simply assuming that higher government spending does increase GDP.
That is a Nobel Prize winner in economics writing there too, so we\’ve at least got to take the idea seriously (even if not immediately assume that it is true: wrthy of study necessarily, but not necessarily true perhaps).
In fact, buried in that (\”even if inefficiently\”), the methods we use to calculate GDP say that even if government spending is making us poorer (which spending less efficient than private sector spending of the same cash would be) then we record it as making us richer.
It\’s going to be interesting what they say about new methods of measuring true growth and increases in wealth, isn\’t it?