What GDP Says About the Economy | WSJ

Economists say the U.S. would be better off if the country's GDP rose at a 3% rate or more each year, rather than the 2% rate it has been growing at for a while. WSJ explains what GDP is, and why economists are so fixated on its growth. Illustration: Stephanie Swart/The Wall Street Journal

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[TheLeester]

Not an odd way at all, you've literally described the common method.... Attention grabbing headline.

[dantetabaku]

I hate to break it to you guys but this is the way every nation in the world calculates its GDP. What you have explained are some of the basics of macroeconomics. We need good reporting not good click baits!

[RumbleRish]

Why does it matter that GDP doesn’t measure happiness or air quality? I thought GDP was supposed to measure productivity... we have other ways to measure happiness and air quality.

[frank]

So why is it odd? This is literally ECON 101 in most colleges...

[yyyyyyyyyyyy]

Misleading headline. You've lost 1 point of trust from me WSJ news.

[aboucard]

This is what you learn in college macro economics 101

[americanexpat]

This video describes the way GDP is calculated as one would learn in a traditional macroeconomics class. GDP is deeply flawed, and often misleading, but not from what is stated in this video.

Take medical care. In the US, a typical colonoscopy costs about $5K, whereas in Europe the same procedure is roughly $1, 000. Exact same test, but the US gets credit for 4 times as much economic activity. Crazy. If one extends that to all US medical care, the best estimates are that about $1 trillion is wasted due to the obesity epidemic and our grossly inefficient health care delivery system. That means that about 5% of total US GDP is largely inconsequential.

GDP is also flawed in that it equates consumption on the same scale as business investment. So, $1 million spent eating out is equivalent to $1 million for advanced materials research. It doesn’t take a genius to figure out which will lead to more long-term activity.

In addition, many financial transactions that are super inefficient are included in that $21 trillion total. High frequency trading doesn’t generate any real economic value, yet it gets included in various ways in the ultimate total.

There’s no easy way to distill the health of an economy down to one number and it’s ludicrous to try and do so. I would prefer alternative measures that track the market share of various important industries and market share projections into the future based on current investments (I know that the future aspect is largely subjective) as a better gauge of a country’s economic activity vis a vis its competitors.

If done this way it would clearly explain East Asia's rise over the past generation when looking back at the data and predict where we are likely to be in the future. In addition, it would show why the German economy is stronger than its GDP would lead one to believe.

If market share proves too difficult, maybe just tracking business investment, distilled into its various subcomponents, would be a better gauge of economic activity than GDP. At the end of the day, where business or government is currently investing is where you are going in the future.

[empemitheos]

people hate on the GDP metric too much, it's a pretty well tested and used statistic, and a very important one, the way people use it to make decisions is what we should be complaining about, if anything

[newmanj]

That's how pretty much every other country calculates GDP, it's not odd at all. GDP is merely a proxy measure of output; there's no feasible way of directly measuring output that doesn't take into account consumption, investment and govt. spending

[tylerellis]

Andrew Yang covers this pretty extensively, it's worth looking into. We need to improve our capitalistic system

[Matt]

practically skips over the real and nominal gdp differences. C’mon wsj. This isn’t a “for dummies” book.

[samuraijack]

WSJ has become a relic of journalism. Surviving solely on the reputation it built over decades but has been eroded immensely in the last 3-4 yrs.

[eml]

@WSJ: GDP is not produce by statisticians in BEA, those numbers are generate by economists. Please say the correct job title, statisticians in BEA are nearly worthless.

[vedantkale]

So GDP is not the revenue of the country as other people say but what the nation actually spends. The name itself actually does not say anything about what it means.

[stGruhn]

How is that odd? Its more honest than China's way of calculating GDP. How would you calculate GDP in a way that isn't "odd"?

[Bodybuildingleague]

Why does the WSJ call economists statisticians? The specific field is also called econometrics

[rahilchakraborty]

Im literally learning this method in AP Macro Econ in high school... Theres nothing odd about this WSJ

[iFreeThink]

"I represent Finance with Starbucks land, Stitch."

[curtiscarpenter]

The British economy has grown 2.5 percent since 1945. Fact. It is what has changed contributing to that growth that counts.

[kunalplaysgames]

Error: 0:30 There are two "1990" instead of "1990" and "1995" on the x axis of the graph