Ghost of GDP: Sponge, Myth or Moustache Twitching?

Sapovadia, Vrajlal (2019): Ghost of GDP: Sponge, Myth or Moustache Twitching?

Abstract

GDP (Gross Domestic Product) and GDP growth are economic buzz words, widely discussed more in politics rather than economics. Many economists are skeptical and ask a curious question; whether Real GDP is real or ghost? Does a GDP growth number help individuals or government in taking decisions to improve life or economy? Can an economy be judged on strength based on GDP numbers? GDP discussion in politics reminds us of a modern proverb; “There is a lie, damn lie and there is statistics”. In a competitive world, economies attempts to prove superior to others, and in this endeavor they plays with GDP and GDP number like a magician. Does GDP demonstrates real strength or is like mustache twitching? Mustache twitching is symbol of muscular strength, but does it make you win in real fight? We argue that GDP is hollow like sponge. GDP is no less than a myth. GDP can be indicative, but not objective indicator enough to take business or managerial decision. For politician it could be a tool to show case strength like moustache twitching, as they are not going to lose anything except the election. A business can lose many things if it fails to take decision to generate profit. Even if Real GDP growth is real, but no growth in the sector in which company operates, GDP is irrelevant to take a business decision. On the contrary in spite of recession, a company may find business opportunity in product line where there is growth potential. Government executives play with the number to produce GDP numbers to please their political bosses. Therefore, majority of GDP growth estimates are revised downward and real numbers are even lower than revised numbers. There is no standard method to calculate GDP. GDP is not calculated on real basis. It is estimated based on proxies of selected goods and services. There is inherent bias in choice of goods and services to include in GDP calculation. Innovations are brought in new methods to calculate GDP without testing it on reality.

• Item Type: MPRA Paper
• Language: English
• Keywords: GDP, Myths, Reality, Pessimist, Optimist
• Subjects: A - General Economics and Teaching > A1 - General Economics; A - General Economics and Teaching > A1 - General Economics > A10 - General; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A20 - General

References

GDP as a Measure of Economic Well-being, Karen Dynan and Louise Sheiner, 2018

The Factors Affecting Gross Domestic Product (GDP) in Developing Countries: The Case of Tanzania, Alex Reuben Kira, 2013

The Facts of Economic Growth, C.I. Jones, n/a

GDP: Does It Measure Up?, Scott A. Wolla, 2013

https://www.bloomberg.com/

https://www.economist.com/graphic-detail/2018/12/15/gdp-predictions-are-reliable-only-in-the-short-term