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Comment by jhoechtl | Hacker News Reader

Gettin somewhat astray from the original intention of the arcticle:

Macroeconomics still proclaims the BIP as the ultima ratio to measure economic performance. The BIP has been invented in times of extremely dire social and economic conditions, where deficit spending has been considered as the last resort to prevent a nation from collapsing. It proved to be a meaningful number during and after WWII where living on credit was somewhat necessary.

BIP measures growth and favors deficit. But we know that unbounded growth is neither healthy nor possible. I think the biggest problem is that we still try to shoehorn every economy into this single number, while it would make more sense to switch to another measure, depending on the operational mode a country/economic region/social system is operating in.

Maybe change operational economic mode according to the https://en.wikipedia.org/wiki/Kondratiev_wave ?

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>BIP measures growth and favors deficit. But we know that unbounded growth is neither healthy nor possible.

GDP growth doesn't mean using more resources. If I find a way to cut hair twice as fast, that's GDP growth. If somebody makes a CPU that's faster and consumes less energy, that's GDP growth. If someone finds a way to distribute parcels more efficiently via a better heuristic for the travelling salesman problem, that's GDP growth.

GDP growth is only bounded if there's a hard limit on the amount of useful ideas people can have, and I think even if such a limit exists, we're extremely far away from reaching it.

GDP measures sale prices.

> If I find a way to cut hair twice as fast, that's GDP growth.

Only it makes people get more haircuts or their is a labor shortage you get a second job.

> If somebody makes a CPU that's faster and consumes less energy, that's GDP growth

Only if it inspires more CPU purchase or usage that costs more energy use overall.

>Only it makes people get more haircuts or their is a labor shortage you get a second job.

There are things that are productive that aren't jobs. You having more time to read HN probably has some productive value, because it teaches you things. It doesn't directly translate to an increase in GDP immediately, but it does do that over time. The hair dresser might end up learning new things during that free time, which would eventually lead to an increase in GDP.

>Only if it inspires more CPU purchase or usage that costs more energy use overall.

Or we get to use the same amount of energy to do more computation. There's a lot of things that can eat up more computation.

>But we know that unbounded growth is neither healthy nor possible.

Why is it unhealthy? From where I'm standing, this growth better be essentially unbounded for our purposes. This value's growth represents the advancement of our technology and society. If it stops growing then it indicates that we have stopped advancing.

I think this growth, for practical purposes, is unbounded. Even if we somehow hit a wall and are unable to advance our technology itself, we can start harnessing the resources in our solar system and engineer more complex systems to take care of our needs. The resources in our solar system might as well be infinite compared to what humanity uses so far.

To put it into perspective what a lack of growth means: 80-90% of all scientists are alive today. Before the industrial revolution, the estimated GDP per capita (PPP) doubled in 1500 years. That is to say, the average person in the area of Denmark in the year 100 AD could buy about 1-2 cups of 1990s coffee for their day's worth of labor, while the average person in the area of Denmark 1600 AD could buy about 2-4 cups of 1990s coffee for their day's worth of labor.[0] That is to say, life for the average person didn't improve much over the centuries. To compare this to the modern world (post industrial revolution): Denmark's GDP per capita PPP doubled from 1999 to 2018 - less than 20 years. The average Dane today could afford 80 cups of that 1990s coffee for a day's labor.

This "unbounded growth" is fundamental to our modern society.

[0] https://en.m.wikipedia.org/wiki/List_of_regions_by_past_GDP_...

> >But we know that unbounded growth is neither healthy nor possible.

> Why is it unhealthy?

Assuming unbounded growth with bounded resources?

I think the issue with the GDP is that it's kind of a jack of all trades, master of none. It has a lot of uses, none of which it excels at. Those who would replace it only consider one use of it. And furthermore they try often to shoehorn their politics into the replacement.

A few uses of the gdp: How well are the people doing? How much slack is there in the economy - if we wanted to focus on essentials how much luxury productions could be changed into necessities production? How much trade power do we have - if we want to import something, do we have anything desirable to export in return? Maybe there are more.

I prefer 4 good numbers over 1 bad number.

Oh certainly, I agree that is the best approach.

Yes, economists should put production front and center. What is being produced by economy? How effectively and how robustly? What is not just the production output, but also capacity? What are the risks to the supply chains? What commodities are more important than others from the risk perspective?

For example, see Steve Keen talking a bit about this: https://www.youtube.com/watch?v=HE-44ngyYoA

Not an economist, but I think the challenge with that is the assumption that we can rationalize those decisions ex-ante whereas the beauty of capitalism (!) is it's emergent ability to rationalize capital allocation and production organically, which we can only observe ex-post. Which is not to say we can't nudge it here and there...

BIP?

Probably 'Bruttoinlandsprodukt', German for GDP.

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