Not accomplishing anything would be better than what is actually happening. Like with the hole example, once you fill it back up there’s a good chance you can still tell a hole was dug in that place.
What does “BNP” stand for in this context?
Does it raise GDP, though? I would have thought a more accurate thing to say is it raises the global temperature.
Maybe they were using Grok :-)
The only case where digging and filling a hole does not increase GDP is if the labour is not paid for.
EDIT: Basically, the two methods you list are the income or expenditure ways of calculating GDP, but in both cases consumption by employers is a factor, and so the payment for the labour increases the GDP irrespective of whether they also increase the final output.
> the production approach estimates the total value of economic output and deducts the cost of intermediate goods that are consumed in the process (like those of materials and services)[1]
This is a very rough definition of it, but role with it. There is no economic value since the hole was dug only to be filled back in. There was a service paid for on each end of the project, but those are services that could fall into the category of intermediate goods consumed that is actually deducted. The transaction could actually have a negative GDP when using the production calculation approach.
[1] the production approach estimates the total value of economic output and deducts the cost of intermediate goods that are consumed in the process (like those of materials and services)
You can make an argument that if the hypothetical workers are salaried they're not technically paid for any given task, while I'd argue that there was an opportunity cost (they could have done other work than digging/filling it in), so there's some subjectivity to it.
My stance is that if it was done as part of paid work, they were paid to carry out the task as there's at least in aggregate if not per every one individual event an opportunity cost in having them do that work instead of something else, and so part of their consumption was paid for by the labour for those tasks, and hence they affect GDP.
That the output does not add value for the procurer of that labour does not nullify the expenditure on that labour. Whether you're calculating GDP on income or expenditure, those add to GDP either as income for the workers or an expenditure for the employer.
I'm not sold on tying it back to opportunity cost though. That may require knowing the potential value of work that could have been done instead. It also means that we could view GDP as the potential economic value if everything is optimized, regardless of what is actually produced. That feels wrong to me at first glance but I'd have to really dig into it further to have a more clear argument why.
With respect to the opportunity cost, the point is not being able to quantity it, but that whether or not the task is productive, because it takes time, it has a cost.
That blurs the line between the different calculation methods though, doesn't it? If nothing is produced then the production method of calculating wouldn't account for the transaction.
This method would also open the possibility for fraud. If the government wanted to boost GDP, for example, they could hire a bunch of people to dig a whole and fill it in all year. Would they? Probably not, they have easier ways to waste money and game GDP. But they could and that seems like a problem.
> because it takes time, it has a cost.
I don't know of any economic metrics that quantify the cost of time like this though. People like to point to unpaid labor as a huge blindspot for GDP precisely because of that - when your day is spent taking care of your home, children, or elderly parents the time is spent but GDP isn't impacted.
The method used to calculate the investment can affect whether the income produced increase the GDP or whether only the consumption generated by that increased income is counted, but in a real-world scenario either alternative will increase the GDP.
> But perhaps you are implying GDP is not correctly calculated?
That GDP doesn't accurately reflect productive, useful effort for this reason has been a core part of the criticism of GDP since it was first formulated.