Hacker News Reader

Comment by B-Con | Hacker News Reader

GDP is a known silly metric, but it's easy to define and measure, so we keep using it.

I'm often reminded of the quote: "A man marries his housekeeper and that country’s GDP falls".

GDP is uncomfortably linked to granularity of measurement as well as the number of times money changes hands to accomplish a task. Split a pipeline over more businesses boundaries and suddenly GDP is "bigger" despite no change in value or utility.

View on HN

GDP is not a silly metric, it measures economic activity that the government can tax; which is what matters to governments at the end of the day.

That's not true; it also measures government spending (e.g. on building infrastructure), which cannot be taxed because it makes no sense for the government to tax its own spending. Gross Private Product is the GDP equivalent that only includes taxable (private) activity.

I am pretty sure government spending is taxed in most countries. Both companies and employees pay taxes. Maybe you meant government revenue? (but then that’s the tax itself!)

Yep, government employees still pay income tax, and government contractors pay taxes on profits.

Some government spending is immune to some taxes which would otherwise be paid on similar private transactions (which taxes and transactions this applies to are different in different jurisdictions.)

Unless you have a transaction tax, this isn't really so. As a contrived example, company A buys thing from company B and sells it to company C, who sells it to company B, all at the same price. There's no profit anywhere in this system (so no tax), but there is economic activity (so, GDP).

Many countries charge a flat x% on revenue (not profit). There is also sales tax (VAT) which has to be eventually paid off by the final consumer. There also other taxes derived from the activity (real estate, employees, etc.). So hardly any company can "operate" without paying any taxes.

Corporate income tax is usually a small slice of the overall taxation of a country.

What GDP measures (and what I meant) is the visible part of the economy that the government has knowledge of; and therefore can (not necessarily do) tax.

In France they count illegal drug trafficking and illegal prostitution in the GDP, I doubt these are taxed...

Wouldn't those 2 things affect GDP exactly because it doesn't get taxed and a lot (presumably) of money goes into it? If the drug trade gets 100 euros, that's 100 euros that isn't going to a legitimate business or person that will pay taxes on that 100 euros.

Reply on news.ycombinator.com