Comment by rahimnathwani | Hacker News Reader

Comment by rahimnathwani | Hacker News Reader

Parent Full thread

You talk mainly about consumption, but GDP (the subject of this article) is a measure of production (gross domestic PRODUCT) not of consumption.

Sure, these things are related, but the article is correct to point out things like exports and capital investment.

If the US were producing more, even if all of the additional product were to be exported, GDP would be higher.

Any problem with GDP (or growth in GDP) is related to value-creating economic activity.

Yes, if the government were to spend (invest?) money in public works, GDP would rise, regardless of the output of the works. There would be secondary effects, too, as some of the money earned would be spent on locally-produced goods/services like lattes and haircuts.

Japan tried this: http://mobile.nytimes.com/2009/02/06/world/asia/06japan.html

The point is that production is a derivative of consumption. Consumption doesn't adapt to production. So, if you want production to rise, you have to work on the consumption side of things.

That is something economists have major disagreements about. Classical economists (see Say's law) would argue that the production of a product creates the market/demand for it.

Yea and that makes sense for products that are actual necessities. It is bullshit if applied to an arbitrary "product".

That's obviously false as plenty of goods are never sold but destroyed instead because nobody wanted them. Production follows demand, any businessman will tell you. Maybe if a few economists actually learned about business we wouldn't have so many recessions.

It's an interesting debate, and the position I find convincing is that Say's law usually holds... except (rarely) when it does not, such as in the recent financial crisis. Believing that it always holds automatically is a fallacy of Classical economics.

It's interesting that Jean-Baptiste Say himself was willing to learn from history.

http://delong.typepad.com/sdj/2010/07/after-the-british-fina...

A rise in production doesn't have to coincide with a rise in consumption. The additional production could be driven by increases in investment or in net exports.

Reply on news.ycombinator.com