A Small Change

Gross Domestic Product (GDP) is defined in an economics textbook as:

“A measure of the value of all the goods and services newly produced in an economy during a specified period of time” John Taylor, 2007, Economics. Fifth Edition, Houghton Mifflin, New York.

The small change, see if you notice it.

“A measure of the price of all the goods and services newly produced in an economy during a specified period of time” John Taylor, 2007, Economics. Fifth Edition, Houghton Mifflin, New York.

The best way to tell what something is is how it is measured.  GDP is measured by adding the prices of all goods and services.  It is in fact the total price.   GDP measures the price of what we produce, not its value.  Don’t let anyone tell you it represents value.  That is one of the misconceptions we are having to deal with these days.

The U.S. Gross Domestic Price this year is $14,000,000,000,000.  That is a huge price we are paying.  When we think it means value, it sounds great to want it to grow.  We hear people on TV saying we need to increase GDP.  That is the last thing we should want.  $14 trillion produced in one year!  That has to be enough,  It’s not the size of GDP that we need to focus on; it is the content of what we are producing.  What is included in that $14 trillion?  That’s what I would like to know.