I know that GDP is bad number. It is really the total spending of the country including government... as if spending is an indicator of economic growth.
So, I wonder what would be optimal.
I thought about two measures. one - standart of living - average income/basket of products (how much you earn, relates to what you can buy with it. but of course, something reliable, not the government false figures, and something simple)
two - total savings, and production. total savings - understood.
total production ->
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In my opinion, the way to calculate a production, is to add the total salaries plus companies profits (before tax and further investment), since they indicate a valuable work that the market appreciates.
Moreover, the difference between the value it cost the market to produce the product (resources used) and the market value (sell price), are indicating the exact amount of value that produced, that express itself in profits (real value produced).
So the "production formula" is:
Total salaries + companies/businesses profits - companies/businesses losses + investment gains -> which are not "on the paper capital gain" (only dividends, rents collected, etc)
-
Government spending/government budget.
What do you think? any better ideas?
Total private investment.
Investment signals that entrepreneurs are seeing profit opportunities from increasing the capital stock. More investment, better future production.
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What about the many people who invest with total ignorance? Should their movements decide if we are in good shape?
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There are no "measures". More like indicators.
yes. especially the ones who, despite their ignorance, still invest successfully.
i don't know if it's the best measure, but the degree of statism in a given situation is my measure. the less, the better.
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demosthenes: yes. especially the ones who, despite their ignorance, still invest successfully. I'm not sure we are talking about the same thing. As I understood the previous poster, he is saying that if more people are investing, that means we are in good shape. I pointed out maybe they are investing for foolish reasons, so their irrational decision to invest should not be considered indicative of a sound economy. If I understand you correctly, you are pointing out that many of these current investors may get lucky and strike it rich. Hey if people are getting richer, that's a good indicator right there of the state of the economy. But we don't know now if these guys will get rich in the future. All we know is that today they have decided to invest. To which I say, that may prove that people are hoping to make money, but it doesn't prove they will. As an extreme example, if every last man woman and child in the USA invested their shirts in a company promising to invent something that travels faster than light [an impossibility], will that indicate we are in good economic shape? I'd say we are headed for a disaster in that case. i don't know if it's the best measure, but the degree of statism in a given situation is my measure. the less, the better. Now that sounds real solid. May I suggest that the degree of statism would give negative points to the measure of the economy's state? Of course what gives it positive numbers is yet to be determined. For instance, I hear Hong Kong has very little statism, and of course Robinson Crusoe suffers from no statism whatsoever. But Hong Kong is clearly in better economic shape than he is. He sleeps on the ground shivering from cold, they watch TV in a warm house munching on nachos. I got the impression from reading here a bit that the amount and value of stuff lying around in a country, the amount of TV sets physically in the country etc, is a measure of it's economic shape. Statist interference is accounted for because their greedy fumbling has stopped even more stuff from being made.
I'm not sure we are talking about the same thing. As I understood the previous poster, he is saying that if more people are investing, that means we are in good shape. I pointed out maybe they are investing for foolish reasons, so their irrational decision to invest should not be considered indicative of a sound economy.
If I understand you correctly, you are pointing out that many of these current investors may get lucky and strike it rich. Hey if people are getting richer, that's a good indicator right there of the state of the economy. But we don't know now if these guys will get rich in the future. All we know is that today they have decided to invest. To which I say, that may prove that people are hoping to make money, but it doesn't prove they will.
As an extreme example, if every last man woman and child in the USA invested their shirts in a company promising to invent something that travels faster than light [an impossibility], will that indicate we are in good economic shape? I'd say we are headed for a disaster in that case.
Now that sounds real solid. May I suggest that the degree of statism would give negative points to the measure of the economy's state? Of course what gives it positive numbers is yet to be determined. For instance, I hear Hong Kong has very little statism, and of course Robinson Crusoe suffers from no statism whatsoever. But Hong Kong is clearly in better economic shape than he is. He sleeps on the ground shivering from cold, they watch TV in a warm house munching on nachos.
I got the impression from reading here a bit that the amount and value of stuff lying around in a country, the amount of TV sets physically in the country etc, is a measure of it's economic shape. Statist interference is accounted for because their greedy fumbling has stopped even more stuff from being made.
so basically:
total capital - state intervention = accurate economic indicators
and
ignorant investments in fiat currency based economy /= accurate economic indicators?
Smiling Dave: demosthenes: I pointed out maybe they are investing for foolish reasons, so their irrational decision to invest should not be considered indicative of a sound economy.
demosthenes: I pointed out maybe they are investing for foolish reasons, so their irrational decision to invest should not be considered indicative of a sound economy.
I pointed out maybe they are investing for foolish reasons, so their irrational decision to invest should not be considered indicative of a sound economy.
hmm... i don't think mises would approve of your use of "irrational." see human action, or chapter 1 of man, economy, and state for rothbard's disapproval.
uhayile: hmm... i don't think mises would approve of your use of "irrational." see human action, or chapter 1 of man, economy, and state for rothbard's disapproval.
As luck would have it, here is a Rothbard quote from http://mises.org/rothbard/extreme.pdf :
First, it must be emphasized that whatever role “rationality” may playin Professor Machlup’s theory, it plays no role whatever for ProfessorMises. Hutchison charges that Mises claims “all economic action was (ormust be) rational.“ This is flatly incorrect. Mises assumes nothing whateverabout the rationality of human action (in fact, Mises does not use the conceptat all). He assumes nothing about the wisdom of man’s ends or about thecorrectness of his means. He “assumes” only that men act, that is, that theyhave some ends, and use some means to try to attain them. This is Mises’sFundamental Axiom, and it is this axiom that gives the whole praxeologicalstructure of economic theory built upon it its absolute and apodicticcertainty.
demosthenes: so basically: total capital - state intervention = accurate economic indicators and ignorant investments in fiat currency based economy /= accurate economic indicators?
I think the OP knows way more about it than me. Didn't mean to get off on a tangent.
Using number of items owned as an indicator in comparisons still assumes similar values across the board. GDP is always better for comparisonthan things like that because you can at least compare incomes.
You mean "basket of products"? I mean... standart of living is a MUST in measuring (ok... you can't exactly measure... this is not mathematics... but get as close as you can) economic health.
So how are you going to measure that? you have to use a basket that will be your "buying power" measure. no way around.
Besides, if you have any better ideas on how to do the whole thing, I'd be glad to hear.
I don't think GDP is a good number. for example, what if americans have no savings, they borrow a lot, and consume a lot? and what if the government spends a lot? the GDP will skyrocket, as it goes in U.S. today (sounds like a newpaper).
Well, that doesn't really say a lot about the economy.Look what had happened in U.S. in the last years - that because of the artificial low interest rate, they were many "investors" in . In fact, in any assets boom, there are a lot of investments.
By the way... I've not studied in the institude itself. What people like Mises and Rothbard are saying? (said)
Where can one find the figures for total private investment in a country? And where can one find a kind of "Austrian" analysis, or index of state intervention in the economy? The Index of Economic Freedom is one measure, but it is deeply flawed, as Stefan Karlsson showed.
I think Hong Kong or Singapore is the way to go.
alright people, stand back, im going to hit y'all with the goods.
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Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring