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Kool-Aid and GDP: The Delusion of Economic Activity
Posted on July 03, 2009
We continually confuse Gross Domestic Product - GDP - with the economy. GDP simply does not measure all the elements. GDP is the total market value of all final goods and services produced in a country in a given year. If an item is imported into the USA, it is subtracted from GDP. This is correct if you are trying to measure the production inside a country, but incorrect if you are measuring economic activity. Simply adding imports (instead of subtracting) inside of GDP, we can get a better feel of what our Great Recession has done to the economy. In 1Q2009, the economy was falli...
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