Comment by invaliduser
10 years ago
Increasing the GDP is easy. First, pay me 50$ to dig a hole. Then I pay you 50$ to fill the very same hole. We created nothing but the GDP increased by 100$ (well, tax aside).
original source of this example: https://ploum.net/largent-doit-il-etre-notre-seul-objectif/ (in french, but interesting essay)
Yeah, try that in scale for a few years and watch the economy collapse under runaway inflation.
You're missing the point. The point is that GDP increases don't necessarily mean productive work is being done.
Not on the short term no, but when you scale it on the long term it evens out and artificial increases like Keynesian style economics are temporary and GDP is in fact a good indicator of productivity.
The original argument was that GDP would decrease if we had less people producing, the counter argument seems "we could make GDP artificially increase" presumably as a way to suggest that GDP isn't meaningful. That's not a very good argument because artificial GDP inflation is a temporary solution that has devastating results down the line
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Probably not, actually, but to recognize that you have to go into the details of how inflation works.
Briefly, the only possible reason why there would be inflation is that the people given money for digging and filling holes now have more income that they can spend, so they increase demand for products. If this raises the price of products (and yes, that's an if), it will also mean that companies will have more money and an incentive to hire new people so that they can meet the increased demand. Some of those people will come from the digging-and-filling-holes program. It's a self-stabilizing feedback loop.
Obviously there are more subtleties, e.g. when a lot of domestic consumption is from imports. But even then, you wouldn't get runaway inflation. In the extreme case, currency markets would adjust up to the point where it becomes profitable to increase domestic production, and you'd get self-stabilization in that way. And increased domestic production in itself would be seen as a good thing by many people.
There is no such thing as "more money than you can spend" basic human nature. The issue is "more money in the system than the system is producing". And that's exactly what the digging holes and filling it system is about. . . it's actually an example that Keynes himself thought up to describe his theory of how to get out of the depression. And as great a man as Keynes was, unfortunately he was wrong because he didn't have the benefit of research into monetary policy. It'll be the same thing as if you printed a whole wackload of money and set it loose in the system.
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