"GDP is more of a measure of economic activity than value". I think this a very good intuition.
As I understand it, a main source of confusion in discussions like this stems from mixing up the notion of "value" as (A) price*quantity=revenue and (B) the difference between the consumer's willingness to pay and the price.
"A" is what counts towards GDP -- mostly for practical reasons, since prices and quantities are, at least theoretically, are straightforward to measure on a national level. However, this definition goes against the intuition of lots of people,... (read more)
I've heard that minivans replaced large station wagons largely because station wagons counted as cars for purposes of fuel economy laws (which mandated that cars sold by a manufacturer achieve a "fleet average" of a certain number of miles per gallon) and minivans didn't.
"GDP is more of a measure of economic activity than value". I think this a very good intuition.
As I understand it, a main source of confusion in discussions like this stems from mixing up the notion of "value" as (A) price*quantity=revenue and (B) the difference between the consumer's willingness to pay and the price.
"A" is what counts towards GDP -- mostly for practical reasons, since prices and quantities are, at least theoretically, are straightforward to measure on a national level. However, this definition goes against the intuition of lots of people,... (read more)