If you're teaching Introductory Macro, here's a useful exam question: "Based on your knowledge of how GDP is calculated, is Elon right? Explain (in up to 280 characters)." #TeachEcon
Comments
Log in with your Bluesky account to leave a comment
Justin, I haven't taught baby macro in about 40 years, but in other classes I do teach the difference between an accounting IDENTITY and a behavioral model.
Krugman (paraphrasing Pauli) liked to say that people who don't get the difference between an identity and a model are "not even wrong."
It makes sense if the goal is to manipulate the numbers to get the desired result, not accuracy. The truth holds no value to these people, but a fake world cannot be sustained for long. At least I hope not.
Perfect example of someone who (apparently) thinks the map is the territory. And doesn't know that primary public goods and services are different in their essential nature and purpose from private goods and services. Or maybe he's deliberately using misleading sound bites as propaganda.
I don’t teach macro, and even I know that his calculation is non-sensical because GDP relates to product, not income. I think that’s all I really need to say to catch the essence.
Musk proposes that C+I+NX, omitting government spending, is a true measure of a country’s strength / productivity. This sounds good, but is clearly wrong if you consider health care as an example. Why should medicine count as productive if paid directly rather than through taxes?
(As another economist). Sigh. What has happened to the US? But it is true that many government services are entered on a cost not output basis. Exclusion of subsidies to Musk should also be noted in definition of 'public' & 'private' output.
Plus, having a ton more DMV workers WOULD make our quality of life better, because right now the lines are so long it's a national joke. It'd be great if you walked in and there were so many clerks you could just go up to a free one like at the grocery store.
Elon THINKS that government workers don't do anything useful because he never has to interact with a government agency, he has people who do that sort of thing FOR him. What does he care if his assistants have to stand in line for hours to take care of his paperwork?
I am not an economists, but I am pretty sure that from roughly 2008 - 2015, blogs/twitter, I saw a lot of PhDs imply that a $ spent by the gov't was a $ taken from the private sector and even it was implied that said taking was bad, as the gov't was inherently less efficient
Because government spending is considered an output rather than an input in GDP accounting because, under the expenditure approach, GDP is measured as the sum of all final expenditures in the economy
Merely shifting output from I to G doesn't change GDP, just which component is larger. It may have negative impacts on potential GDP if it lowers productivity, but his contention shifting employment is a way to goose numbers instantly is wrong. The actual big lever governments have is immigration.
I guess an explicitly inflationary policy like printing money and doubling everyone's salary would goose nominal GDP, but the employment shift is incidental in that case.
Finally, in the real world the new DMV workers salaries + value of the service would never fully offset the loss of auto industry output + rise in imports so the net effect of such a scheme would be to reduce GDP. You'd think the fact no country does this would cross his mind.
GDP measures real output and expenditure. Not employment. This statement would only be true if employment (headcount) were exactly identical in car manufacturing and public sector employment with regard to real output and real expenditure. Unlikely
Seems like pushing workers to unproductive purposes would decrease GDP. Yes, in the example, I would decrease (less spent on worker salaries), and G would increase (more spent on worker salaries), but with no cars to buy, overall GDP would decline since C and G couldn't consume cars?
And isn't this also an incorrect statement from Musk because the DMV employees aren't producing a good, which would then influence the I/C/NX portion as well?
I'll admit, I never ever took an economics course, but I was fairly decent at understanding a simple math equation...
Yes, kind of.
As long as:
*DMV work has the same multiplier effect as cars
* the US can export DMV work the same as cars
* there are zero knock on effects to ceasing the final step in the car supply chain
* time stops running forward
We need to remove all government road infrastructure employees and contractor funding and gift those workers and money to car manufacturers to magically increase GDP. #IAmVerySmart
Note Elon’s false assumption that there is no government spending that makes anyone’s life better. Yeah, sure, Medicare, Medicaid and Social Security don’t make anyone’s life better. The National Weather Service doesn’t make anyone’s life better. You get the idea.
The claim is off. GDP measures the market value of all final goods and services—public or private. Excluding government spending doesn’t make GDP “more accurate.” If you shift car builders to the DMV, output falls and so does GDP, reflecting that real loss in production.
"If you shift car builders to the DMV, output falls and so does GDP". Don't get your point. GDP includes public added value, estimated by spent wages in the public sector.
Yes, GDP includes government wages, but the point is that private production, e.g. building cars, adds more: wages plus profit plus capital costs (depreciation).
You could also include the one where Elon asserted that the level of inflation is equal to the federal deficit. SMH. I can’t believe this is where we are.
Elon could, you know, take GDP, done right, and then subtract - I think it's called arithmetic - GS, and arrive at his inaccurate measure of GDP. There is also this thing called economics, and these really smart people have done scientific studies on right sizing government. Requires reading though.
Elon is incorrect. His preferred allocation would be to fire all government workers and to give all money to SpaceX contracts, which would result is fewer goods and services—with one important exception: Musk would be in a spaceship traveling to Mars. The value of that travel might be near infinite.
Comments
Checkmix liberlardo.
Krugman (paraphrasing Pauli) liked to say that people who don't get the difference between an identity and a model are "not even wrong."
so look in the mirror
Are you daft?
Consumer spending (C) + Investment spending (I) + GOVERNMENT SPENDING (G) + Net Exports (NX) = Gross Domestic Product (P)
Musk is the biggest fraud in history.
I'll admit, I never ever took an economics course, but I was fairly decent at understanding a simple math equation...
As long as:
*DMV work has the same multiplier effect as cars
* the US can export DMV work the same as cars
* there are zero knock on effects to ceasing the final step in the car supply chain
* time stops running forward
So … no.
There won't be many billionaires left after that...
A poorly-funded DMV may **technically** function, but it's absolutely awful to deal with.
A properly-staffed one, by comparison, handles large volumes without difficulty.
Of course, Musk never has to deal with such things himself... 🙄
What's my grade?