| | Steve, I'm agree with most everything in your post #3 -- sanction. Obviously, if the government GDP numbers are fake, and the government is destroying wealth and making people poorer, then eventually, over the long term, even those fake GDP numbers will drop -- unless they are tweaked and redefined again and again to distort what is actually going on, in an effort to satisfy political goals.
You are right that the biggest cheat for the GDP numbers is the government spending category, but there are other ways that the GDP numbers are divorced from reality. One of the bigger additional problems:
Economic value is necessarily subjective and can't really be captured with great precision by statistics trying to measure objective numbers.
For example, a few days ago I bought a loaded 2007 Toyota Avalon from a private party. The seller was dissatisfied with the car because she lives in an insanely crowded urban part of Honolulu where a big car like that is hard to drive and park, and because she is used to driving fancy cars like Mercedes.
I'm really happy with the car, though, because I live in suburbia where ample parking and light traffic makes a big car more practical, and because it is a huge upgrade to the battered 12 year old Camry I've been driving. Thus, a great deal of value was created by transferring this car to a different owner, even though the car itself remains unchanged.
But, the government statistics don't capture any of that increase in value at all. The addition to GDP, in the eyes of the government, is the cost of the salaries of the government workers who charged me some fees related to the paperwork they required to record the transaction, plus the cost of the gasoline I bought to drive to the government office, even though these activities DESTROYED value as I subjectively experience it due to the waste of my time and the cost of driving to the office and the aggravation of dealing with a unionized government employee.
I could go on all day giving examples of the fundamental disconnect between GDP numbers versus actual value created or destroyed.
Basically, GDP is such an unreliable and inaccurate measure of anything meaningful and real that I personally ignore it and concentrate on other numbers if I want to determine what I think is going on in an economy.
One minor quibble: You said, "Slave labor isn't employment." Well, actually it is employment, albeit an immoral and inefficient form of employment that destroys productive potential and violates rights.
When the government temporarily enslaves me by forcing me, under the threat of fines or imprisonment, to fill out tax forms or serve on a jury or drive to the DMV to register a car and pay fees on it or, until recently, serve in the military as a conscript (thankfully that finally ended!), that is employment (though not all such forced labor is counted in government statistics of employment).
(Edited by Jim Henshaw on 9/30, 12:14pm)
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"And when we’re experiencing depression economics ... this is a situation in which virtue becomes vice and prudence is folly; what we need above all is for someone to spend more, even if the spending isn’t particularly wise ... public spending on the scale needed never seems to happen ... and what actually ended up doing the trick [for ending the Great Depression] was spending that was beyond pointless, it was actually destructive – a sort of cruel joke on the part of the gods of economics. The point is that it would have been much better if the Depression had been ended with massive spending on useful things, on roads and railroads and schools and parks. But the political consensus for spending on a sufficient scale never materialized; we needed Hitler and Hirohito instead."
