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Sunday, July 15, 2012

What Is GDP?

William and I replaced 16 feet of our side fence the other day. It was hard work. I am still sore.
But the soreness feels good after a job well done.
I estimate the value of our labor to have been $500.
But that value will not be included in GDP. GDP only measures the money economy.
It does not measure all the good done by people for themselves.
If I pay someone to cook my dinner it is part of GDP. If I cook my own dinner it is not part of GDP.

For us there is another bonus of value in that we did not have to pay taxes, income taxes, on our labor.
When you pay anyone for a job the tax collector wants a cut.
They have not yet figured out how to tax you for making your bed, or mowing your own lawn,
or cutting your own hair.

Imagine an economy of volunteers and people doing their own work for themselves and GDP would be zero.

What would the tax collector do?


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