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by a_thro_away
3521 days ago
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Thanks you for the reply. Your rigid definition of GDP is only one of many models. GDP(I) and GDP are similar and should be exact but because of statistical and measurement defects, they are not. But GDP(I) does in fact use taxes. I understand (grossly) that to make GDP(I) == GDP, you add taxes to GDP. Regardless, GDP can be modeled in several ways according to the US Bureau of Economic Analysis. If a government decides to not tax air, no economic activity. If they do, and a company sells you taxable air, there is economic activity. In the former case, it no money is required. In the latter, it generates economic activity, activity that cannot be swept under the rug and must be measured. It does matter, gov vs private industry. |
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GDP can be measured in several ways. In a perfectly observable system, all the measurements would be exactly equal. They are not different models and they do not represent different underlying concepts. It is wrong to say that taxes are included in one measurement of GDP and not the other. In some methods, they are measured directly, and in others, they are measured indirectly. In both cases, taxes have the same effect.
> If a government decides to not tax air, no economic activity. If they do, and a company sells you taxable air, there is economic activity. In the former case, it no money is required. In the latter, it generates economic activity, activity that cannot be swept under the rug and must be measured.
Your usage of "economic activity" isn't really well-defined. But the difference between the two situations you're describing is that, in one, air is free, and in the other, air is being sold. The fact that it's being taxed on top of the sale is irrelevant.
This is also a really pointless example because air is mostly a non-excludable resource, so talking about either "selling" it or "taxing" doesn't reveal anything meaningful.
> It does matter, gov vs private industry.
No, it does not. Taxation doesn't come from nowhere. From a macroeconomics perspective, the government isn't "special".
Let me try one last time: Remember when I said that GDP = consumption + investment + government expenditures + net exports? Some economists would instead say that GDP is really "just" consumption + investment + net exports. And guess what? Regardless of which school of thought you subscribe to, the end result is exactly the same. It doesn't matter whether you break out government expenditures separately from consumption, investment, and net exports or whether you include government consumption in "consumption", government investment in "investment" and so on. The end result is exactly the same.