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That's a great post, thanks for bringing it up again.

I have two observations: one is that under exponential growth, wealth, GDP and GDP growth become interchangeable, as the rate of GDP growth squals the ratio of GDP to wealth.

The second observation is that DoDo above is forgetting that we're talking about rates so that if the same amount of money can be pushed around faster then GDP will increase.

(source) Appart form money supply and inflation, the velocity of money is the third factor in GDP.

So maybe all that's happening with global GDP growth is that the economy is accelerating. The problem is that thermodynamic cycles become more and more inefficient the faster they are operated, and that these inefficiencies are not properly accounted in economics.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Thu Jun 29th, 2006 at 09:04:00 AM EST
[ Parent ]
Good point, I knew it was something obvious I missed...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jun 29th, 2006 at 09:20:29 AM EST
[ Parent ]
Well said.  The real question is whether that acceleration is the result of increased ability to buy -- from (say) higher productivity and the resulting lower (real) prices -- or simply shifting one's buying habits from one period to another, as in the case of higher borrowing due to low interest rates, which we, of course, talk about quite often here with regard to the current state of the US economy.  That's what I think we're really getting at, or at least what we should be getting at, in discussions on the health of the economy.

That's not to say that borrowing on low rates is necessarily bad.  Managed properly, it can be perfectly intelligent to take advantage of that situation.  It can also, of course, become a catastrophic mistake.  That's all according to how people behave.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 29th, 2006 at 03:16:52 PM EST
[ Parent ]

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