Wow. The response to this blog—in comments, in email, and in mentions around the web—has been huge and overwhelmingly positive. I am particularly struck by the many thoughtful (and thought-provoking) comments from attentive readers. We’re only two days into this and I’ve learned a lot already. Thank you.
I’m taking the weekend off, but I’ll be back on Monday to amuse, enlighten, provoke and continue to learn. In the meantime, for your amusement, I present this letter to the editor from the estimable organizer of Freedomfest, correcting a possible Freudian slip at the New York Times:
The New York Times report (“Economy Grew 3.5% in Quarter: Worries Linger,” October 30, 2009, p. A1) by Catherine Rampell contains three errors in her definition of Gross Domestic Product (GDP). In the article, she defines GDP as “the broadest measure of the government’s total goods and services produced.”
First, GDP does not measure “total” goods and services produced in a year, but only the value of “final” output. It deliberately nets out all intermediate production in the earlier stages of production.
Second, it is not the “broadest” measure of national output. The Bureau of Economic Analysis at the US Commerce Department also releases annual Gross Output figures, which measures output at all stages of production. Gross Output is almost twice the size of GDP.
Third, the New York Times may well want “the government” to produce the entire GDP, but it doesn’t yet. Currently government spending represents approximately 20% of GDP. The remaining 80% is privately produced.
Best wishes, AEIOU,
Benjamin Franklin Chair of Management
Adjunct Professor of Economics, Columbia University, 2004-05