Does GDP Present an Accurate Picture of the Economy? Not Likely
2023-05-03
To understand the economy, most financial experts and commentators rely upon gross domestic product (GDP). The GDP framework looks at the value of final goods and services produced during a particular time interval, usually a quarter or a year.
This statistic is constructed with the view that consumption, not wealth production, drives an economy. Since consumer outlays are the largest part of the overall demand, it is assumed that consumer demand drives economic growth, a fundamental assumption in Keynesian economics.
The belief is that demand for goods gives rise almost immediately to their supply. This framework, however, ignores the stages of production that precede the emergence of the final good. It is not enough to demand goods; there must be the means to accommodate the demand. Real
How to Teach Austrian Economics to the Neighbor Kids
2023-05-02
A mom in the neighborhood recently made trouble. Macroeconomic trouble. Here is a way to spot such trouble, and how to help nurture the goodness in our economic way of life.
A few months back her boy went door to door, confidently introducing himself, explaining his purpose, and handing us a detailed flier: “Twelve-year-old boy willing to work.” He was trying to earn money to go to sailing school. I was impressed. My wife was impressed. We told our kids to be impressed.
There is virtue in hard work and initiative, and such virtue is doubled when it involves tweens and teens. I commend the boy and the mom—both of whom were complete strangers to me.
But then things turned bad. Not with the boy—he was great. I called him to bring our empty trash cans back up to the house one day when we would