Business & Economics: May 2014 Archives

GDP Is a Poor Metric

US GPD contracted in 2014Q1, but is that significant? In my opinion, GDP is a pretty stupid metric. Why?

If you and I each mow our own laws, GDP = $0.
If you and I pay each other $50 to mow each others' lawns, GDP = $100.

The U.S. economy contracted in the first quarter for the first time in three years as it buckled under the weight of a severe winter, but there are signs activity has since rebounded.
The Commerce Department on Thursday revised down its growth estimate to show gross domestic product shrinking at a 1.0 annual rate.

It was the worst performance since the first quarter of 2011 and reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit.