This is true to a large extent. But what’s funny is you posted a chart that has Ireland with some crazy GDP that isn’t real. It’s just due to accounting quirks related to corporate profit shifting. You didn’t really argue for the validity of GDP as a measure of income here. I think it is a useful measure, but the map isn’t the territory here. China targets an annual level of GDP growth and basically achieves it without fail. Because GDP is actually easy to create and does not correspond one to one with wealth creation, at least in practice, they can just jack up credit creation and pour money into unproductive investment that counts as GDP.
To me the real debate shouldn’t be around whether GDP is a useful metric, which it certainly is when considered in its full context. We should consider whether it is a suitable target and what qualifications are required to use it as a measuring stick of policy success. To Vance’s point, you can have all the gambling apps and porn in the world and it won’t help you produce warships or replacement fertility from health families. There is some share of GDP in any given country that’s really just straight exploitation and may have knock on social benefits in terms of exports or tax revenue created, but it has no more value than just giving all the people in its employ their income through welfare checks.
That’s just not accurate. Investment in capital goods, inventories, etc. is part of GDP. Investing in a stock is obviously not part of production. The calculation of GDP is Consumption plus Investment plus Government Spending plus Net Exports.
Not quite. Investment doesn't count as GDP. Only the income an investment produces is counted as GDP. When you invest in a stock you aren't buying a good or service, which is what GDP is. When you sell the stock and start spending the proceeds on goods and services, what you spend counts as GDP. If the investment goes bust and never produces anything, GDP doesn't capture it.
It is true that unproductive *spending* increases GDP because GDP doesn't care about the virtues of the money that changes hands on porn and gambling apps, or government welfare cheques paid to the idle. If the government hires more civil servants, their wages count in GDP. The best you can hope is that "productive" spending leads to investment that eventually produces income and grows the GDP more durably than wasteful spending does. If the government doesn't like the choices people make with their own money, and it often doesn't, it can -- and does -- tax their income to build warships or provide free healthcare.
The good news is that America's GDP is not being inflated spuriously by the buoyant stock markets, nor does a market crash directly and immediately lead to a fall in GDP.
Yes it is. GDP is a measure of national production, not the thing itself, for one. Two, I never said that is a sustainable strategy. Three, China is an authoritarian country.
"they can just jack up credit creation and pour money into unproductive investment that counts as GDP." It really is that easy huh, to increase national income and production all we need to do is print money and pretend there are more resources in the economy. Why doesn't everyone do this?
You need a currency that doesn't depreciate to toilet paper when you crank up the money printer. USD is that currency because the whole world use it as the currency of global trade due to historical reasons and US military might. US is number 1 in GDP because it's number 1 in GDP, it's self sustaining
Doubtful. The US has a very good labour market, very good capital, lots of growth because of immigration and fast technology diffusion. Good fundamentals. Other countries that have more efficient markets are often just smaller, like denmark, singapoure and UAE.
Yes excellent capital market, the best in the world. That's how you get superior valuation premium for both listed companies and startups. Some example: In memory chip industry, Micron has a larger market cap than SK Hynix despite a market share of less than half of SK Hynix. Robotics startups in the US like Figure AI has 4 times the valuation of China's Unitree which has shipped more humanoid robots than all US startups combined.
Credit creation goes into the liquid financial market very readily and the pumps up the equity prices, startup fundings and attracts further capital from around the world. Finance is America's greatest strength
Your attack on GDP attackers is entirely on-target, but you create a straw man. There are real problems with GDP's failure to accurately assess national wealth.
Medians vs means is an issue (underweighting central tendencies) but not my point. I sit at my desk right now. It probably costs (inflation-adjusted) about the same that a comparable desk would have cost 75 years ago. I sit here to use a computer 10% of whose functionality might have been available for $100,000 30 years ago, with a small box in my pocket whose functionality would not have been available for a billion dollars 30 years ago. A large fraction of my kid's life is dominated by that box.
I always hear this, but it's never explained how this is true, or what would be a better measure of national wealth. It's almost like you guys just want to debunk the idea of economics itself, like JD Vance.
"There’s nothing stopping Americans from seeking out jobs that have fewer hours, but generally people like earning money."
Well, there is. Just like with GDP, with wages, there's a certain (price-adjusted) threshold after which the incremental increase doesn't matter as much. Nothing is stopping Europeans from getting a second job, too, but they don't have to because their needs are being met. And they spend the extra time on leisure. Many Americans on the other hand need to work longer or get a second job because many of the basics that the European state provides, the US does not.
Infrastructure is a good example. If you want to go from SF to LA, it's a minimum $200 roundtrip flight. You can drive on the I-5 but it's very congested, and rail is not an option. So you need to work to earn that $200. A comparable distance in Europe, say Madrid to Barcelona, is $50 on a flight because there's a high-speed train competing with the flight, and if you feel extra poor, you can just drive on a pristine freeway. So an European doesn't need to put in that extra hour to afford it.
Of course, this is not to say GDP is meaningless - it's very important. But it's not necessarily a good measure of the quality of life because it relies heavily on price levels, and, in case of the US, on the reserve currency status of the US dollar. If the dollar ever loses its status (and Trump is working heavily towards that goal, even if inadvertently), the American standard of living is going to take a huge hit, probably falling below the European standard of living.
I think another good example of why GDP shouldn't be treated as a quality-of-life proxy is the migration patterns. America has never been more wealthy than Europe in terms of GDP, but simultaneously, the migration from Europe to the US has slowed down tremendously and in fact there is data to suggest that it has reversed for the first time in history (meaning more Americans migrate to Europe than the other way around).
Based on back of the envelope math and Google Gemini numbers, normalizing to the median hourly wage $50 in Spain would be equivalent to around $127 in America. Yes, that is still around 36% cheaper relative to the median hourly wage, but I am very seriously doubtful that stuff like that would get anywhere near to making up for so many other things being more affordable for the median American than for the median Spaniard.
Regarding migration patterns, Mexican immigration to America was net-negative from 2010 to 2021, with the number of Mexican-born residents in America going from 11.7 million to 10.7 million*. Obviously that was not because Mexico had gotten richer than America during that time. A country doesn't have to get *that* rich before the social costs of emigration (language barriers, moving far away from family and friends, etc) start to seriously compete with the economic benefits, and allow other factors like the immigration policy of the destination country to become more significant. In particular, if the "data to suggest that it has reversed for the first time in history" is from after January 2025 then I can imagine that there are likely some non-economic significant factors in the form of Trump's immigration policy at work there.
Coming from New Zealand, hating on GDP is a huge thing in our country. The media routinely rolls out left wing economists who attack GDP (and data centers).
NZ has become a lot richer since our 1980s market reforms, but even so, kiwis are a lot poorer than Americans. The average home here doesn’t even have double glazed windows, and certainly not central heating. Americans have incredible prosperity all around them!
My problem with GDP is that it's NOT a wealth metric. GDP measures consumption, not growth or production. Now, consumption implies that you have the means to consume that which you consume, which is why the gaps between the United States and Europe do point to real wealth disparities. But when you include government spending and spending financed by liabilities, the GDP metric doesn't give you an objective measure of wealth created. In fact, it could be that in a specific year people consumed more than they produced, and GDP would still "grow."
As far as GDP is concerned, a millionaire who spends all his money and goes bankrupt is treated exactly the same as an entrepreneur who is generating wealth for the same sum via productive enterprises.
youre mistaken. gdp measures production, not consumption. to some extent it is an imperfect measure of production but that is an issue of measurement quality, not a theoretical issue.
for instance, if you manufacture a bunch of air conditioners and store them in a warehouse, that will be included in gdp even though they are not consumed, because they were produced.
and if you import a bunch of grapes and eat them, they will not be included in gdp, because they were not produced in your country, even though they were consumed there.
some government spending is included in gdp because it is spent on goods and services that are produced. the government might use those goods and services inefficiently or counterproductively, but gdp says nothing about how well goods and services are used.
i don't understand why "spending financed on liabilities" is a problem for gdp as a measure of production. it's true that it's not a measure of debt. however there are other debt measures available. no single number can be expected to convey all useful information.
"a millionaire who spends all his money and goes bankrupt is treated exactly the same as an entrepreneur who is generating wealth for the same sum via productive enterprises." it's a legitimate point that gdp does not distinguish between production which is consumed and production which is invested. but again, no single number can be expected to convey all useful information.
I agree with most of what you said, except for your conclusion. The philosophy that underlies GDP treats goods as static quantities. If you measure the production vs. consumption of each individual in the economy, you'd get a dynamic aggregate metric of the economy's growth. If you treat every sale as a static event, then yes, no one number will do the trick, and production/consumption will be conflated.
i don't understand what you mean, sorry. what do you mean when you say "static" and "dynamic"? what's an example of a way production and consumption could be conflated under current practice?
Let's say you produced 2 loaves of bread this week, but ate 3, including the one leftover from last week. This means you consumed more than you produced.
By contrast, if you produce 4 loaves this week and eat 3, you're producing more than you consume. (Growth would measure an increase in genuine production across time.)
If you just measure total output you don't capture this dynamism of quantities and their relation to humans. Quantities are meaningless on their own.
I think the issue with GDP is that it conflates government wealth destruction with private production.
For example, if I bake two loaves of bread and the government taxes me one of those loaves, according to the GDP we now have three loaves in the economy.
But in reality, I only have one loaf left. The other one was stolen.
By counting government spending as additive output rather than a reallocation of private production, GDP inflates economic numbers, disguises capital consumption, and hands central planners a deeply flawed metric for evaluating civilizational health.
this is not correct. GDP would count one loaf consumed by your customers and one loaf consumed by government and correctly show that two loaves were produced.
Yes, it treats government spending as "production" and tracks purchases of production goods—which may or may not end up as a successful market investment.
My essential point remains: GDP can indicate "growth" when in fact the nation in a single year consumed more than it produced.
It treats government spending as “production” only to the extent the spending reflects the production of goods and services.
It does not track purchases of production goods, it tracks production of production goods, with value indexed to the market price.
GDP can indicate growth when the nation consumed more than it produced if the nation produced more than it did in the previous year. That doesn’t mean GDP doesn’t track production.
Governments don't produce. They take your savings by force (or borrow debt) and dump it on projects. No profit is involved, hence it is not productive by definition. Also, purchases of goods and services for government operations are included too.
As for your last proposition, it's true if you presume the production metric to be objective/accurate. I don't think it is.
Ok this is nonsensical; does the road the local DOT build not count as production? By all means, if you're trying to argue that government crowds out more productive private investment you can make that claim but the idea that government produces NOTHING is beyond silly
If by "production" you mean the creation of something new, then sure, the government produces. But the context of this discussion is measuring the growth of an economy. If I raise $1 billion to create new smartphones but nobody buys them and I go bankrupt, my "production" isn't production from a market perspective; it is a business failure. The government by definition does not profit from its projects. If no profit is involved then the project counts only as consumption (of costs).
Even if you say: yeah, but people can still use the government-built-road, the same can be said of the bankrupt business that sold the smartphones below costs (or for free). Since no profit is involved, we can't measure the efficiency of government projects; namely they can't be categorized as productive enterprises.
You can consume more than you produce indefinitely if the rate of growth in your production is sufficient to cover the required borrowing. Not a very good argument.
Treating politics like economics fails on an even deeper level: GDP is not a real metric.
Much like IQ attempts to reduce human intelligence to a single synthetic integer, GDP attempts to reduce a complex, living economy into a fiat spending total. It makes no distinction between productive private investment and coercive state waste.
When a government takes ten billion dollars from productive businesses and squanders it on central-planning projects, GDP goes up. It actively conflates capital destruction with wealth creation, handing politicians a false positive that masks the decay of the real economy.
"You don’t get to just assume that red cars are slower than blue cars because you have a bias against the engineering method that makes cars go faster." actually the red ones go faster
As far as I’m aware, most Europeans (including me) criticizing your notes on this, were not denying the importance of GDP, or the superiority of the US on many economic metrics and policies. You did seem to paint a picture of the US as some utopia in European eyes.
Anyway, talking policies, to name a few on health: our Dutch government makes agreements with supermarkets on making their offerings healthier, we make it difficult for fast food chains to operate on different spots, we make policy to prevent “hypermarkets” but instead incentivize small neighborhood supermarkets reachable by bike or foot, we massively subsidize amateur sports, we have all these municipal sports initiatives, accessible and safe parks where you can do sports/run, a countrywide subsidized network of recreational bike, mountainbike and hiking lanes, in general nudge people in a 1000 different ways to take the bike ot walk, most prominently through good infrastructure, secondly by making “non car-centric” cities and taxing and regulating the hell out of cars. At the European level we have EFSA of course, the strictest food regulations in the world.
So yeah, to some degree being fat is a policy choice. If you would research the policies that are most effective in counteracting obesity, these would be blocked in the US by a coalition of conservative/libertarian ideology and corporate interest lobbying. The same ideology and lobbying that gives you the faster growth, higher GDP rate, etc. Similarly, I have good hope that the EU with implementing the DMA and DSA will get a grip on the attention-grabbing, democracy destroying social media feeds, while the US will not.
I would love the US tax rates plus EU preventive health policy, but there seem to be real trade-offs in modes of governance, and its not clear to me that the EU got the shorter end of the stick, at least not when it comes to short-term population welfare.
It is funny that US which is easily the most successful nation on earth, constantly trying to and acknowledges what other countries might be doing right. There is a debate that discusses quality of food in france, cleanliness in Japan, academic achievements in China, issues of scale from India, education in Finland etc. where are every other country pretends as if they have already figured out everything.
The only two countries who looked at successful countries and asked "how can we be more like them" were Japan and Singapore. Both became very successful as result. Both of them copied UK which was the biggest power at that time.
Chances are, USA will have high GPD and low obesity few years down the line due to GLP-1. Chances are Europe will suffer from lower GDP and higher obesity down the line.
Skinny French anecdotes: kids get served full, beautiful meals at school, silverware, fish, veggie, and desert. Personal trainer session is 60€, and half of that is covered by the government.
I feel like that Europe coddles the middle class, and US coddles the rich.
That decreases the GDP! Imagine how much the GDP of France would increase if instead they were fed reheated frozen chicken nuggets on paper plates and with single-use plastic forks. And then increase the GDP further by buying GLP-1s and having bypass surgery! /s
This is true America is richer then us In the UK but not nessacarirly true for an unskilled worker working a 40 hour week. We make more then I would in the us I also get 5 weeks off and maternity/paternity may be helpful in increasing birth rates as you actually get to spend time with your kids. But then again maybe not. We also have less working homeless and don't have to choose between holessness or health treatment. Not perfect by any means as a country but I'd prefer to have free markets with workers protections then pure libertarianism. I admit skilled workers and the wealthy make more in the us then the UK but I know where I'd prefer to live. Big fan love the fact people on here can disagree without wanting to genocide each other
As long as we have a working non-genocide agreement, let me respond…
1) Lots of companies offer various vacation packages for unskilled labor in the US. Here, people choose if they want lots of vacation or a higher base pay in part by which company they apply with. My grandson just started a job with 5 weeks vacation. To be honest, I think the vast majority of large companies have extremely robust maternity policies. They just aren’t mandated. Unemployment rates are extremely low, so with a bit of work, it shouldn’t be too hard for someone to find the tradeoffs that are roughly best for them.
2) The poor here qualify for Medicaid, Cobra (unemployment) or Medicare. Many states have additional subsidies for health care premiums. I was recently getting huge subsidies on my premiums and my family is the antithesis of poor.
Haha I like hearing different points of view it's how to best form an opinion, I think for me it's a trust system that could be exploited by someone who's unscrupulous I imagine 75% of companies are trustworthy but there's nothing to stop the few that aren't, I'm all for free markets above pure socialism but I think a balance of worker protections with a cut in beauracracy works better then pure libertarianism. Also in comparison to higher wages is it more expensive to live? Do essentials like food, rent/mortgage and travel expenses cost more in comparison to money made? Then they do over here because I make enough to live in relative comfort. Also I do accept that better qualified people or people with in demand skills make more in America then here.
Economic statism is always sold on moral grounds: "helping the poor," "affordable healthcare," or "saving the planet." It's never pitched as a wealth-builder. It's pitched as a moral duty.
Until advocates of limited government and capitalism start making the explicit moral case for individual liberty, they will continue to lose by default. You cannot win a philosophical debate with a GDP spreadsheet.
Contrary to the title, it's the lovers of GDP that aren't making serious arguments.
They treat politics as a branch of accounting rather than a branch of ethics. They fail to understand that free markets, wealth creation, and high standards of living are merely downstream consequences of a society built on the moral ideals of individual rights and a rights-protecting government.
This doesn't address distribution, which is especially important in light of hours worked. Although we're working more and are wealthier overall, most stocks (51%) are owned by the top 1%. Although this has some benefits for everyone else from investment, the same is not true for taxes because the income is sheltered in various ways, and because capital income is taxed at a lower rate than labor income.
For distribution, this is important for answering whether the median German, for example, is making more money per hour worked and after transfers/public goods. There are a few ways to look at this, but generally the median American is worse off than median German who is "buying" leisure time.
You also bring up obesity as if it's totally exogenous to our economic system, rather than the result of policy, not just food policy, but also auto-sprawl, walkability, and leisure time for exercise, cooking, sleep (which affects fat storage and hunger hormones) and other things.
You completely ignore the entire GDP PPP question of constant v current prices, which others have written about on Substack (on both sides of the issue). In short, improvements in tech cause our constant price GDP to be higher.
On heart disease: Looking at the Cram et al study on heart attacks, this is such a weird pick to illustrate your point. It compares the US with the Netherlands, Canada (only two provinces), Israel, Taiwan, and England. "We use almost as many balloon stents as Canada despite spending an extra 5% GDP, without leading on survival rates" is a weird flex! What good is that extra 5% GDP doing us?
Some of our very high GDP is actually parasitic. Gambling, most of which is sports betting, is now about 1% of GDP. Our military budget is over $1T and we can't open the Strait of Hormuz. Iran spends $8B, which sounds like a good number to me.
The cancer survivorship study does not illustrate the point you think it does. We're basically tied with Canada, even though we spend 5% more as share of GDP, and don't have universal coverage, but do have health care bankruptcies and many hours spent on the phone trying to get things covered. What good is that extra 5%?
Anyone who knows a bit about cancer survival rate data knows that comparisons between countries are difficult because the US has more early screening (which is good) but that skews the survival rate from the date of diagnosis when it's caught earlier. Callemani et al (read the whole thing before you copy the charts!) try to deal with this a couple of ways (mostly by excluding lots of data) but acknowledge the limitation. The real apples-to-apples number is mortality. You'd think that the early screening would mean that we have better cancer mortality rates, but we don't, and there's no relationship between spending and mortality (see link) so what good is all that extra health care GDP?
What the extra 5% is doing is this: It protects the shareholders of one insurance company from having to pay claims that should be the responsibility of another insurance company, or of no insurance company at all.
In Canada, doctor bills and hospital care and many but not all drugs are paid for for everyone from general taxation, which funds a single payer with legal monopsony power. Because we have a progressive tax system -- so do you, but our top marginal rates are higher and bite at lower income levels and mortgage interest isn't deductible --, our high-income taxpayers pay much more to fund the system than middle-income taxpayers do. Low-income people, who pay no taxes, pay nothing at all. This even though the consumption of medical services is strongly negatively associated with income. (Poor people are much sicker and fatter than rich people and, if there are no financial barriers, will have much more spent on their behalf.)
At first blush this sounds like a great idea, from each according to his ability to pay, and to each according to his needs for care. But a Canadian who earns a million dollars a year will pay about $450,000 in income tax -- the top marginal rate in Ontario is 55% and kicks in at a $220,000, with the rate under that still taxed at about 37% (all figures Canadian $.) About 40% of this tax bill goes to health care consumed largely by other people. This high taxation for free health care (and other government services consumed mostly by the poor) deters the individual effort to earn higher income, so the ones who can and want to earn more move to the U.S. It's hard to recruit very highly paid professional athletes and CEOs to Canada because of the high taxation they face.
In the U.S., health care premiums are set by insurance companies according to the likely medical risk of the pool of planholders, not according to their income. (Medicare payroll taxes are related to income, yes, but workplace insurance premiums aren't. Ability to pay doesn't figure in premium-setting, just the expected demands of the pool.) The task of the insurance company is to be sure that a bill submitted for a medical service is in respect of a covered life for a covered service. To make this work, the insurance company has to be sure that it isn't some other company, or Medicaid or Medicare, or the patient himself who's supposed to pay and that the claimed service was eligible under their rules. The insurance companies are motivated to avoid giving away free medical care in a way the government isn't. The cost of that claim checking is part of that 5% extra GDP.
This also means that a high-income American resident pays much less for "his" health care in the U.S. than he would, at the same income, in Canada, simply because all of it in Canada is funded from progressive taxation whereas only the Medicare/Medicaid obligation is so funded in the U.S., and his tax bill would be higher in Canada to begin with.
If you adopted Medicare-for-all paid entirely from general taxation, the percent of GDP allocated to health care would go down (because insurance company claim-checking would be eliminated) but the tax burden on high-income earners would rise dramatically, given how expensive it is. GDP would fall, too, because health care accounts for 17% of the economy. If you take out the insurance companies' economic activity, GDP has to fall until all the clerks and drones find something else productive to do.
The other advantage of monopsony power in single-payer is that you can impose very stringent price controls on doctors and service-volume caps on hospitals. One reason why we spend less on health care is that we pay people less for doing it and restrict how much of it they can do. Treatments that are clearly evidence-based, like stents for STEMI heart attacks we do well on, as the article says. For conditions that are more discretionary that are driven by patient demand from what they are told on television, such as hip and knee replacement and some types of cancer treatment, we do much less of them. This may or may not be acceptable to Americans who are used to demanding the insurance company pay for whatever they want, and usually getting it. Too much medical care is not only wasteful but dangerous to health. Nonetheless, people don't like being told they can't have something because the government says they don't need it. That's where a lot of the 5% goes to, also: freedom to spend the insurance company's money.
I'm not super concerned about the high earners. I've been hearing about how high tax rates would drive that best Canadians to America forever, and Canada still has a higher quality of life.
And I'm not even sure that getting rid of duplicative insurance coders and all the waste in the US system would actually shrink GDP. Those people can do other things. But, as it relates to the article, the extra 5% isn't making people healthier, and because insurance is a financial product, it's actually making life for Americans more stressful and precarious.
Well, sure, that's why we call it waste, because it isn't making people any healthier. But it's not meant to be. It's meant to protect the interests of shareholders of insurance companies, the ones on the hook for medical bills submitted to them. If they went bankrupt, who would pay your doctor/hospital bill? You?
No, nobody cares about high earners as long as they obediently keep working and paying their taxes and keeping their employees working. Canada has a better quality of life because we have mostly sloughed off expensive military spending and can spend the money on comfortable things. (Canadians don't want to be soldiers even if we spent money on them.) Nice gig if you can get it. And we don't have a dysfunctional urban underclass that makes it hard to have nice things, and causes cops to be jumpier. Our underclass is mostly out of sight in remote rural and northern areas, albeit still costly.
But we still have to try to reverse outflow of capital if we are to maintain that nice quality of life:
I'm not calling for lower tax rates on high incomes in U.S. or in Canada. I'm just making the point that if you go to single-payer funded from general taxation (to cut out the insurance companies) you will have to increase taxes substantially on the high earners in the U.S., who pay most of the income taxes in both countries. Under private insurance, a high earner pays the same premium for his company's health insurance plan as the production workers at the bottom, so far as I know.....(unless there are so-called "top hat" executive plans that cover more and therefore cost the employer more. We have those in Canada.) Under single payer, he will have to pay much much more because the cost is coming out of taxation which he shoulders a disproportionate burden for. For him, the 5% premium attributable to administrative insurance-company waste is small potatoes by comparison. This alone is why, I suspect, that wealthy movers and shakers of the U.S. economy will never allow single-payer to be enacted. This may be morally repugnant but that's just how it goes. To them it would be an enormous tax increase for which they would get no benefit.
The administrative cost of U.S. health care is famously burdensome. But exactly because insurance companies finance about half of a 17% chunk of the US economy, they ain't going anywhere. Commercial insurance companies also administer parts of Medicare. The capital invested in those financial companies is not going to be vaporized by government edict, any more than the richest 0.5% are going to be shaken down to expand Obamacare and Medicaid. And given that many of these super-high-income earners are themselves executives and shareholders in health insurance companies and hospital corporations, it's not waste at all. It's income. They make money on both sides of the transaction.
The other thing you would need to do under single payer is use the resulting monopsony power to control prices, wages, technology diffusion, and service volumes. Single payer gives the government this power. It will have to use it if it is going to control costs in the face of doctor- and patient- generated demand. You'll also have to decide if you want illegal aliens to be eligible to receive benefits on a national basis as some states do now for Medicaid.
I don't think anyone argues against the proposition that ordinary Americans aren't being well-served by the health insurance industry. But that's to be expected. Ordinary Americans aren't customers in the system, the guy who is always right. You are alms-seekers, supplicants and petitioners. The system isn't intended to respond to your needs. It works perfectly to achieve the outcomes it was designed for.
Yes, it's income for execs and shareholders. But let's recall the original RH point: higher GDP means better lives (for ordinary people, not just the rich). I think we're in agreement that the extra 5% is not welfare-enhancing.
As for the burden on the rich, let's do some quick math, just thinking out loud here. Health spending is 17% US GDP, and, as you note, 47% is paid by the government anyway, so that's 8.5%. In Canada, it's 12.7% of GDP, and 70% of that is govt spending, just Googling here. So it's basically the same amount of govt health spending?
As a percentage of GDP in each country, yes the gov't spending on it is about the same. Good observation. Because per capita GDP is so much greater in the US, (US$94,430 vs US$60,305), the spending per capita (both public and private) is much higher in the U.S. To figure out the impact that tax-funded single-payer would have on high-income Americans, you'd have to compute the total dollar amount that would be taken out of the insurance industry and loaded onto the tax system, then use the knowledge about the progressiveness of the tax system to figure the impact on the top tax bracket (who would pay almost all the extra tax.) This gets iteratively complicated because the tax rates would likely have to rise themselves. And of course the more you earn, the larger the tax implication would be for you individually. (You'd also have to decide politically how much you wanted the government to pay. 70% like Canada? or shoot the works and cover outpatient drug prescriptions and dentistry, which Canada doesn't cover publicly, except drugs for over 65s?)
The 5% doesn't contribute to health, no. But I wouldn't say it's not welfare-enhancing in the economic sense. Suppose your job with Walmart is to process merchandise returned by customers who want refunds. At a minimum you have to verify that the customer actually bought the merchandise from Walmart, i.e., he didn't steal it and he didn't buy it from Amazon. You have to check to see if it was a special sale with no returns/refunds allowed. Are the goods damaged or used in such a way that they can't be re-sold? Are the goods defective? Under warranty? Etc. And you have to find out if the sale was cash or by credit card, to determine if you reimburse with cash or a credit note. Your wage to do this is part of Walmart's overhead. It's not a cost the customer wants to pay. He'd rather just chuck the goods into a return chute and have cash come back out to him no questions asked. But Walmart wants to pay you because it doesn't trust its customers to be honest about returns. It is welfare-enhancing from Walmart's point of view, and so isn't waste as long as your policing of claims saves Walmart more than your salary.. If Walmart decided it didn't want to police returns because it wasn't worth the money it would get rid of your position. But if your union told Walmart they would come out on strike if it made the returns policemen redundant, *then* the cost of your wage *is* waste and is not welfare-enhancing, but rather rent-seeking.
Some people who don't like insurance companies would have that they should never question or refuse claims because that's bad for people's health. If you're covered by the insurance company and your doctor wants to do a treatment, it should pay no questions asked. That might reduce the administrative waste from 5% to maybe 3% by letting a lot of claim-checkers go, but claim losses would rise because fewer were denied. (To us, the point of insurance companies is to pay out claims. But to shareholders, the point of insurance companies is *not* to pay out claims more than strictly legally contractually necessary.) Since believe it or not insurance companies operate on narrow margins sometimes with an underwriting loss, saved by their investment returns, this could threaten their financial stability, especially if they can't raise premiums for competitive or regulatory reasons.
You avoid most of this under single-payer, although even single-payer plans have to make sure you are legally in the country, the only test of whether you are covered, and it scrutinizes doctors' billings to pick up fraud and lack of medical necessity. The public plans in Canada deny far fewer claims, though, because they try to provide everything for everybody (for political reasons) and do it by squeezing the cost of their inputs. But there are still costs of administrative claim-checking hidden in the financial performance of the Ministries of Health.
American prosperity historically benefited from scale: the United States had an enormous free-trade zone among the states, while the federal government maintained a relatively small footprint. Today, however, that scale has become a drag on GDP. The federal government is extracting productive capital from the economy, and the two-party system has broken down beyond the point of repair. Federalism cannot be restored, given the ratio of representatives to citizens and the entrenched power of the political-industrial complex. Until we recognize that the central problem is one of scale, little else will matter.
Since this essay, GDP Haters Aren't Making Serious Arguments, was posted 18 hours ago, the national debt has grown by approximately $6.17 billion, based on a rate of $95,178.17 per second.
Has there been a Treasury auction in the last 18 hours? One that I missed? If not, then how could this be true? If so, did they just roll the debt, or did they issue more on top?
Fair point. The $95,178.17 figure is the average rate of debt growth over the past year, not a claim that Treasury issues debt continuously. More precisely, the 18 hours since the essay was posted represent approximately $6.17 billion in additional debt at the trailing-year average pace. Actual debt balances change through discrete issuances, redemptions, and other Treasury transactions.
You are suffering from metric capture, Richard. You are looking at the exhaust pipe of a burning engine and celebrating how much smoke it produces. Your entire premise rests on a fundamental category error: You are conflating Transaction Velocity with Wealth.
Even Simon Kuznets, the chief architect of the GDP metric, explicitly warned Congress in 1934: “The welfare of a nation can scarcely be inferred from a measure of national income.” He knew that GDP does not measure the accumulation of capital or human agency; it measures the friction of the system.
You boast that America has a staggering GDP despite our obesity, opioid addiction, and car accidents. You have the physics backward. We have a staggering GDP because of those things.
A healthy citizen who walks to work, eats whole foods, and doesn't get shot generates almost nothing in GDP.
A diabetic citizen who commutes two hours in traffic, gets into a car crash, requires emergency surgery, and gets hooked on fentanyl generates millions of dollars in GDP.
The US spends nearly 18% of its GDP on healthcare to manage its own systemic decay. If Americans adopted the skinnier European lifestyle you mock, the medical-industrial complex would contract by trillions of dollars. Your beloved GDP line would plummet. You are literally pointing to the monetized cost of our sickness and calling it a superior economic system.
Europe isn't the answer — they are just a slower, more bureaucratic version of the same failing paradigm. But your defense of the American system is nothing more than cheering for a parasite.
That's incorrect. An American worker who walks to work, eats whole foods, and doesn't get shot generates, with his wages that he spends immediately or later in retirement after growth compounding, the same GDP as the other guy does. He just spends his money on things other than medical care. (That's assuming that the lifestyle choices you highlight are actually causally connected to health spending, and not just confounded with underlying covariates. The determinants of health run deep.)
The third-party payment system of private insurance or Medicare/Medicaid or Canadian-European single payer models distorts the incentives, I don't dispute that. This allows health care providers to reap rents from illness that they would not be able to obtain were sick people paying for their health care out of pocket. In the olden days, doctors scrambled to accumulate paying patients in their practices. Since there weren't very many wealthy sick people --not for long anyway --, the economy couldn't support very many doctors unless they treated the worried well with placebos and charged them high fees. The medical-industrial complex would indeed contract if everyone had to go self-pay and both government and private insurance were banned. But the talent and labour efforts of those displaced MIC workers would find work elsewhere in the economy eventually and GDP itself wouldn't fall, except to the extent that the insurance schemes foster rent-seeking, which they do. So does professional licensing and requirement for prescriptions for many drugs.
The third-party payment system encourages wasteful spending, defined as costs that someone would not choose to pay out of pocket for. But eliminating waste doesn't necessarily shrink the GDP. All else equal, eliminating waste frees up dollars to be invested in things people want to spend their own money on, which in the long run increases GDP.
I feel like most of what you've just said actually makes my point for me.
Here's a simpler example: a tornado devastates a county. GDP goes up due to all the activity associated with rebuilding what was destroyed. This is a measurable increase in GDP (activity) that is directly linked to a decrease in wealth (accumulated assets).
Right. But the economy as a whole would still have been better off without the tornado (even if nobody died.) The money that had to be spent on reconstruction would have produced more wealth in the long run if it had been invested in new income-producing assets, or just spent on discretionary consumption, than rebuilding what was there whether it was producing income at all. See, somebody had to put up the cash to rebuild the county, either an insurance company or government relief. Somebody, the insurance company shareholders or the taxpayers, is worse off as a result of the tornado. Never mind that the local building trades get a windfall.
This is what I think user_leon means about the broken-window fallacy. Why doesn't a window-glass maker pay urchins to go around town throwing rocks through windows? (It's a classic of economics.) Replacing the windows (with his glass) increases the GDP. Why not let arsonists burn down buildings to increase the GDP still further? Start a war and get bombed to rubble?
So Richard is correct, that America has high GDP despite (not because of) the poor health status of so many Americans. GDP would be higher still if they didn't incur wasteful spending on poor health.
Your conclusions don't follow from your own logic. If immediate spending was lower (no urgency, more wealth saved/invested), GDP would have to be lower. This is simple math.
"Simple math" is not an argument. It's an attempt at an insult. Math is simple only if you artificially restrict the domain and range to obvious trivialities.
Maybe I should have answered my own question because I think you missed it: why don't we let vandals break windows, given that replacing them juices the local economy? Because the money spent to produce that new window glass is wasted. The building owner would not have bought new window glass had his perfectly good windows not been broken. He would have spent his money on something else, produced by someone else somewhere else in the economy. So the GDP of the nation as a whole doesn't fall just because fewer windows need to be replaced after the soccer hooligans are locked up.
Surely you don't think that efforts to reduce vandalism are bad for the economy, even the local economy, just because the local glassmaker doesn't sell as many windows. Besides, if he's any good as a glass maker he'll have other customers who want glass for new construction that generates more wealth. He will better serve those customers at no loss to himself, or to the economy, if vandalism can be curtailed and he doesn't have to tell new buildings that he can't supply them with fifty windows because he has to respond to a spate of vandalism in his town. So both the glass maker and the building owners *and the GDP* benefit from having to replace fewer broken windows.
Again, I think you are not seeing the downstream effects. If not for the tornado, the money spent on producing new buildings would have been used to produce better mousetraps or AI models that the investors believe will eventually produce profits. Savings and investment do contribute to GDP to the extent that the investor ploughs the money into production capacity or the bank that he deposited the money in lends it out to back productive investments, or trips to Disneyland which are also a type of production. All of that is production that wouldn't happen if the money (and labour!) had to be spent instead to produce bricks, shingles, and drywall to rebuild destroyed houses. The GDP doesn't suffer in years where there are no damaging tornadoes.
Economics is about managing scarcity through choices. Let's look at the tornado again. Most people who own houses or trailers (the type of dwelling most likely to be destroyed in a tornado) can't afford to replace them out of their own savings. They rely on insurance. But some people can't afford insurance and take their chances. If their uninsured trailer is destroyed, what happens? No one with money will say, "Gee, that trailer was such an important economic asset to this community that I will put up my own money to buy a new one, because I expect a good return on my investment when it's completed and Clem moves back in and pays me rent." (You don't think I'm just going to *give* Clem a new trailer, do you?) So no, Clem will have to throw himself on the mercy of the residents of the county, or the government socially, to buy him a new trailer which he will expect to own free and clear, just as if he *had* insured it.
Thing is, most houses in tornado country aren't worth very much, because few people who can afford to live elsewhere want to live there. Their economic value is less than the cost of replacing them. So by rights, houses destroyed by tornadoes shouldn't be rebuilt, because the money should be invested elsewhere and the residents encouraged to move away to safer areas, by leaving them homeless. If the houses *are* rebuilt out of pity and sympathy, then the money is wasted because it could have been invested more productively elsewhere. Thus through knock-on effects, the money spent to rebuild tornado damage would cause the nation-wide GDP to fall. Conversely, if the damage was not rebuilt, nation-wide GDP would rise. This argument is already being used in denying flood insurance on floodplains and fire insurance in dry canyons, where floods and fires are more predictable than tornadoes.
This is true to a large extent. But what’s funny is you posted a chart that has Ireland with some crazy GDP that isn’t real. It’s just due to accounting quirks related to corporate profit shifting. You didn’t really argue for the validity of GDP as a measure of income here. I think it is a useful measure, but the map isn’t the territory here. China targets an annual level of GDP growth and basically achieves it without fail. Because GDP is actually easy to create and does not correspond one to one with wealth creation, at least in practice, they can just jack up credit creation and pour money into unproductive investment that counts as GDP.
To me the real debate shouldn’t be around whether GDP is a useful metric, which it certainly is when considered in its full context. We should consider whether it is a suitable target and what qualifications are required to use it as a measuring stick of policy success. To Vance’s point, you can have all the gambling apps and porn in the world and it won’t help you produce warships or replacement fertility from health families. There is some share of GDP in any given country that’s really just straight exploitation and may have knock on social benefits in terms of exports or tax revenue created, but it has no more value than just giving all the people in its employ their income through welfare checks.
That’s just not accurate. Investment in capital goods, inventories, etc. is part of GDP. Investing in a stock is obviously not part of production. The calculation of GDP is Consumption plus Investment plus Government Spending plus Net Exports.
Not quite. Investment doesn't count as GDP. Only the income an investment produces is counted as GDP. When you invest in a stock you aren't buying a good or service, which is what GDP is. When you sell the stock and start spending the proceeds on goods and services, what you spend counts as GDP. If the investment goes bust and never produces anything, GDP doesn't capture it.
It is true that unproductive *spending* increases GDP because GDP doesn't care about the virtues of the money that changes hands on porn and gambling apps, or government welfare cheques paid to the idle. If the government hires more civil servants, their wages count in GDP. The best you can hope is that "productive" spending leads to investment that eventually produces income and grows the GDP more durably than wasteful spending does. If the government doesn't like the choices people make with their own money, and it often doesn't, it can -- and does -- tax their income to build warships or provide free healthcare.
The good news is that America's GDP is not being inflated spuriously by the buoyant stock markets, nor does a market crash directly and immediately lead to a fall in GDP.
Yes it is. GDP is a measure of national production, not the thing itself, for one. Two, I never said that is a sustainable strategy. Three, China is an authoritarian country.
"they can just jack up credit creation and pour money into unproductive investment that counts as GDP." It really is that easy huh, to increase national income and production all we need to do is print money and pretend there are more resources in the economy. Why doesn't everyone do this?
You need a currency that doesn't depreciate to toilet paper when you crank up the money printer. USD is that currency because the whole world use it as the currency of global trade due to historical reasons and US military might. US is number 1 in GDP because it's number 1 in GDP, it's self sustaining
Doubtful. The US has a very good labour market, very good capital, lots of growth because of immigration and fast technology diffusion. Good fundamentals. Other countries that have more efficient markets are often just smaller, like denmark, singapoure and UAE.
Yes excellent capital market, the best in the world. That's how you get superior valuation premium for both listed companies and startups. Some example: In memory chip industry, Micron has a larger market cap than SK Hynix despite a market share of less than half of SK Hynix. Robotics startups in the US like Figure AI has 4 times the valuation of China's Unitree which has shipped more humanoid robots than all US startups combined.
Credit creation goes into the liquid financial market very readily and the pumps up the equity prices, startup fundings and attracts further capital from around the world. Finance is America's greatest strength
Your attack on GDP attackers is entirely on-target, but you create a straw man. There are real problems with GDP's failure to accurately assess national wealth.
Is that a criticism of GDP as a metric or of people who don't also look at things like median household income, median household wealth, etc?
Medians vs means is an issue (underweighting central tendencies) but not my point. I sit at my desk right now. It probably costs (inflation-adjusted) about the same that a comparable desk would have cost 75 years ago. I sit here to use a computer 10% of whose functionality might have been available for $100,000 30 years ago, with a small box in my pocket whose functionality would not have been available for a billion dollars 30 years ago. A large fraction of my kid's life is dominated by that box.
GDP's purpose isn't to measure wealth, it's supposed to measure income and production.
I always hear this, but it's never explained how this is true, or what would be a better measure of national wealth. It's almost like you guys just want to debunk the idea of economics itself, like JD Vance.
GDP=C+I+G... that means GDP is just a measure of how much the government wastes money!!! GDP Debunked!
"There’s nothing stopping Americans from seeking out jobs that have fewer hours, but generally people like earning money."
Well, there is. Just like with GDP, with wages, there's a certain (price-adjusted) threshold after which the incremental increase doesn't matter as much. Nothing is stopping Europeans from getting a second job, too, but they don't have to because their needs are being met. And they spend the extra time on leisure. Many Americans on the other hand need to work longer or get a second job because many of the basics that the European state provides, the US does not.
Infrastructure is a good example. If you want to go from SF to LA, it's a minimum $200 roundtrip flight. You can drive on the I-5 but it's very congested, and rail is not an option. So you need to work to earn that $200. A comparable distance in Europe, say Madrid to Barcelona, is $50 on a flight because there's a high-speed train competing with the flight, and if you feel extra poor, you can just drive on a pristine freeway. So an European doesn't need to put in that extra hour to afford it.
Of course, this is not to say GDP is meaningless - it's very important. But it's not necessarily a good measure of the quality of life because it relies heavily on price levels, and, in case of the US, on the reserve currency status of the US dollar. If the dollar ever loses its status (and Trump is working heavily towards that goal, even if inadvertently), the American standard of living is going to take a huge hit, probably falling below the European standard of living.
I think another good example of why GDP shouldn't be treated as a quality-of-life proxy is the migration patterns. America has never been more wealthy than Europe in terms of GDP, but simultaneously, the migration from Europe to the US has slowed down tremendously and in fact there is data to suggest that it has reversed for the first time in history (meaning more Americans migrate to Europe than the other way around).
Based on back of the envelope math and Google Gemini numbers, normalizing to the median hourly wage $50 in Spain would be equivalent to around $127 in America. Yes, that is still around 36% cheaper relative to the median hourly wage, but I am very seriously doubtful that stuff like that would get anywhere near to making up for so many other things being more affordable for the median American than for the median Spaniard.
Regarding migration patterns, Mexican immigration to America was net-negative from 2010 to 2021, with the number of Mexican-born residents in America going from 11.7 million to 10.7 million*. Obviously that was not because Mexico had gotten richer than America during that time. A country doesn't have to get *that* rich before the social costs of emigration (language barriers, moving far away from family and friends, etc) start to seriously compete with the economic benefits, and allow other factors like the immigration policy of the destination country to become more significant. In particular, if the "data to suggest that it has reversed for the first time in history" is from after January 2025 then I can imagine that there are likely some non-economic significant factors in the form of Trump's immigration policy at work there.
* Source: https://www.pewresearch.org/race-and-ethnicity/fact-sheet/us-hispanics-facts-on-mexican-origin-latinos/
Im not sure the reserve status of the dollar is doing much work.
Coming from New Zealand, hating on GDP is a huge thing in our country. The media routinely rolls out left wing economists who attack GDP (and data centers).
NZ has become a lot richer since our 1980s market reforms, but even so, kiwis are a lot poorer than Americans. The average home here doesn’t even have double glazed windows, and certainly not central heating. Americans have incredible prosperity all around them!
If New Zealand were a US State:
- Flightless Bird Species: 1st
- Internationally popular folk-parody duos: 1st
- Sheep per capita: 1st
- GDP: 51st
Very logical and straightforward.
It's especially depressing how the new populist right has borrowed economic ignorance from the left.
My problem with GDP is that it's NOT a wealth metric. GDP measures consumption, not growth or production. Now, consumption implies that you have the means to consume that which you consume, which is why the gaps between the United States and Europe do point to real wealth disparities. But when you include government spending and spending financed by liabilities, the GDP metric doesn't give you an objective measure of wealth created. In fact, it could be that in a specific year people consumed more than they produced, and GDP would still "grow."
As far as GDP is concerned, a millionaire who spends all his money and goes bankrupt is treated exactly the same as an entrepreneur who is generating wealth for the same sum via productive enterprises.
youre mistaken. gdp measures production, not consumption. to some extent it is an imperfect measure of production but that is an issue of measurement quality, not a theoretical issue.
for instance, if you manufacture a bunch of air conditioners and store them in a warehouse, that will be included in gdp even though they are not consumed, because they were produced.
and if you import a bunch of grapes and eat them, they will not be included in gdp, because they were not produced in your country, even though they were consumed there.
some government spending is included in gdp because it is spent on goods and services that are produced. the government might use those goods and services inefficiently or counterproductively, but gdp says nothing about how well goods and services are used.
i don't understand why "spending financed on liabilities" is a problem for gdp as a measure of production. it's true that it's not a measure of debt. however there are other debt measures available. no single number can be expected to convey all useful information.
"a millionaire who spends all his money and goes bankrupt is treated exactly the same as an entrepreneur who is generating wealth for the same sum via productive enterprises." it's a legitimate point that gdp does not distinguish between production which is consumed and production which is invested. but again, no single number can be expected to convey all useful information.
I agree with most of what you said, except for your conclusion. The philosophy that underlies GDP treats goods as static quantities. If you measure the production vs. consumption of each individual in the economy, you'd get a dynamic aggregate metric of the economy's growth. If you treat every sale as a static event, then yes, no one number will do the trick, and production/consumption will be conflated.
i don't understand what you mean, sorry. what do you mean when you say "static" and "dynamic"? what's an example of a way production and consumption could be conflated under current practice?
Let's say you produced 2 loaves of bread this week, but ate 3, including the one leftover from last week. This means you consumed more than you produced.
By contrast, if you produce 4 loaves this week and eat 3, you're producing more than you consume. (Growth would measure an increase in genuine production across time.)
If you just measure total output you don't capture this dynamism of quantities and their relation to humans. Quantities are meaningless on their own.
I think the issue with GDP is that it conflates government wealth destruction with private production.
For example, if I bake two loaves of bread and the government taxes me one of those loaves, according to the GDP we now have three loaves in the economy.
But in reality, I only have one loaf left. The other one was stolen.
By counting government spending as additive output rather than a reallocation of private production, GDP inflates economic numbers, disguises capital consumption, and hands central planners a deeply flawed metric for evaluating civilizational health.
this is not correct. GDP would count one loaf consumed by your customers and one loaf consumed by government and correctly show that two loaves were produced.
Bingo.
this would not be an issue for GDP calculations, because net change in inventory is part of investment. in the first scenario i would calculate:
- consumption: 3 loaves of bread
- investment: -1 loaves of bread
- total output: 3-1 = 2 loaves of bread
in the second scenario i would calculate
- consumption: 3 loaves of bread
- investment: 1 loaf of bread
- total output: 3+1 = 4 loaves of bread
in both scenarios i correctly measure the quantity produced
But in the first scenario you're left with 0 loaves, and in the second with 1 loaf. That's the real status.
GDP does measure production. It’s called Gross Domestic *Product*, not Gross Domestic Consumption.
Yes, it treats government spending as "production" and tracks purchases of production goods—which may or may not end up as a successful market investment.
My essential point remains: GDP can indicate "growth" when in fact the nation in a single year consumed more than it produced.
It treats government spending as “production” only to the extent the spending reflects the production of goods and services.
It does not track purchases of production goods, it tracks production of production goods, with value indexed to the market price.
GDP can indicate growth when the nation consumed more than it produced if the nation produced more than it did in the previous year. That doesn’t mean GDP doesn’t track production.
Governments don't produce. They take your savings by force (or borrow debt) and dump it on projects. No profit is involved, hence it is not productive by definition. Also, purchases of goods and services for government operations are included too.
As for your last proposition, it's true if you presume the production metric to be objective/accurate. I don't think it is.
Ok this is nonsensical; does the road the local DOT build not count as production? By all means, if you're trying to argue that government crowds out more productive private investment you can make that claim but the idea that government produces NOTHING is beyond silly
If by "production" you mean the creation of something new, then sure, the government produces. But the context of this discussion is measuring the growth of an economy. If I raise $1 billion to create new smartphones but nobody buys them and I go bankrupt, my "production" isn't production from a market perspective; it is a business failure. The government by definition does not profit from its projects. If no profit is involved then the project counts only as consumption (of costs).
Even if you say: yeah, but people can still use the government-built-road, the same can be said of the bankrupt business that sold the smartphones below costs (or for free). Since no profit is involved, we can't measure the efficiency of government projects; namely they can't be categorized as productive enterprises.
You can consume more than you produce indefinitely if the rate of growth in your production is sufficient to cover the required borrowing. Not a very good argument.
GDP = national income
Treating politics like economics fails on an even deeper level: GDP is not a real metric.
Much like IQ attempts to reduce human intelligence to a single synthetic integer, GDP attempts to reduce a complex, living economy into a fiat spending total. It makes no distinction between productive private investment and coercive state waste.
When a government takes ten billion dollars from productive businesses and squanders it on central-planning projects, GDP goes up. It actively conflates capital destruction with wealth creation, handing politicians a false positive that masks the decay of the real economy.
Old Man, yelling at clouds.
"You don’t get to just assume that red cars are slower than blue cars because you have a bias against the engineering method that makes cars go faster." actually the red ones go faster
Fact chekt by tru green Gitz: Tru
You're right because if the blue cars went faster they would be red-shifted anyways
As far as I’m aware, most Europeans (including me) criticizing your notes on this, were not denying the importance of GDP, or the superiority of the US on many economic metrics and policies. You did seem to paint a picture of the US as some utopia in European eyes.
Anyway, talking policies, to name a few on health: our Dutch government makes agreements with supermarkets on making their offerings healthier, we make it difficult for fast food chains to operate on different spots, we make policy to prevent “hypermarkets” but instead incentivize small neighborhood supermarkets reachable by bike or foot, we massively subsidize amateur sports, we have all these municipal sports initiatives, accessible and safe parks where you can do sports/run, a countrywide subsidized network of recreational bike, mountainbike and hiking lanes, in general nudge people in a 1000 different ways to take the bike ot walk, most prominently through good infrastructure, secondly by making “non car-centric” cities and taxing and regulating the hell out of cars. At the European level we have EFSA of course, the strictest food regulations in the world.
So yeah, to some degree being fat is a policy choice. If you would research the policies that are most effective in counteracting obesity, these would be blocked in the US by a coalition of conservative/libertarian ideology and corporate interest lobbying. The same ideology and lobbying that gives you the faster growth, higher GDP rate, etc. Similarly, I have good hope that the EU with implementing the DMA and DSA will get a grip on the attention-grabbing, democracy destroying social media feeds, while the US will not.
I would love the US tax rates plus EU preventive health policy, but there seem to be real trade-offs in modes of governance, and its not clear to me that the EU got the shorter end of the stick, at least not when it comes to short-term population welfare.
It is funny that US which is easily the most successful nation on earth, constantly trying to and acknowledges what other countries might be doing right. There is a debate that discusses quality of food in france, cleanliness in Japan, academic achievements in China, issues of scale from India, education in Finland etc. where are every other country pretends as if they have already figured out everything.
The only two countries who looked at successful countries and asked "how can we be more like them" were Japan and Singapore. Both became very successful as result. Both of them copied UK which was the biggest power at that time.
Chances are, USA will have high GPD and low obesity few years down the line due to GLP-1. Chances are Europe will suffer from lower GDP and higher obesity down the line.
Skinny French anecdotes: kids get served full, beautiful meals at school, silverware, fish, veggie, and desert. Personal trainer session is 60€, and half of that is covered by the government.
I feel like that Europe coddles the middle class, and US coddles the rich.
People here just eat like total pigs.
Warning, do not ever book a cruise ship with Americans. The all you can eat buffets are disgusting. The only thin people on the boat are the servers.
That decreases the GDP! Imagine how much the GDP of France would increase if instead they were fed reheated frozen chicken nuggets on paper plates and with single-use plastic forks. And then increase the GDP further by buying GLP-1s and having bypass surgery! /s
This is true America is richer then us In the UK but not nessacarirly true for an unskilled worker working a 40 hour week. We make more then I would in the us I also get 5 weeks off and maternity/paternity may be helpful in increasing birth rates as you actually get to spend time with your kids. But then again maybe not. We also have less working homeless and don't have to choose between holessness or health treatment. Not perfect by any means as a country but I'd prefer to have free markets with workers protections then pure libertarianism. I admit skilled workers and the wealthy make more in the us then the UK but I know where I'd prefer to live. Big fan love the fact people on here can disagree without wanting to genocide each other
As long as we have a working non-genocide agreement, let me respond…
1) Lots of companies offer various vacation packages for unskilled labor in the US. Here, people choose if they want lots of vacation or a higher base pay in part by which company they apply with. My grandson just started a job with 5 weeks vacation. To be honest, I think the vast majority of large companies have extremely robust maternity policies. They just aren’t mandated. Unemployment rates are extremely low, so with a bit of work, it shouldn’t be too hard for someone to find the tradeoffs that are roughly best for them.
2) The poor here qualify for Medicaid, Cobra (unemployment) or Medicare. Many states have additional subsidies for health care premiums. I was recently getting huge subsidies on my premiums and my family is the antithesis of poor.
I am glad you like the UK!
Haha I like hearing different points of view it's how to best form an opinion, I think for me it's a trust system that could be exploited by someone who's unscrupulous I imagine 75% of companies are trustworthy but there's nothing to stop the few that aren't, I'm all for free markets above pure socialism but I think a balance of worker protections with a cut in beauracracy works better then pure libertarianism. Also in comparison to higher wages is it more expensive to live? Do essentials like food, rent/mortgage and travel expenses cost more in comparison to money made? Then they do over here because I make enough to live in relative comfort. Also I do accept that better qualified people or people with in demand skills make more in America then here.
I’m mean to you, but this is a good article. I like you much more when you choose to be thoughtful and analytical.
Economic statism is always sold on moral grounds: "helping the poor," "affordable healthcare," or "saving the planet." It's never pitched as a wealth-builder. It's pitched as a moral duty.
Until advocates of limited government and capitalism start making the explicit moral case for individual liberty, they will continue to lose by default. You cannot win a philosophical debate with a GDP spreadsheet.
Contrary to the title, it's the lovers of GDP that aren't making serious arguments.
They treat politics as a branch of accounting rather than a branch of ethics. They fail to understand that free markets, wealth creation, and high standards of living are merely downstream consequences of a society built on the moral ideals of individual rights and a rights-protecting government.
This doesn't address distribution, which is especially important in light of hours worked. Although we're working more and are wealthier overall, most stocks (51%) are owned by the top 1%. Although this has some benefits for everyone else from investment, the same is not true for taxes because the income is sheltered in various ways, and because capital income is taxed at a lower rate than labor income.
For distribution, this is important for answering whether the median German, for example, is making more money per hour worked and after transfers/public goods. There are a few ways to look at this, but generally the median American is worse off than median German who is "buying" leisure time.
You also bring up obesity as if it's totally exogenous to our economic system, rather than the result of policy, not just food policy, but also auto-sprawl, walkability, and leisure time for exercise, cooking, sleep (which affects fat storage and hunger hormones) and other things.
You completely ignore the entire GDP PPP question of constant v current prices, which others have written about on Substack (on both sides of the issue). In short, improvements in tech cause our constant price GDP to be higher.
On heart disease: Looking at the Cram et al study on heart attacks, this is such a weird pick to illustrate your point. It compares the US with the Netherlands, Canada (only two provinces), Israel, Taiwan, and England. "We use almost as many balloon stents as Canada despite spending an extra 5% GDP, without leading on survival rates" is a weird flex! What good is that extra 5% GDP doing us?
Some of our very high GDP is actually parasitic. Gambling, most of which is sports betting, is now about 1% of GDP. Our military budget is over $1T and we can't open the Strait of Hormuz. Iran spends $8B, which sounds like a good number to me.
The cancer survivorship study does not illustrate the point you think it does. We're basically tied with Canada, even though we spend 5% more as share of GDP, and don't have universal coverage, but do have health care bankruptcies and many hours spent on the phone trying to get things covered. What good is that extra 5%?
Anyone who knows a bit about cancer survival rate data knows that comparisons between countries are difficult because the US has more early screening (which is good) but that skews the survival rate from the date of diagnosis when it's caught earlier. Callemani et al (read the whole thing before you copy the charts!) try to deal with this a couple of ways (mostly by excluding lots of data) but acknowledge the limitation. The real apples-to-apples number is mortality. You'd think that the early screening would mean that we have better cancer mortality rates, but we don't, and there's no relationship between spending and mortality (see link) so what good is all that extra health care GDP?
https://jamanetwork.com/journals/jama-health-forum/fullarticle/2792761
What the extra 5% is doing is this: It protects the shareholders of one insurance company from having to pay claims that should be the responsibility of another insurance company, or of no insurance company at all.
In Canada, doctor bills and hospital care and many but not all drugs are paid for for everyone from general taxation, which funds a single payer with legal monopsony power. Because we have a progressive tax system -- so do you, but our top marginal rates are higher and bite at lower income levels and mortgage interest isn't deductible --, our high-income taxpayers pay much more to fund the system than middle-income taxpayers do. Low-income people, who pay no taxes, pay nothing at all. This even though the consumption of medical services is strongly negatively associated with income. (Poor people are much sicker and fatter than rich people and, if there are no financial barriers, will have much more spent on their behalf.)
At first blush this sounds like a great idea, from each according to his ability to pay, and to each according to his needs for care. But a Canadian who earns a million dollars a year will pay about $450,000 in income tax -- the top marginal rate in Ontario is 55% and kicks in at a $220,000, with the rate under that still taxed at about 37% (all figures Canadian $.) About 40% of this tax bill goes to health care consumed largely by other people. This high taxation for free health care (and other government services consumed mostly by the poor) deters the individual effort to earn higher income, so the ones who can and want to earn more move to the U.S. It's hard to recruit very highly paid professional athletes and CEOs to Canada because of the high taxation they face.
In the U.S., health care premiums are set by insurance companies according to the likely medical risk of the pool of planholders, not according to their income. (Medicare payroll taxes are related to income, yes, but workplace insurance premiums aren't. Ability to pay doesn't figure in premium-setting, just the expected demands of the pool.) The task of the insurance company is to be sure that a bill submitted for a medical service is in respect of a covered life for a covered service. To make this work, the insurance company has to be sure that it isn't some other company, or Medicaid or Medicare, or the patient himself who's supposed to pay and that the claimed service was eligible under their rules. The insurance companies are motivated to avoid giving away free medical care in a way the government isn't. The cost of that claim checking is part of that 5% extra GDP.
This also means that a high-income American resident pays much less for "his" health care in the U.S. than he would, at the same income, in Canada, simply because all of it in Canada is funded from progressive taxation whereas only the Medicare/Medicaid obligation is so funded in the U.S., and his tax bill would be higher in Canada to begin with.
If you adopted Medicare-for-all paid entirely from general taxation, the percent of GDP allocated to health care would go down (because insurance company claim-checking would be eliminated) but the tax burden on high-income earners would rise dramatically, given how expensive it is. GDP would fall, too, because health care accounts for 17% of the economy. If you take out the insurance companies' economic activity, GDP has to fall until all the clerks and drones find something else productive to do.
The other advantage of monopsony power in single-payer is that you can impose very stringent price controls on doctors and service-volume caps on hospitals. One reason why we spend less on health care is that we pay people less for doing it and restrict how much of it they can do. Treatments that are clearly evidence-based, like stents for STEMI heart attacks we do well on, as the article says. For conditions that are more discretionary that are driven by patient demand from what they are told on television, such as hip and knee replacement and some types of cancer treatment, we do much less of them. This may or may not be acceptable to Americans who are used to demanding the insurance company pay for whatever they want, and usually getting it. Too much medical care is not only wasteful but dangerous to health. Nonetheless, people don't like being told they can't have something because the government says they don't need it. That's where a lot of the 5% goes to, also: freedom to spend the insurance company's money.
I'm not super concerned about the high earners. I've been hearing about how high tax rates would drive that best Canadians to America forever, and Canada still has a higher quality of life.
And I'm not even sure that getting rid of duplicative insurance coders and all the waste in the US system would actually shrink GDP. Those people can do other things. But, as it relates to the article, the extra 5% isn't making people healthier, and because insurance is a financial product, it's actually making life for Americans more stressful and precarious.
Well, sure, that's why we call it waste, because it isn't making people any healthier. But it's not meant to be. It's meant to protect the interests of shareholders of insurance companies, the ones on the hook for medical bills submitted to them. If they went bankrupt, who would pay your doctor/hospital bill? You?
No, nobody cares about high earners as long as they obediently keep working and paying their taxes and keeping their employees working. Canada has a better quality of life because we have mostly sloughed off expensive military spending and can spend the money on comfortable things. (Canadians don't want to be soldiers even if we spent money on them.) Nice gig if you can get it. And we don't have a dysfunctional urban underclass that makes it hard to have nice things, and causes cops to be jumpier. Our underclass is mostly out of sight in remote rural and northern areas, albeit still costly.
But we still have to try to reverse outflow of capital if we are to maintain that nice quality of life:
https://www.rbc.com/en/thought-leadership/geopolitics-trade-and-the-economy/capital-gains-how-canada-can-unlock-the-1-8-trillion-it-needs-for-growth/ (RBC is Canada's largest bank.)
I'm not calling for lower tax rates on high incomes in U.S. or in Canada. I'm just making the point that if you go to single-payer funded from general taxation (to cut out the insurance companies) you will have to increase taxes substantially on the high earners in the U.S., who pay most of the income taxes in both countries. Under private insurance, a high earner pays the same premium for his company's health insurance plan as the production workers at the bottom, so far as I know.....(unless there are so-called "top hat" executive plans that cover more and therefore cost the employer more. We have those in Canada.) Under single payer, he will have to pay much much more because the cost is coming out of taxation which he shoulders a disproportionate burden for. For him, the 5% premium attributable to administrative insurance-company waste is small potatoes by comparison. This alone is why, I suspect, that wealthy movers and shakers of the U.S. economy will never allow single-payer to be enacted. This may be morally repugnant but that's just how it goes. To them it would be an enormous tax increase for which they would get no benefit.
The administrative cost of U.S. health care is famously burdensome. But exactly because insurance companies finance about half of a 17% chunk of the US economy, they ain't going anywhere. Commercial insurance companies also administer parts of Medicare. The capital invested in those financial companies is not going to be vaporized by government edict, any more than the richest 0.5% are going to be shaken down to expand Obamacare and Medicaid. And given that many of these super-high-income earners are themselves executives and shareholders in health insurance companies and hospital corporations, it's not waste at all. It's income. They make money on both sides of the transaction.
The other thing you would need to do under single payer is use the resulting monopsony power to control prices, wages, technology diffusion, and service volumes. Single payer gives the government this power. It will have to use it if it is going to control costs in the face of doctor- and patient- generated demand. You'll also have to decide if you want illegal aliens to be eligible to receive benefits on a national basis as some states do now for Medicaid.
I don't think anyone argues against the proposition that ordinary Americans aren't being well-served by the health insurance industry. But that's to be expected. Ordinary Americans aren't customers in the system, the guy who is always right. You are alms-seekers, supplicants and petitioners. The system isn't intended to respond to your needs. It works perfectly to achieve the outcomes it was designed for.
Yes, it's income for execs and shareholders. But let's recall the original RH point: higher GDP means better lives (for ordinary people, not just the rich). I think we're in agreement that the extra 5% is not welfare-enhancing.
As for the burden on the rich, let's do some quick math, just thinking out loud here. Health spending is 17% US GDP, and, as you note, 47% is paid by the government anyway, so that's 8.5%. In Canada, it's 12.7% of GDP, and 70% of that is govt spending, just Googling here. So it's basically the same amount of govt health spending?
As a percentage of GDP in each country, yes the gov't spending on it is about the same. Good observation. Because per capita GDP is so much greater in the US, (US$94,430 vs US$60,305), the spending per capita (both public and private) is much higher in the U.S. To figure out the impact that tax-funded single-payer would have on high-income Americans, you'd have to compute the total dollar amount that would be taken out of the insurance industry and loaded onto the tax system, then use the knowledge about the progressiveness of the tax system to figure the impact on the top tax bracket (who would pay almost all the extra tax.) This gets iteratively complicated because the tax rates would likely have to rise themselves. And of course the more you earn, the larger the tax implication would be for you individually. (You'd also have to decide politically how much you wanted the government to pay. 70% like Canada? or shoot the works and cover outpatient drug prescriptions and dentistry, which Canada doesn't cover publicly, except drugs for over 65s?)
The 5% doesn't contribute to health, no. But I wouldn't say it's not welfare-enhancing in the economic sense. Suppose your job with Walmart is to process merchandise returned by customers who want refunds. At a minimum you have to verify that the customer actually bought the merchandise from Walmart, i.e., he didn't steal it and he didn't buy it from Amazon. You have to check to see if it was a special sale with no returns/refunds allowed. Are the goods damaged or used in such a way that they can't be re-sold? Are the goods defective? Under warranty? Etc. And you have to find out if the sale was cash or by credit card, to determine if you reimburse with cash or a credit note. Your wage to do this is part of Walmart's overhead. It's not a cost the customer wants to pay. He'd rather just chuck the goods into a return chute and have cash come back out to him no questions asked. But Walmart wants to pay you because it doesn't trust its customers to be honest about returns. It is welfare-enhancing from Walmart's point of view, and so isn't waste as long as your policing of claims saves Walmart more than your salary.. If Walmart decided it didn't want to police returns because it wasn't worth the money it would get rid of your position. But if your union told Walmart they would come out on strike if it made the returns policemen redundant, *then* the cost of your wage *is* waste and is not welfare-enhancing, but rather rent-seeking.
Some people who don't like insurance companies would have that they should never question or refuse claims because that's bad for people's health. If you're covered by the insurance company and your doctor wants to do a treatment, it should pay no questions asked. That might reduce the administrative waste from 5% to maybe 3% by letting a lot of claim-checkers go, but claim losses would rise because fewer were denied. (To us, the point of insurance companies is to pay out claims. But to shareholders, the point of insurance companies is *not* to pay out claims more than strictly legally contractually necessary.) Since believe it or not insurance companies operate on narrow margins sometimes with an underwriting loss, saved by their investment returns, this could threaten their financial stability, especially if they can't raise premiums for competitive or regulatory reasons.
You avoid most of this under single-payer, although even single-payer plans have to make sure you are legally in the country, the only test of whether you are covered, and it scrutinizes doctors' billings to pick up fraud and lack of medical necessity. The public plans in Canada deny far fewer claims, though, because they try to provide everything for everybody (for political reasons) and do it by squeezing the cost of their inputs. But there are still costs of administrative claim-checking hidden in the financial performance of the Ministries of Health.
American prosperity historically benefited from scale: the United States had an enormous free-trade zone among the states, while the federal government maintained a relatively small footprint. Today, however, that scale has become a drag on GDP. The federal government is extracting productive capital from the economy, and the two-party system has broken down beyond the point of repair. Federalism cannot be restored, given the ratio of representatives to citizens and the entrenched power of the political-industrial complex. Until we recognize that the central problem is one of scale, little else will matter.
Total national debt has grown by
$95,178.17
per second for the past year.
https://www.jec.senate.gov/public/index.cfm/republicans/debt-dashboard
Since this essay, GDP Haters Aren't Making Serious Arguments, was posted 18 hours ago, the national debt has grown by approximately $6.17 billion, based on a rate of $95,178.17 per second.
Has there been a Treasury auction in the last 18 hours? One that I missed? If not, then how could this be true? If so, did they just roll the debt, or did they issue more on top?
Fair point. The $95,178.17 figure is the average rate of debt growth over the past year, not a claim that Treasury issues debt continuously. More precisely, the 18 hours since the essay was posted represent approximately $6.17 billion in additional debt at the trailing-year average pace. Actual debt balances change through discrete issuances, redemptions, and other Treasury transactions.
You are suffering from metric capture, Richard. You are looking at the exhaust pipe of a burning engine and celebrating how much smoke it produces. Your entire premise rests on a fundamental category error: You are conflating Transaction Velocity with Wealth.
Even Simon Kuznets, the chief architect of the GDP metric, explicitly warned Congress in 1934: “The welfare of a nation can scarcely be inferred from a measure of national income.” He knew that GDP does not measure the accumulation of capital or human agency; it measures the friction of the system.
You boast that America has a staggering GDP despite our obesity, opioid addiction, and car accidents. You have the physics backward. We have a staggering GDP because of those things.
A healthy citizen who walks to work, eats whole foods, and doesn't get shot generates almost nothing in GDP.
A diabetic citizen who commutes two hours in traffic, gets into a car crash, requires emergency surgery, and gets hooked on fentanyl generates millions of dollars in GDP.
The US spends nearly 18% of its GDP on healthcare to manage its own systemic decay. If Americans adopted the skinnier European lifestyle you mock, the medical-industrial complex would contract by trillions of dollars. Your beloved GDP line would plummet. You are literally pointing to the monetized cost of our sickness and calling it a superior economic system.
Europe isn't the answer — they are just a slower, more bureaucratic version of the same failing paradigm. But your defense of the American system is nothing more than cheering for a parasite.
Slop. Broken window fallacy.
That's incorrect. An American worker who walks to work, eats whole foods, and doesn't get shot generates, with his wages that he spends immediately or later in retirement after growth compounding, the same GDP as the other guy does. He just spends his money on things other than medical care. (That's assuming that the lifestyle choices you highlight are actually causally connected to health spending, and not just confounded with underlying covariates. The determinants of health run deep.)
The third-party payment system of private insurance or Medicare/Medicaid or Canadian-European single payer models distorts the incentives, I don't dispute that. This allows health care providers to reap rents from illness that they would not be able to obtain were sick people paying for their health care out of pocket. In the olden days, doctors scrambled to accumulate paying patients in their practices. Since there weren't very many wealthy sick people --not for long anyway --, the economy couldn't support very many doctors unless they treated the worried well with placebos and charged them high fees. The medical-industrial complex would indeed contract if everyone had to go self-pay and both government and private insurance were banned. But the talent and labour efforts of those displaced MIC workers would find work elsewhere in the economy eventually and GDP itself wouldn't fall, except to the extent that the insurance schemes foster rent-seeking, which they do. So does professional licensing and requirement for prescriptions for many drugs.
The third-party payment system encourages wasteful spending, defined as costs that someone would not choose to pay out of pocket for. But eliminating waste doesn't necessarily shrink the GDP. All else equal, eliminating waste frees up dollars to be invested in things people want to spend their own money on, which in the long run increases GDP.
I feel like most of what you've just said actually makes my point for me.
Here's a simpler example: a tornado devastates a county. GDP goes up due to all the activity associated with rebuilding what was destroyed. This is a measurable increase in GDP (activity) that is directly linked to a decrease in wealth (accumulated assets).
Right. But the economy as a whole would still have been better off without the tornado (even if nobody died.) The money that had to be spent on reconstruction would have produced more wealth in the long run if it had been invested in new income-producing assets, or just spent on discretionary consumption, than rebuilding what was there whether it was producing income at all. See, somebody had to put up the cash to rebuild the county, either an insurance company or government relief. Somebody, the insurance company shareholders or the taxpayers, is worse off as a result of the tornado. Never mind that the local building trades get a windfall.
This is what I think user_leon means about the broken-window fallacy. Why doesn't a window-glass maker pay urchins to go around town throwing rocks through windows? (It's a classic of economics.) Replacing the windows (with his glass) increases the GDP. Why not let arsonists burn down buildings to increase the GDP still further? Start a war and get bombed to rubble?
So Richard is correct, that America has high GDP despite (not because of) the poor health status of so many Americans. GDP would be higher still if they didn't incur wasteful spending on poor health.
Your conclusions don't follow from your own logic. If immediate spending was lower (no urgency, more wealth saved/invested), GDP would have to be lower. This is simple math.
"Simple math" is not an argument. It's an attempt at an insult. Math is simple only if you artificially restrict the domain and range to obvious trivialities.
Maybe I should have answered my own question because I think you missed it: why don't we let vandals break windows, given that replacing them juices the local economy? Because the money spent to produce that new window glass is wasted. The building owner would not have bought new window glass had his perfectly good windows not been broken. He would have spent his money on something else, produced by someone else somewhere else in the economy. So the GDP of the nation as a whole doesn't fall just because fewer windows need to be replaced after the soccer hooligans are locked up.
Surely you don't think that efforts to reduce vandalism are bad for the economy, even the local economy, just because the local glassmaker doesn't sell as many windows. Besides, if he's any good as a glass maker he'll have other customers who want glass for new construction that generates more wealth. He will better serve those customers at no loss to himself, or to the economy, if vandalism can be curtailed and he doesn't have to tell new buildings that he can't supply them with fifty windows because he has to respond to a spate of vandalism in his town. So both the glass maker and the building owners *and the GDP* benefit from having to replace fewer broken windows.
Again, I think you are not seeing the downstream effects. If not for the tornado, the money spent on producing new buildings would have been used to produce better mousetraps or AI models that the investors believe will eventually produce profits. Savings and investment do contribute to GDP to the extent that the investor ploughs the money into production capacity or the bank that he deposited the money in lends it out to back productive investments, or trips to Disneyland which are also a type of production. All of that is production that wouldn't happen if the money (and labour!) had to be spent instead to produce bricks, shingles, and drywall to rebuild destroyed houses. The GDP doesn't suffer in years where there are no damaging tornadoes.
Economics is about managing scarcity through choices. Let's look at the tornado again. Most people who own houses or trailers (the type of dwelling most likely to be destroyed in a tornado) can't afford to replace them out of their own savings. They rely on insurance. But some people can't afford insurance and take their chances. If their uninsured trailer is destroyed, what happens? No one with money will say, "Gee, that trailer was such an important economic asset to this community that I will put up my own money to buy a new one, because I expect a good return on my investment when it's completed and Clem moves back in and pays me rent." (You don't think I'm just going to *give* Clem a new trailer, do you?) So no, Clem will have to throw himself on the mercy of the residents of the county, or the government socially, to buy him a new trailer which he will expect to own free and clear, just as if he *had* insured it.
Thing is, most houses in tornado country aren't worth very much, because few people who can afford to live elsewhere want to live there. Their economic value is less than the cost of replacing them. So by rights, houses destroyed by tornadoes shouldn't be rebuilt, because the money should be invested elsewhere and the residents encouraged to move away to safer areas, by leaving them homeless. If the houses *are* rebuilt out of pity and sympathy, then the money is wasted because it could have been invested more productively elsewhere. Thus through knock-on effects, the money spent to rebuild tornado damage would cause the nation-wide GDP to fall. Conversely, if the damage was not rebuilt, nation-wide GDP would rise. This argument is already being used in denying flood insurance on floodplains and fire insurance in dry canyons, where floods and fires are more predictable than tornadoes.