GDP growth, as traditionally calculated, is a weird metric. People interpret it as measuring “economic growth”, but… well, think about electronics. Electronics which would have cost millions of dollars (or more) in 1984 are now commonplace, everyone carries them around in their pockets. So if we calculate GDP growth based on 1984 prices, then GDP has grown multiple orders of magnitude since then, everyone now owns things which would make 1984's wealthiest people jealous, and practically all of that growth has come from electronics. On the other hand, if we calculate GDP based on 2024 prices, then all of the digital electronics produced before, say, 2004 are worth almost nothing, so electronics contributed near-zero GDP growth throughout the entire internet boom.

Economists didn’t like either of those conclusions, so back in the 90's, they mostly switched to a different way of calculating GDP growth: “chaining”. Basically, we calculate 1984-1985 [...]

---

Outline:

(01:45) A Toy Example

(04:12) Some Policy Suggestions

(05:06) Policy 1: The See-Saw

(07:00) Policy 2: Rotation of Excessive Overpayment

(11:22) Other Possibilities?

The original text contained 1 footnote which was omitted from this narration.

---

First published:

Source:

Narrated by TYPE III AUDIO.