I’m not sure what you mean. There’s plenty of the economy that isn’t factored into GDP, but that’s particularly those aspects that don’t have a market price and thus aren’t directly relevant to inflation.
If, for example, the quality of teachers is reduced by 50%, then the price of the same amount of teaching has effectively doubled. But unless their salary is also affected (which is not obvious), how would you actually notice this in the inflation or GDP figures?
GDP measures all goods and services produced. Inflation measures a basket of consumer goods which excludes a lot if not most of the economy. E.g. the whole of the B2B sector. Any price incease that’s not part of the CPI basket which did not reduce sales volume would result in increased real GDP.
GDP most assuredly does not measure “all” goods and services in an economy. I gave you an example that isn’t measured by GDP in the very post you responded to.
GDP is a rough estimate of the market value of a certain part of the goods and services produced in an economy. Those aspects that are not directly traded for money, or have indirect effects, are disregarded. This includes but is not limited to leisure time, child-rearing in families, and pollution, among many other examples.
The official inflation figure is strongly affected by the B2B sector. The cost of B2B transactions is passed onto the consumer in the final price. For example, an oil refinery (a business) buys oil from another business. The petrol that is sold to consumers will be more expensive if this oil is also more expensive.
I meant priced goods and services. But again, CPI misses a lot more than GDP measures even without touching externalities. Some believe it’s good enough. I don’t.
Good enough for what? The official inflation numbers say prices have doubled in the past 30 years or so, which fits decently with my subjective assessment. Any small discrepancies between the “true” inflation numbers and the official figures are irrelevant to consumers, and any large discrepancies are paranoid conspiracy thinking.
Thay may be the case where you are. Certainly isn’t the case where I am. Housing doubled in a decade between 2010-2020 while inflation was under 2% in that period. No amount of calling it conspiracy thinking can hide the material effects of that. Most Canadians would laugh at such suggestion. 😄
Well okay, if the inflation is X it doesn’t mean that every single commodity became X more expensive. It’s an average.
Real estate typically appreciates at a rate higher than inflation, partially because land is finite, and partially because taxes haven’t increased at the rate productivity has (so there is more money available to spend on housing).
GDP growth is generally corrected for inflation (but not for population growth).
True, but given how much of the economy isn’t factored in inflation numbers, I think my joke is still in decent standing.
I’m not sure what you mean. There’s plenty of the economy that isn’t factored into GDP, but that’s particularly those aspects that don’t have a market price and thus aren’t directly relevant to inflation.
If, for example, the quality of teachers is reduced by 50%, then the price of the same amount of teaching has effectively doubled. But unless their salary is also affected (which is not obvious), how would you actually notice this in the inflation or GDP figures?
GDP measures all goods and services produced. Inflation measures a basket of consumer goods which excludes a lot if not most of the economy. E.g. the whole of the B2B sector. Any price incease that’s not part of the CPI basket which did not reduce sales volume would result in increased real GDP.
GDP most assuredly does not measure “all” goods and services in an economy. I gave you an example that isn’t measured by GDP in the very post you responded to.
GDP is a rough estimate of the market value of a certain part of the goods and services produced in an economy. Those aspects that are not directly traded for money, or have indirect effects, are disregarded. This includes but is not limited to leisure time, child-rearing in families, and pollution, among many other examples.
The official inflation figure is strongly affected by the B2B sector. The cost of B2B transactions is passed onto the consumer in the final price. For example, an oil refinery (a business) buys oil from another business. The petrol that is sold to consumers will be more expensive if this oil is also more expensive.
I meant priced goods and services. But again, CPI misses a lot more than GDP measures even without touching externalities. Some believe it’s good enough. I don’t.
Good enough for what? The official inflation numbers say prices have doubled in the past 30 years or so, which fits decently with my subjective assessment. Any small discrepancies between the “true” inflation numbers and the official figures are irrelevant to consumers, and any large discrepancies are paranoid conspiracy thinking.
Thay may be the case where you are. Certainly isn’t the case where I am. Housing doubled in a decade between 2010-2020 while inflation was under 2% in that period. No amount of calling it conspiracy thinking can hide the material effects of that. Most Canadians would laugh at such suggestion. 😄
Well okay, if the inflation is X it doesn’t mean that every single commodity became X more expensive. It’s an average.
Real estate typically appreciates at a rate higher than inflation, partially because land is finite, and partially because taxes haven’t increased at the rate productivity has (so there is more money available to spend on housing).