Stuffing the GDP numbers upward entails:
The changes involved are pretty simple. Beforehand, if a factory bought a drill press, the government would count that as an investment that would generate income over time, depreciating along the way until its value added fell to zero.
But consider the movie companies or TV studios that produce lasting hits like “Star Wars” or “Seinfeld.” They, too, spin off years of revenues. In that sense, their production is much like a capital investment, though there’s been no place in the national accounts to score that investment.
Now there is a new category in the quarterly G.D.P. reports called “intellectual property products,” including “entertainment originals.” For example, the production costs of what the B.E.A., a part of the Commerce Department, calls “long-lived TV shows” — ones that provide a steady stream of income, like “Seinfeld” reruns — will for the first time be counted as investment. That’s right — the ultimate show about nothing will now add billions to G.D.P.
Research and development spending that was previously treated as an expense to business, the same as paper clips and electricity, will also now be treated as an investment with the potential to generate future income.
The logic here is solid. Spend a few hours on Netflix and you’re happily consuming the results of considerable R & D in streaming technology, along with investments in the shows themselves. It seems clear that the intellectual property called “The Sopranos” is as valuable to its owners as the laptop and software enabling you to binge-watch it.
Still, if that sounds squishy, that’s because it kind of is. Also, most people may not react well to being told that, according to the B.E.A., we’re all about $1,800 richer on a per-capita basis — but only on paper. Your paycheck’s still your paycheck. Have a nice day.
Okay, I start a production company, make one lol cat video, and one person watches it. The GDP has now gone up a few pennies?
Aside from padding the size of the economy, this also has the effect of making us look less taxed than we actually are. If you artificially raise the GDP, this means that the ratio that is governments’ spending over GDP by definition will decrease, making big spending governments (such as the American Federal government in the Obama era) look smaller than it actually is. Related news…the higher the GDP can be claimed to be, the smaller will be the percentage that Americans donate and give away relative to the GDP, ergo Americans will seem to be less generous.
N’Deshawntavious buys a hot gun from the black market for twice as much as it would cost to buy it legit (if N’Deshawntavious could buy it legit, which he probably couldn’t because he’s an underage convicted felon). He uses that gun to protect dope territory and to threaten customers who are in arrears. Therefore, the illegal gun is a capital investment that helped him earn money. Do we count that as part of GDP? Especially considering that when the gun was legally purchased some time in the past, that went into the GDP. Therefore, you have the same gun double-stuffing the GDP because of its legal market value and its black market capital investment value.
This is getting comical.