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Fall 2013

ISSN 0890-913X

Volume 29, Number 1

Categories: Fall 2013 | Economics | Government policy

Gross Actual Product: Why GDP Fosters Increased Government Spending and Should Be Replaced

Brian Kent Strow, Western Kentucky University

Claudia Wood Strow, Western Kentucky University

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TheJournalofPrivateEnterprise29(1),2013,53–71GrossActualProduct:WhyGDPFostersIncreasedGovernmentSpendingandShouldBeReplacedBrianKentStrowWesternKentuckyUniversityClaudiaWoodStrowWesternKentuckyUniversityAbstractCallsforincreasedgovernmentspendingortransferpaymentsundertheguisethattheywillincreaseeconomicgrowthasmeasuredbyGrossDomesticProductaretautologicalatbest.Ifonedefinesgrowthasmoregovernmentspending,thenmoregovernmentspendingwillbydefaultincrease“growth.”Byreassessinghistoricaldatainlightofvoluntarytransactions,thispaperillustrateshowtheuseofGrossDomesticProducthasinfluencedpolicymakerstoengageinpoliciesthathaveslowedwealthcreation.TheauthorsdemonstratehowGDPitselfhasbeenusedasatooltoincreasethesizeandscopeofgovernmentandproposeanalternativemeasurementtobettermeasuregrowth.JELCodes:H50,H10,E20,E61Keywords:GDP;Governmentspending;Nationalincomeaccounting;EconomicgrowthI.IntroductionThe2007–2009recessionfocusedtheattentionofeconomists,politicians,andthegeneralpubliconnationalincomeaccounting.Everyonewantedtoknowjust“howbad”theeconomywas.Theyalsowantedtoknowtheeffectivenessofgovernmentpoliciesinturningtheeconomyaround.Theagreed-uponmeasureofsuccesswasimprovementingrossdomesticproduct(GDP).Economistsdesigned,andpoliticiansimplemented,policesexplicitlydesignedtomaximizecurrentGDP,subjecttofewifanyconstraints.Thepopulardebateamongeconomistsbecamewhetherornotthestimuluspackageindeedstimulatedtheeconomy,andifso,bywhatmagnitude.WhileLarrySummers,RobertBarro,andothersarguedoverthesizeoftheKeynesianspendingmultiplier,theyallseemedtoagreethattheappropriatemeasureofsuccesswasa53

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Metadata [hide]

Title	Gross Actual Product: Why GDP Fosters Increased Government Spending and Should Be Replaced
Authors/Creators:	Brian Kent Strow, Western Kentucky University Claudia Wood Strow, Western Kentucky University
Year:	2013
Volume:	29
Number:	1
Pages:	53 - 71
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Economics, Government policy

Citation:
Strow, Brian Kent; Wood Strow, Claudia / 2013. "Gross Actual Product: Why GDP Fosters Increased Government Spending and Should Be Replaced." The Journal of Private Enterprise, 29(1): 53-71.