“If Washington spends $1 a year on bureaucrat’s salary, for example, GDP numbers will register growth of exactly $1, whether or not the employee has produced any value for that money. By contrast, if a firm pays an engineer $1, that $1 only shows up in the GDP if the engineer produces $1 worth of stuff to sell. This distinction biases GDP numbers—and the policies based on them—toward every-increasing government spending.”
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Veronique de Rugy
I’m pretty sure I’ve posted this before but I was just re-reading it and had to post it again. In her article ”Ugly Modeling” Veronique blows away the basic assumptions of Keynesianism. If I were ever to bump into her in real life I would surely ask her to autograph my copy of her article (located on page 16 of Reason’s June 2011 issue).
