How do we know the real size of China's GDP?
xiaophil
December 29, 2009, 10:49 PM posted in I Have a QuestionAs a person who really knows nothing about such matters, I'm wondering if any fellow poddies can tell me if experts can really know how big the GDP of China is? Yes, I have read that there are different ways of measuring GDP, but that isn't what I'm getting at. I assume that no matter what method is used in measuring GDP, the result is only as good as the quality of input data. These 5 points are what have been ping-ponging in my head lately:
- Sometimes I think the Chinese economy is much more massive than it already is because I often see people not reporting money. It is very normal. From what I hear, this goes on at all levels of business.
- Sometimes I think that it is much smaller because China isn't known for transparency, and so I figure the government exaggerates figures to get face and make its population happy.
- Sometimes I think it is a combination of 1 and 2 and the end result is the two factors somewhat cancel each other out.
- Sometimes I think maybe the economists' calculation methods have a way around 3 and 4.
- Or none of the above.
Can anyone give any insight? Sadly, I might not be able to get online much today, but I will check in if I can.
bodawei
December 30, 2009, 03:09 AM@xiaophil
I should be able to help you but I am also interested to see if there are any resident experts. But a couple of points occur to me:
First, it may be some comfort to know that GDP is a statistic more important to newspapers than to economists. It is a very dodgy concept, regardless of the level of accuracy.
I expect that China uses one of the standard approaches to measurement. And statistics are collected by the National Bureau of Statistics. As you say, much of the money is not 'reported', but there are ways around this. Economists can be devious. :-) You may not need to measure money flowing at the level where people do not keep records.
Of course much of the economy is not reported in the United States as well; this is one reason why GDP is of limited value.
An economist is always interested in 'what lies beneath the surface'. [Cue Jaws soundtrack].
changye
December 30, 2009, 03:13 AMAll I can say is that economic statistics in the PRC might be slightly less unreliable than those in Russia.
xiaophil
December 30, 2009, 03:39 AMbodawei
Thanks for your insight. It filled in some gaps for me. Basically, I have felt that the the concept of GDP always seemed a bit too abstract to really say anything concretely. A useful pointer, perhaps, but not the full picture. Anyway, I'm sure the drug dealers in America aren't reporting their income, haha.
Changye
I love your humor! Keep it coming.
orangina
December 30, 2009, 01:09 PMDrug dealers in America are reporting their income if they learned anything from Al Capone... and prostitutes and drug dealers reporting income was the start of the ACORN scandal.
Sorry, off topic. GDP is useless in my opinion.
waiguoren
December 30, 2009, 01:31 PMContinuing with the off topic (and dated) diversion:
http://www.straightdope.com/columns/read/295/are-you-required-to-report-illegal-income-on-your-tax-return
An interesting read, nevertheless.
bodawei
December 31, 2009, 03:30 PMAh, just to correct perhaps a mis-interpretation of my original post, it is not illegal activities that I was referring to that avoid the GDP boffins. I think that some probably does, but the significant area of 'production' that does not get counted is unpaid work - eg. people that run households, unpaid carers of old people and children, and all of that volunteering that is now a significant part of our economies. Anybody that does something for 'fun' escapes the net.
And the major flaw in the common interpretation of GDP as a 'good' thing is that all production is counted - even the 'bad' things in our lives. So for example, the effort in numerous wars being fought around the globe are counted, as is the efforts in restoring peoples lives (if possible) in the event that the fighting stops. All effort involved in cleaning up every kind of pollution, damage and injury suffered by the world's population is counted. As is any paid work associated with socially and personally undesirable activity such as domestic violence; child abuse; child pornography; murder; torture; trade in drugs, organs, prostitutes and children; assault; arson; vandalism; piracy; etc. Every traffic accident, drowning and overdose. Every execution. Every cent spent on maintaining our gaols. In fact every human tragedy is counted. So when you see a GDP figure quoted in the paper just remember that it is not just about honest labour. This is the main reason why it is a poor indicator of 'quality of life'.
pretzellogic
January 02, 2010, 05:32 PMI do recall one of my econ professors implying that the numbers that you generate are dependent on what you want to use the data for. It isn't clear to me why you want to know other than general curiousity, which is of course fine. But depending on what you wanted to do with GDP, you could remove or incorporate assumptions to somewhat suit your needs. I realize this isn't much of an answer.
xiaophil
December 29, 2009, 10:56 PMerrr, number 4 should say:
Sometimes I think maybe the economists' calculation methods have a way around 1 and 2.
Not sure what happened there.