Economic Wisdom to Apply in Your Twenties

Chapter 15

Chapter 2 Section 3 Kissing the shoes of beautiful women can also increase GDP
Businessman A said to businessman B: "If you can go over and kiss that beautiful woman's shoe, I will give you 100 million yuan!"

Businessman B walked towards the beautiful woman without hesitation, knelt on the ground, kissed the beautiful woman's shoes deeply, and thus he won A's 100 million.

The next day, local newspapers ran headlines saying: "Businessmen rush to kiss beautiful women's shoes, making country's GDP 10% higher this year than last year."

Kissing beautiful women's shoes are actually contributing to GDP?It's ridiculous, but we want to know what GDP is.

GDP (gross domestic product) is the abbreviation of gross domestic product.It usually refers to the total value of the market value of all final products and labor services produced in the economy of a country or region within a certain period of time (a quarter or a year).

In economics, GDP is often used as a general indicator to measure the comprehensive level of economic development of a country or region, which is also a commonly used measurement method in various countries and regions.It reflects the total value added of various sectors of the national economy.For the understanding of this concept, the following issues should be paid attention to:

First, GDP is measured in terms of final products, which is the value of final products sold during the period.Generally, according to the actual use of the product, the product can be divided into intermediate products and final products.The so-called final products refer to the goods and services that can be directly consumed or used by people produced within a certain period of time.These products have reached the final stage of production and cannot be used as raw materials or semi-finished products in the production process of other products and services, such as consumer goods and capital goods.Intermediate products refer to the goods and services used in the production of other products for reprocessing or resale, such as raw materials and fuels. GDP must be calculated on the basis of the final products of the current period, and intermediate products cannot be included, otherwise double counting will result.

Second, GDP is a concept of market value.The market value of various final products is the value exchanged in the market, which is measured by currency and reflected through market exchange.The market value of a product is obtained by multiplying the unit price of this final product by its output.

Third, GDP generally refers only to the value resulting from market activity.Those unproductive activities such as housework, self-sufficiency production, illegal gambling and drug trade are not counted in GDP, as well as underground transactions and black market transactions.

GDP is the most concerned economic statistic in macroeconomics, because it is considered to be the most important indicator to measure the development of the national economy, but it also has certain limitations and is not a panacea.Because GDP cannot reflect social costs, the mode of economic growth and the price paid for it, the efficiency, effectiveness and quality of economic growth and the total accumulation of social wealth, nor can it measure social distribution and social justice.

Therefore, we should adopt a scientific attitude towards GDP, and we should not only pay one-sided attention to the growth of economic aggregate and speed, but ignore the loss of resources, environmental pollution, and ecological damage. This will often lead to economic growth, but the quality of life of the people will decline. Even the economy itself cannot continue to grow.

Wisdom Pieces: Green GDP
For a long time, some local governments have always put GDP first, often ignoring environmental protection.Because emphasizing environmental protection requires investment, many projects cannot be started, which will affect the growth of GDP.Under the guidance of the idea of ​​"emphasizing development and ignoring environmental protection", some leaders even asked the environmental protection department to give the green light to illegal construction.In order to correctly measure my country's economic aggregate and correctly guide the economic growth mode, my country is actively promoting the calculation method of green GDP.

Green GDP refers to the final result of a country or region's economic activities after considering the impact of natural resources (mainly including land, forests, minerals, water and oceans) and environmental factors (including ecological environment, natural environment, human environment, etc.). The resource depletion costs and environmental degradation costs paid in economic activities are deducted from GDP.Reform the current national economic accounting system, calculate environmental resources, and deduct environmental resource costs and environmental resource protection service fees from the current GDP. The calculation result can be called "green GDP".

The formula for green GDP can be expressed as: Green GDP = total GDP - (environmental resource cost + environmental resource protection service fee)

(End of this chapter)