There’s a scene in an excellent but little known movie called Blue In the Face†, where a hustler played by Michael J. Fox (!!!) asks another character “How much would I have to pay you to get you to eat a bowl of dog shit right now?” Which leads me to:
Seth Roberts’ joke post about China:
Person A to Person B: “See that piece of shit? If you eat it I’ll give you 100 million yuan.”
Person B eats the shit.
But Person A doesn’t want to give him 100 million yuan. He says to Person B: “How about I eat shit too? Then we’ll be even.”
Person B agrees.
Person A eats some shit. “Now we’re even,” he says.
They have just increased GDP by 200 million yuan.‡
I'm a big fan of GDP - it's the best game in town - but this is a good illustration of what can go wrong with GDP.
The practical concern is how much of reported GDP in a place like China is actually transactions like this. Certainly the Chinese are building things like high-rises that no one wants only to tear them down again shortly thereafter.
† The backstory with Blue In the Face is that the cast of Smoke had such a good time filming it that they decided to do another movie right then and there. I recommend both.
‡ For those inclined to think that GDP hasn't changed here, in principle, in-kind transfers like this do count as part of GDP. What’s key here is that the market value of eating the shit has been established. But, in-kind transfers are not measured well. So theoretically, this would be part of GDP, but for practical purposes it would probably be missed.
"They have just increased GDP by 200 million yuan"
Not unless they've got sales bills and tax receipts. If the transaction isn't visible to the state, or at least to the people who keep property records, it isn't official.
That's my first response. My second is that the transaction may be a silly one which gets recorded anyhow, and this shows why we like to have several statistical figures to judge an economy rather than just GNP.
My third response ... Don't we generally exclude sales of used goods from GNP calculations, on the grounds that they're not "new" and thus not "production?" Feces really do see to fall in that category.
Posted by: mike shupp | August 10, 2012 at 02:07 AM
The point of the joke is that this is how GDP gets counted in China.
1) Visibility to the state is a hallmark of behavior in highly centralized states like China. Checking whether what is visible is also reasonable is a hallmark of governments, like China's, without good checks and balances.
2) Agreed. This is why even Li Keiqang, the presumptive leader of China has said that he doesn't trust their GDP numbers.
3) ;-)
Posted by: David Tufte | August 10, 2012 at 11:54 AM