Article Analysis #2

Article Analysis #2 - overstates as well as undermines some...

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Colin Desmond 1-29-09 ECON 2020 - 10 Article Analysis #2 An Overdue Correction Standing behind a podium facing agitated reporters, with the economic recession hover- ing over his head, ex-President Bush digs for good signs that our economy is back on the rise. His defense: GDP growth went up 3.5% in the third quarter. Pondering his statistic, many wondered how with a near bankrupt banking system and booming employment rate our GDP could rise. This brings a question to my mind: how effective is GDP in portraying our economic status? According to Gernot Wagner’s article, “Fixing GDP: Green Accounting in the United States”, it’s not so effective. GDP doesn’t follow an accounting-style equation. According to the GDP equation, costs are pluses, and externalities and volunteering are irrelevant. Therefore, GDP
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Unformatted text preview: overstates, as well as undermines, some very important numbers. Take a group of miners, for ex-ample, that create tons of coal in their career, but develop lifelong health problems and diseases, and need to pay health costs. While truly the health costs are negatives so far as the economic value of coal goes, they show up as a positive in the whole GDP equation, along with the coal they’ve created. This creates a problem in overstating the true value of coal, along with our real GDP. GDP hasn’t been revised because such revisions would most likely include negative ex-ternalities and depreciation, which would in turn undermine the importance of the mining indus-tries. Therefore, many pro-mining representatives got together to stop the revision....
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