Monday, May 04, 2009

If Non-Market Household Production Has Increased, Official GDP Stats Overstate Economic Contraction

Home construction is way down in the United States, but home production — work to produce goods and services for our own consumption — is way up. As people forgo expensive restaurant meals, they spend more time cooking at home. A Time Magazine poll reports that individuals are doing more housework and home repairs. Many Americans, famously including Michelle Obama, are planting vegetable gardens. Even some urbanites are raising chickens in their backyards.

Nancy Folbre, writing in the NY Times Economix blog, makes a good point: Adjusted for the increase in household production over the last six months or longer, the -6% contractions in real GDP over the last two quarters might overstate the severity of the contraction. That is, household production (cooking at home, home repairs, gardening, etc.) is NOT counted as part of official GDP output statistics because it is not market-based production. To the extent that Americans have increased household production in response to the economic slowdown, the BEA's official GDP statistics have overstated the true amount of economic contraction.


At 5/04/2009 10:28 AM, Blogger Walt G. said...

If we are going to start adjusting the official standards to measure output using extraneous factors, then we have to put a value on my time for changing my own oil. Wouldn’t the amount of money I saved changing my own oil be approximately balanced by the value of my time spent purchasing, changing, and disposing of the oil with a net decrease or increase of zero GDP? After all, time is money.

At 5/04/2009 1:01 PM, Blogger fboness said...

Economists don't want John Galt to leave the economy.

At 5/04/2009 1:55 PM, Blogger BxCapricorn said...

I had to read that three times to grasp the magnitude of misunderstanding. Think about the enormity of "economy" going on in the 3rd world, unmeasured.

At 5/04/2009 5:13 PM, Blogger bix1951 said...

the easiest way to increse GDP is for someone to get cancer and go in for the treatments.
bone marrow transplant
etc. etc.

so what are we counting? human welfare?

At 5/04/2009 6:53 PM, Blogger Craig said...

Using the GDP as the yardstick for the national economy will be our undoing if the idiot media don't do it first.

Who would've known that mowing my own lawn, lo, these many years, was unmeasured economic activity that caused the national accounts to be understated. Oh, my aching brain.

At 5/05/2009 3:56 PM, Blogger al fin said...

The Obama government needs to jump on this immediately. Think of all the taxes that are not assessed due to this overlooking of household production!

Don't forget the carbon credits from not driving and not operating industrial machinery while at home.

Thank god we have the kind of government and media that is willing to look into this economic activity at last and take it into account.

Not only does all of our money belong to the government, but apparently all of our time as well.


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