Musing from my armchair, with a glass of ‘buy local’ wine bought through the new on-line ‘Buy from Benalla’ website beside me, I wonder about the accuracy of the GDP figures in terms of truly measuring production. An example used in Economics classes rings in my ears – if a person employs a paid housekeeper, GDP will increase; if they go on to marry and not pay this housekeeper, GDP will fall, although household production will remain the same.
COVID-19 regulations have clearly resulted in an increase in household production, production which is not paid for and therefore not included in GDP. Meals and coffees purchased in restaurants and cafes, which were included in GDP, are largely being produced at home. Office space is now being provided by households; children are being mentored if not taught at home. Videos and books which were sitting as ‘stocks or inventory’ are now being viewed; tasks previously in the too hard basket being tackled which will make future life operate more efficiently and effectively. Clothes are being mended, or produced; old projects completed, new projects around the house commenced and so much more.
While sales of the materials needed to complete production by households will go up and be included in GDP, the labour involved will not. Not being able to use our cars will mean that GDP as reflected by petrol sales will fall, even factoring in the reduction in petrol price; while at the same time there is a benefit in the reduction in pollution and green house gas emissions.
I wonder if some economists will point out that GDP figures are flawed in not measuring household production, which will clearly have increased during the COVID- 19 hiatus, and that it is possible to develop imputed values for this production. I very much doubt that this will happen. So, when I hear commentary about the GDP figures tomorrow, while obviously concerned about economic recovery, I will be taking some of the hype with a grain of salt!
“Armchair Economist (name supplied)”