The quote discusses how economic measurements can sometimes fail to capture the true value of certain types of spending and production. It points out that when a private company spends heavily on employees but produces something that fails to gain traction or sell well, this effort does not contribute positively to GDP because there is no market value generated. In contrast, any government spending is automatically included in economic growth measurements regardless of the effectiveness or outcome of those expenditures.
The deeper meaning of the quote highlights issues within how economic activity and productivity are assessed. It suggests that the way we measure contributions to GDP might not accurately reflect real-world success or efficiency. The inclusion of all government spending without considering its impact or quality raises questions about the validity and comprehensiveness of current economic indicators. This insight prompts a broader discussion on whether alternative methods for evaluating economic performance could provide more accurate reflections of true value creation in society.
Robert Higgs is an economist known for his work on political economy, particularly focusing on the relationship between government intervention and economic outcomes. He has written extensively about how various forms of government activity can influence economic behavior and market dynamics in ways that are not always beneficial or reflective of genuine productivity gains. His perspective often challenges conventional views on economic measurements and the role of governments in economic systems.
