GDP is consumer spending, plus government outlays, plus gross investments, plus exports, minus imports. With the exception of exports, GDP measures spending.
But GDP does not distinguish between spending on good project vs. bad projects, between spending that results in production vs consumption, between debt financed and savings financed spending. There certainly must be differences.
Say the Pittsburgh Pirates, as an entity, have a budget of 45 million dollars and they are going to spend 7 million dollars on a power hitting first baseman. Is spending that money for Pujols the same as it would be for Overbay? Would things be the same if you borrowed money from next year to buy Pujols? Either way buying Pujols is a good deal for the team, in no way is buying Overbay a good deal. And going into debt to buy Pujols is still a good deal.
The problem here is that GDP is a poor marker, an inaccurate stat. It measures--except for exports--consumption, not production. It substitutes consumption for wealth.
That is a trailer park error.
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