Orhan Aygun (University of Minnesota)
Description: Reading group: Orhan Aygun (University of Minnesota)
Location: 368A Heady Hall
Contact Person: Bertan Turhan
Description: Reading group: Orhan Aygun (University of Minnesota)
Location: 368A Heady Hall
Contact Person: Bertan Turhan
GDP per capita and average family income are two distinct indicators used to evaluate economic performance. Each has its advantages and disadvantages, which vary based on the specific question and context.
Most economists would start to answer this question by asking a question: what is the objective you have in mind, and why? Specifically, what problem are you trying to solve for which the solution is a wealth cap? Wealth is a stock, of past accumulated income (from labor and capital), much of which has already been taxed under existing tax laws. Yes, the U.S.
Steady-state level of output per worker is roughly the same as per capita income in the long run. There is nothing good or bad about it, except countries and their residents enjoy higher standards of living in a material sense if the per capita income is high.
I am not familiar with the report you mention, but conceptually it is possible to construct and measure GDP by specific demographic groups, say by educational levels, race/ethnicity, gender, or age. The precision of those indicators would depend on the type of data available, and the soundness of the imputations needed. There are well-known difficulties in estimating aggregate GDP, but also well-known adjustments. For example, GDP includes imputed rental values of owner-occupied homes.
Income is the return of factors, such as labor, human capital and physical capital, that you own and exchange with other agents in the economy. Income inequality in different countries may arise for different reasons and thus it is difficult to have one answer for all.
When banks lend out money, they do so expecting repayment. If banks are not repaid, the value of the loan decreases. By law, banks are obligated to value their loans at the fair market value. Mandating that all repayment stop would mean that every loan would drop in value. Banks whose assets are lower than their liabilities are ‘bankrupt’ and would be closed. I suspect that your policy would bankrupt every bank in the United States.
The difference is between real and nominal growth. The GDP of a country is the $ value of the goods & services produced by that country in a year. Say, the GDP of a country in 2010 is $100 and that in 2011 is $110. The increase could have happened because a) the country produced more goods in 2011 than it did in 2010 even as prices did not change, or) it produced the same amount of goods in both years but prices of the goods (in $) went up. In case a), we would say that the real growth rate is 10% because none of that is attributable to price level increases (inflation).
The main problem with your calculation is that you are using as "G" the French government's budgetary expenditure, which most likely includes large transfer payments. Transfer payments are not part of GDP. Another problem is that you are adjusting for the government borrowing, which has no place in the GDP calculations.
Location: 368A Heady
Contact Person: Joydeep Bhattacharya