I mean… yes. That is how this works. The problem with its implied understanding is that the economists don’t appear to have gained anything from the work they paid the other to do. GDP is generally a pretty decent stat because people tend to pay things to do things that provide them with some sort of value.

With notable exceptions for things like war.

Right. Presumably in that scenario both economists thought it to be at least $100 worth of entertainment to watch the other eat shit, while both also thought $100 was enough compensation to eat it. Everyone is better off.

Just because you think you're better off doesn't mean you're better off though.

Why not? What we think is pretty much all that matters

Perhaps cumulatively, but in a particular moment? A infectious disease specialist may further raise GDP in this story, moments or years later.

Healthier gut biome, people pay for this stuff.

It’s supposed to go in the other end though. Stomach acid is unforgiving.

https://www.fda.gov/news-events/press-announcements/fda-appr.... """ The administration of fecal microbiota is thought to facilitate restoration of the gut flora to prevent further episodes of CDI.

The dosing regimen of Vowst is four capsules taken once a day, orally, for three consecutive days. """

That’s the pharmaceutical version. When going organic, you gotta make compromises.

(I’m kidding. Obviously we don’t put probiotic foods up our butt, even though I do find yoghurt works great as a lubricant)

To be pedantic, if you ate it fast enough in large chunks as economists do, the inner core might survive as the outer core dissolves at some rate (faster rate but thicker shell to compensate compared to the pharmaceuticals).

Just in case anyone ever needs to DIY a stool transplant, double encapsulation with inner gelatin and outer enteric coated capsules works. Do a colonoscopy prep the previous day and try to take repeat doses throughout several days and in between meals rather than all at once.

> GDP is generally a pretty decent stat because people tend to pay things to do things that provide them with some sort of value.

Only if the net value is positive-sum.

Setting a city on fire, or giving cancer to a million people, or just going down the street, smashing every parked car's window with a tire iron will likely increase national GDP.

Liekwise, people pay a lot of money for net negative-sum industries - the health insurance industry in the US immediately springs to mind. We'd all be better off without that parasite.

Net negative sum would by definition lower GDP.

GDP is a proxy for 'amount of work done that people were paid for'.

If I pay Fat Tony to break your legs, and then you pay a doctor to put them back together, this whole adventure increased GDP, but is a net-negative-sum activity.

"People have to do more work to accomplish the same amount of results" isn't a worthy goal in itself.

And me not working due to broken legs is somehow not relevant to the GDP? My capital being misallocated is not relevant to GDP? I think your example is quite likely to lower GDP...

Unless you earn more than the 200k the doctor was paid plus the 50k Fat Tony rightfully earned, the GDP grew.

You might want to think this through some more.

> My capital being misallocated is not relevant to GDP?

It's not. If I steal a million dollars from you, the net impact on GDP is ~0. Hell, if you were keeping it in your mattress, and I spend it on drugs and parties, GDP will actually go up.

GDP is a useful number, but it's not the only useful number.

If you steal 1 million out of my payroll account, GDP might go down because I might close my shop, for example. It really is not so simple.

Could one carefully construct examples, sure, does that scale - not so much.

Insurance companies had to pay €650M to cover the damages caused by the French ritos. It also costs to keep the perpetrators locked up in prison, French prisons are cutrently at 120% occupancy. But the French economy grew 0.2% in Q1 this year compared to 0.1% for the same period last year.

I mean, we have to pay someone to guarantee coverage in the event of catastrophic losses. You might even call them insurance companies.

If only there was a way to have just one of those insurance companies, maybe run as a government agency of sorts... Wait, I got one of those where I live, it's called the Ontario Health Insurance Plan. It is not amazing but it easily clears the extremely low bar of being better than the US health insurance setup.

Over in Manitoba they've got one of those for car insurance too. Amazingly, people continue driving there just the same, the government insurance plan never needs subsidies and Manitobans pay way less for insurance. Almost as if the concept of the free market being the best solution for market X needs to be tested once in a while just to be sure, and results may be surprising.

It's possible for really motivated individuals to run a government department well, if you have people of excellent character, work ethic and comp tence doing so, but there's not a load of incentive for them to be run well outside of that unlikely combination.

Well, while we're on the topic of insinuations that totally don't give away underlying biases, it's possible for really ethical individuals to run a number of competing corporations well, though there's not a load of incentive for them to steer clear of regulatory capture, cartel-like collusion and various other forms of customer-screwing behaviour.

The larger point being: there are many areas of the economy in which the free market approach is clearly better, and there are many other areas of the economy in which the free market approach is clearly deficient and a government-run agency is superior. Insurance is in neither of these convenient buckets. "Unlikely" is an opinion on a hypothetical; it is not necessary when real-world examples abound.

Any market is shaped by policy. It can be argued that the US health insurance market is not really free in significant ways and set up such that the net result is the mess we see. A government-run institution performing better than the private market is not necessarily a sign that the institution is good, it might just mean that the market is set up in a deficient way.

I mean, last time I looked, social security in France gave back 81€ for every 100€ invested. Swisslife (it was either 2018 or 2019) gave back the same year 67€ for every 100€. What's funny is that only 11€ went to shareholders that year, that mean that even w/o capitalists, sometimes public services are more efficient than private companies.

As I said a few comments above, it's possible for things to be run efficiently; there's just less of an incentive to do so.

In terms of this exact comparison - is this like for like? I don't understand it well enough to know.

I'm not insinuating anything; I'm just saying it. What do you think I was insinuating?

Too bad Manitoba guillotined its public telecom. How's Bhell treating you these days?

The risk pooling isn't the problem, its not why the industry is an unproductive leech on our society. The insane amounts of waste and bureaucracy it produces, and the price inflation it facilitates is.

(Not to mention suboptimal health outcomes arising from the perverse incentives it creates.)

We do have to assume that externalities are not so material as to render such stats misleading, yes.

But wouldn’t that be true of any kind of performance art? What value is created by me paying to watch a musician/movie/baseball? Fundamentally seems the same as watching someone eat shit for my amusement.

Your enjoying of it. The economists in the story don’t acknowledge enjoying making the other eat shit.

It is valuable to society to do things that create joy.

Shit eating may not hold up specifically.

Is that not the implicit agreement of capitalism? If I trade X dollars for a thing, I got something I value for it. Joy, revenge, boredom, or just a lighter load in the wallet. Something must have been gained. By definition, it seems that both economists gained the experience they wanted of watching the other debase themselves.

Yes. And GDP is a rough measurement of how much value is being created, in dollars.

One of the advantages of money is that the enjoyment is implicit in the exchange, with no explicit acknowledgment necessary.

The enjoyment derived by the watcher must exceed that of having $100 and using that money in the future, or he wouldn’t have paid out. The disgust of the eater is more than compensated by the $100, or he wouldn’t accept that payment and do the job.

Both coprophages have thus derived utility from the exchange. From an economic standpoint, eating shit is just a form of working.

A at-home dad get paid nothing to take care of his children.

He takes a 50k job, pays à baby-sitter 20k (said babysitter couldn't find a service job that could pay him 50k, weirdly), and voilà, 70k GDP.

I’m not going to argue that GDP is a perfect metric, because it clearly is not. But I feel obliged to point out that 5/7 of the GDP created in your own scenario is a guy doing presumably valuable work, and 2/7 is the baby sitter doing previously unaccounted for work; which is also based on wages, perhaps more fit to their skills.

It would be great if we could measure work done without exchange of goods however that is generally not so large as to totally distort the general numbers. To no discredit of the work parents do.

> He takes a 50k job

so, he produces 50k value somewhere

There are so many funny punch lines available after the second shit pile is eaten

"We earned 100$ each!"?

"We earned 60$ each and owe the state 40$!"

Or do you have a better suggestion? I will retell this story so please share.

The first economist picks the shit from the ground and sells it to somebody with a box for 25$, which delivers it to another person for 50$, which wraps it in a film and sells it to another person for 75$, which finally hands it to the second economist for 100$. GDP 250$. Add more links to the supply chain as you please.

GDP is estimated on a value added basis to avoid complex supply chains being worth more than the final sale price, FWIW.

It's one of the reasons it's so easy to screw up the estimates when companies have bigger inventories than usual...

In the real world, each would have had to declare $100 of income and pay the appropriate income tax. The more they eat, the more often money changes hands, the more tax income the government receives. Velocity of money. https://en.wikipedia.org/wiki/Velocity_of_money

This story ... was really good. I feel funny stories like these are way to rare today. They used to be way more common.

The revealed preferences in this story reveal that for these two individuals there is at least $100 of value in viewing this spectacle, and less than $100 distaste in performing this spectacle. Sadly GDP does not measure how much surplus value was created by these two transactions, given that maximizing utility is a better normative goal than maximizing GDP, but GDP did indeed increase by $200 and it is accurate in indicating that at least total utility was increased (less unaccounted for externalities like unfertilized trees or whatever).

> value

In this case we have two approximately equal economists, but in general any discussion about revealed preferences, utility, and value is remiss without a parallel discussion on how value is wealth-weighted. Feeding a starving orphan creates 0 economic value because the orphan has no money, but figuring out how to merge companies into a monopoly creates extreme amounts of economic value by way of making rich investors even richer.

> 0 economic value

Economic value is not only distinguished as economic measurement. This is why utility theory and revealed preference theory exist.

Translation: Economist 1 needed the pile of shit to be eaten but at that time was unwilling to do it for $100, Economist 2 is willing and is willing to take Economist 1's good faith agreement to return a $100 favor later on. Probably eating the pile of shit is not as expensive to Economist 2 as $100 at that time. Later Economist 2 discovers a pile of shit that he is unwilling to eat for $100, it's a more expensive exercise, perhaps to Economist 2 this pile of shit is worse, or he's not in the right state to do it. Economist 1 now considers this exercise worth doing for $100 and does so. They are both left in a state where they each had a pile of shit eaten on their behalf and they are otherwise net 0 in costs. Instead of $100 they could possibly have agreed between them their own currency of made up IOUs. They did indeed end up producing $200 of equivalent work. Without an ability to create a credible debt contract between them, the piles of shit would not have been eaten, and presumably they would both have been worse off. Unless as the joke implies they are complete idiots who ask people to do worthless tasks. In which case, ha ha, I get it.

Here is a less scatological parable about GDP.

Alice loves widgets. She would pay $100 for a widget. She goes on line and finds Bob offering widgets for sale for $100. Err, that is not really what she had in mind. She imagined paying $30 for a widget, and feeling $70 better off as a consequence. She emails Bob: How about $90?

Bob feels like giving up altogether. It takes him ten hours to hand craft a widget and the minimum wage where he lives is $10 an hour. He was offering widgets for $150. $100 is the absolute minimum. Bob replies: No.

While Alice is deciding whether to pay $100 for a widget that is only worth $100 to her, Carol puts the finishing touches to her widget making machine. At the press of a button Carol can produce a widget for only $10. She activates her website, offering widgets for $40. Alice orders one at once.

How would Eve the economist like to analyse this? She would like to identify a consumer surplus of 100 - 40 = 60 dollars, and a producer surplus of 40 - 10 = 30 dollars, for a total gain from trade of 60 + 30 = 90 dollars. But before she can do this she has to telephone Alice and Carol and find out the secret numbers, $100 and $10. Only the market price of $40 is overt.

Alice thinks Eve is spying for Carol. If Carol learns that Alice is willing to pay $100, she will up the price to $80. So Alice bullshits Eve: Yeh, I'm regretting my purchase, I've rushed to buy a widget, but what's it worth really? $35. I've over paid.

Carol thinks Eve is spying for Alice. If Alice learns that they only cost $10 to make, then she will bargain Carol down to $20. Carol bullshits Eve: Currently they cost me $45 to make, but if I can grow volumes I'll get a bulk discount on raw materials and I hope to be making them for $35 and be in profit by 2016.

Eve realises that she isn't going to be able to get the numbers she needs, so she values the trade at its market price and declares GDP to be $40. It is what economist do. It is the desperate expedient to which the opacity of business has reduced them.

Now for the twist in the tale. Carol presses the button on her widget making machine, which catches fire and is destroyed. Carol gives up widget making. Alice buys from Bob for $100. Neither is happy with the deal; the total of consumer surplus and producer surplus is zero. Alice is thinking that she would have been happier spending her $100 eating out. Bob is thinking that he would have had a nicer time earning his $100 waiting tables for 10 hours.

Eve revises her GDP estimate. She has committed herself to market prices, so it is up 150% at $100. Err, that is not what is supposed to happen. Vital machinery is lost in a fire, prices soar and goods are produced by tedious manual labour, the economy has gone to shit, producing no surplus instead of producing a $90 surplus. But Eve's figures make this look good.

If you zoom out and look at the aggregate widget contribution to the GDP (price * # sold), it is likely that the effect is either much reduced or goes away entirely. Fewer people will buy for $100, depending on price elasticity on demand the GDP number may in fact end up accurately reflecting that something shitty took place.

Thanks for the instructive example! Gives a much clearer understanding of GDP.

Anyone have recommendations for Economics books that explain such concepts with simple to understand examples?

Well, there's also $200 worth of shit no longer left on the ground, now that we have an established market rate of $100 per pile of shit.

This sounds good and funny at first but how is this different from this scenario: A software engineer pays a dentist for servicing his teeth and he turns around to pay the software engineer to build an appointment system for him? Clearly lots of value was created so unless this is to illustrate that GDP calculations can't filter out bogus transactions (bogus according to whom), I can't really make sense of it...

Eating shit provides very little value to anyone.

This example points out that we also have to look out whether GDP is also tied to valuable activities.

Things that come to mind are gambling, buying lottery, trading arts / crypto / stocks, and generally entertainment.

Some activities offer very little value.

This means these low value activities should reflect a minor part of your total GDP.

If the majority of your GDP comes from people in your own country trading arts with each other, you are fucked.

Tangential, but your joke got a laugh from Elon Musk: https://twitter.com/elonmusk/status/1699289522167517475

and proved, yes, there is such as thing as a free lunch... it'll just taste like shit