Governments can and do target GDP with their spending, with predictable results. The classic example is "ghost cities" in China. They have ghost cities nobody lives in, ghost roads nobody drives on, and ghost bullet trains that go nowhere useful. All because regional governors are expected, one way or the other, to match GDP targets for their regions.
Goodhart's law applies here. "Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes." or "When a measure becomes a target, it ceases to be a good measure."
GDP is subject to manipulation when it becomes a target. So is lots of other things like "Consumer Price Index", which nowadays doesn't index a whole lot other then what the goverment's target is for inflation (and yes, the Federal Reserve actually counts as part of the "government" here).
Which means that GDP, like the CPI, is not particularly useful measurement anymore.
Most of the "Ghost Cities" that you read about ten years ago are now normal cities full of people. The Chinese innovation was building the cities before you moved people there, "opening" the city empty and then watching it slowly fill up with residential and commercial over a decade or two. This was always the plan. In the US, our current plan for cities is "Don't build them at all". In the US media we obsessively create headlines over Those Wacky Chinese And Their Weird Things, but we come up well short in this particular comparison.
For historical finance-culture reasons (they're reflexive savers, and there aren't many other investments allowed), China does have a lot of real estate investment relative to population, even considering their rapid urbanization, and not all of it is looking to be sustainable; In retrospect there's been a bit of a bubble. But >90% of it? There are hundreds of third/fourth-tier cities housing hundreds of millions of people that might have drawn fire originally under "Ghost City" theory.
In a worst-case scenario, what Chinese people get instead of a return on their nest egg investment is inexpensive houses/apartments with more living space, and maybe the option to support themselves without a DINK family.
GDP has never been that great a measure but it makes absolutely no sense to exclude one of the biggest demand factors (government spending).
Most people that I know who are credible on this topic pay much more attention to real GDP growth (ie change in GDP after accounting for inflation) than nominal GDP itself.
It’s important to note the western myth of “ghost cities”. It goes that the cities were built and were never intended to be, and forever will be empty and unpopulated.
It’s hard to imagine in the west just how fast china is urbanizing- and the immense scale that the government is preemptively tackling a housing crisis.
GDP is it a useful measure? Maybe? Maybe not? What is your argument and how does the GDP numbers support it?
Ghost cities like Pudong, which now houses 6 million people? Building in advance of demand seems far more reasonable than places like SF which struggles to build anything at all.
> Which means that GDP, like the CPI, is not particularly useful measurement anymore.
This is just nutty extrapolation.
Does "Goodhart law means that human height and weight are not accurate anymore, because people target them. We can't trust weights and measures." sound sane?
Governments can and do target GDP with their spending, with predictable results. The classic example is "ghost cities" in China. They have ghost cities nobody lives in, ghost roads nobody drives on, and ghost bullet trains that go nowhere useful. All because regional governors are expected, one way or the other, to match GDP targets for their regions.
Goodhart's law applies here. "Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes." or "When a measure becomes a target, it ceases to be a good measure."
GDP is subject to manipulation when it becomes a target. So is lots of other things like "Consumer Price Index", which nowadays doesn't index a whole lot other then what the goverment's target is for inflation (and yes, the Federal Reserve actually counts as part of the "government" here).
Which means that GDP, like the CPI, is not particularly useful measurement anymore.