GDP and Government expenditure

[DrishanBanerjee]

Hello,

It turns out that the story I said about the way G was introduced in GDP was incorrect. :(
I had heard of it a very long time ago and messed up the facts. What had happened is that Simon Kuznets was asked to calculate the GDP of the US in the 1930s and he was initially against including G in the calculation of GDP because he had thought that a country could go to as many wars as they wanted and this would increase G and inflate the GDP numbers. However, during this time Roosevelt had signed off on the New Deal due to which the US did a lot of government spending and the NBER forced him to include it in his calculations. Their justification was that the US government was spending on things beyond war. Later on in the 1950s when the Cold War started, US wanted to show that Russia was doing poorly. Post WW2, the Russian economy had bounced back strongly and the US felt that they were sure Russia was inflating their GDP numbers somehow. Then it was the US who sent spies from the CIA to Russia to find out how they were fudging the numbers. (and not the other way around, sorry about that)

If anyone is interested they can listen to this podcast about the history of GDP measurement. It is quite fascinating and informative.

https://seenunseen.in/episodes/2019/7/22/episode-130-demystifying-gdp/

The sources are given in the source notes.

[pmichaillat]

Thank you for the updated story! That’s very interesting.

[YoshiShono]

Thank you, very interesting!

[DizhiWang]

The Juiciness of the story didn't decrease!