Unemployment should drop GDP...shouldn't it?

[PARAdoxiBLE]

@Chantern15

It could be argued that most countries have exceeded potential GDP, as most countries have inflation.

Full employment is defined as virtually (~100) all those who can work, are working, which is as good as saying zero unemployment, because even if only a few hundred people are left unemployed, they are not nearly enough people to ensure that employers can have a sufficient number of people if they need to. I never said that GDP at full employment is useless. I said it’s not preferable, I did not say that it’s not useful, it is useful, it keeps people busy and out of radicalization, it mitigates poverty, it boosts wages, it does many other things, but it reduces the fluid movement of labour in an economy.

Saying Potential GDP to be not preferable cuz it’s not actually efficient isn’t that different from “nominal output of machines is useless (or not preferable) because it costs more to eliminate losses so that you can reach there”. That’s how your words sound like. What’s the point of arguing ‘max potential’ to be inefficient except for nitpicking?

Also, you have said “Although we at this moment don’t know what your formula for GDP is (i.e. how have you redefined it). So, it would be helpful to know that.” and then “Yes, I could look at all the values which increase disposable income in game, but it would be easier, if Cliff could write the formula here, with a legend for all the inputs.”. It definitely sounds like you are linking disposable incomes with the GDP since there’s nothing to be called ‘formula’ for disposable income.

@Chantern15

If you raise Sales Taxes (which is essentially a tax on consumption) high enough, it really reduces GDP, which reflects that in game Cliff has assumed that GDP is also about consumption, not just production. He is after all an economist and C + I + G + (Ex - Im) is Econ 101.

Sales Tax or Value-Added Tax reducing the GDP doesn’t mean the consumption is factored in its calculation. If you regard that as a proof, you can also say pollution is a source of GDP since Pollution Control also reduces the GDP. The fact Sales Tax has a negative impact on GDP just reflects losses incurred by taxation in the markets. C+I+G=Y just means parts of Gross Domestic Product are consumed by the people, not consumption contributes to the production (GDP) directly. You need to produce or earn more goods & services if you want to consume more anyway.

I’d also like to remind a comment written a month ago.

@cliffski

But although the retired consume goods and services, they do not produce any goods or services that get counted as GDP (granted they can provide childcare etc, although less no now that families are more geographically mobile).
As far as economic growth is concerned, its production that counts, not consumption, which will always globally match production.
So if the state retirement cost drops because the elderly die young, that money is either spent elsewhere by the govt, or returned to the working-age citizens through lower taxes.

https://forums.positech.co.uk/t/adding-a-model-of-mental-health-to-the-game/18197/6