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GDP, the climate crisis and how to think like an economist

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When it comes to “thinking like an economist,” the usual ideas are about supply and demand, prices and incentives and opportunity cost.

That is all well and fine, but there is another important yet neglected component of the economic way of thinking: an intuitive understanding of the size of gross domestic product and a preference for assessing magnitudes as a fraction of GDP.

While economics has a reputation for being pessimistic (“the dismal science”), most economists I know are pretty optimistic and tend to see most systems as being robust. In part this is because they have some understanding of the size of the U.S. GDP — about $23 trillion, with plenty of GDP in many other countries as well.

An appreciation of GDP helps keep things in perspective. Say there is some social or economic trend you dislike or think dangerous. One inclination would be to try to visualize that trend as a share of GDP. Most things are a pretty small fraction of GDP, reflecting the scope and the robustness of the U.S. economy. In one sense America is a vast and sprawling system of shopping malls, restaurants, factories, coffee shops, construction sites, art galleries and much, much more.


© The Japan Times

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