The case of the man giving a job to maid is definitely worth more to the economy than the man who sticks it all under the mattress.
Why? If the man sticks money under the mattress, he reduces inflation (slightly) and increases the buying power of the rest of the world. In practical terms, a person who was a marginal purchaser of maid services is now able to have a clean home.
I.e. for simplicity suppose there were 1000 people willing to buy maid service for $25k, 1 person willing to buy at $24,999 (the marginal purchaser) and 1000 maids. If the man becomes a miser, the price of maid service drops to $24,999 and the marginal purchaser has a clean home.
Saying it's a bad measure of individual wealth, while true, is completely beside the point. It was never meant to measure that.
Tell that to whoever wrote the article. You and I seem to be in complete agreement.
> Why? If the man sticks money under the mattress, he reduces inflation (slightly) and increases the buying power of the rest of the world.
Because the money under the mattress doesn't produce a good or service. The maid does. By spending money you increase the number of goods and services available to the world. That's the way our economy tends to work. You spend money to get goods and services, which encourages the production of goods and services. Money in motion leads to more stuff. Money not in motion means people are sitting idle, not producing the goods and services they otherwise would. Whatever good the money under the mattress does for the inflation rate, it's more than counterbalanced by the fact that the world has less stuff to spend its money on.
We're probably not disagreeing as much as you think. I started off by saying that GDP has problems. My favorite example of the problem with GDP is that Apple charges $100 for $27 worth of ram and they have magically added $73 to the GDP, when really the only thing they've added is a gross inefficiency.
What I objected to way back in the initial post was your example: A person spending the money giving someone a job vs. not spending the money. That doesn't illustrate why GDP is messed up at all.
Saving money is great, because it allows you to more/better goods+services for your buck. Getting more stuff is what the economy is about. But you will help the economy much more if you take the money you saved and buy more stuff, or invest it, or whatever, than if you put it under the mattress.
A boom is when the money is in motion. A recession is when the money isn't. Even if the size of the economy shrinks, the number of actual dollars hasn't. They've just stopped moving around, causing the prices of things, like stocks, or labor (wages), to plummet.
Why? If the man sticks money under the mattress, he reduces inflation (slightly) and increases the buying power of the rest of the world. In practical terms, a person who was a marginal purchaser of maid services is now able to have a clean home.
I.e. for simplicity suppose there were 1000 people willing to buy maid service for $25k, 1 person willing to buy at $24,999 (the marginal purchaser) and 1000 maids. If the man becomes a miser, the price of maid service drops to $24,999 and the marginal purchaser has a clean home.
Saying it's a bad measure of individual wealth, while true, is completely beside the point. It was never meant to measure that.
Tell that to whoever wrote the article. You and I seem to be in complete agreement.