American Economics Thread
- Thread starter Bernard
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This topic on power consumption vs economy growth has been beaten to death a few times. Power consumption is a good metric for manufacturing based economies like China. But the US economy is service based. It takes far less energy to create a trillion dollars in GDP in the US than to create seven trillion yuans in China.
For example, the healthcare sectors in the US economy added 1.8 trillion dollars, IIRC, to its GDP in 2023. How much more energy would it have required to produce 1.8 trillion dollars worth of cars, cellphones, and washing machines? I bet it would have been a lot more whether it was in the US or in China. And we are not even touching the financing sectors that probably use even less energy than the healthcare ones on a dollar to dollar basis.
In a sense, the US is indeed more energy efficient in growing GDP than China.
For example, the healthcare sectors in the US economy added 1.8 trillion dollars, IIRC, to its GDP in 2023. How much more energy would it have required to produce 1.8 trillion dollars worth of cars, cellphones, and washing machines? I bet it would have been a lot more whether it was in the US or in China. And we are not even touching the financing sectors that probably use even less energy than the healthcare ones on a dollar to dollar basis.
In a sense, the US is indeed more energy efficient in growing GDP than China.
The more important set of factors is to look at how the economy of both countries affects the living conditions of the people in their respective countries. Healthcare spending has risen 40% vs wage growth since the late 90s in the US, has healthcare indicators improved at least somewhat proportionate to that degree of spending? (life expectancy (which does have a ceiling to be fair), infant and maternal mortality, mortality from common ailments and health conditions, like heart attacks, etc)
The US has the highest per capita healthcare spending of any OECD country (twice the OECD average) but some of the worst outcomes, with similar life expectancy, infant and maternal mortality figures to a developing economy like China. .
Whereas the growth of new industries in China which have helped drive Chinese economic growth (like cheap EVs and renewable energy) has had a more obvious improvement to the lives of Chinese people. Even comparing the costs of owning an ICE vehicle vs an EV, charging EVs is significant cheaper than paying for gas for ICE vehicles. This is not even counting the positive externalities of renewable energy in reducing carbon emissions and smog.
That's why the obsession over GDP numbers is not entirely justified. You can certainly look at GDP, but you also have to look at other metrics to accurately determine the living conditions of the average person in one of these countries.
The US has the highest per capita healthcare spending of any OECD country (twice the OECD average) but some of the worst outcomes, with similar life expectancy, infant and maternal mortality figures to a developing economy like China. .
Whereas the growth of new industries in China which have helped drive Chinese economic growth (like cheap EVs and renewable energy) has had a more obvious improvement to the lives of Chinese people. Even comparing the costs of owning an ICE vehicle vs an EV, charging EVs is significant cheaper than paying for gas for ICE vehicles. This is not even counting the positive externalities of renewable energy in reducing carbon emissions and smog.
That's why the obsession over GDP numbers is not entirely justified. You can certainly look at GDP, but you also have to look at other metrics to accurately determine the living conditions of the average person in one of these countries.
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Let's say it is far more energy efficient with sevices in the US. But I doubt the US can have a comparable economy using half the energy as China. It would be reasonable of China uses 10%, 20% or even 50% more. Not 200%. If the US can have a comparable real economy with "services" then every poor nation would use this route instead of investing trillions in infrastructure and factories like China.
Nigeria, India and South Sudan can just develop "services" to become developed without building anything and without using using electricity.
Do you realize how ridiculous this shit sounds?
Now, let's say this fairy tale "service" economy is real. But shouldn't even a service economy need more energy as it grows? You can be super efficient but to grow you still need to use more energy. Otherwise, you are talking about a perpetual motion machine -- things just keep going without needing to put in energy.
Sorry, this fairy tale makes no sense in the real world.
You cannot grow an economy without more energy. The truth is you simply have inflation for the price of your produce which in the accounting of nominal GDP is not adequately normalized for inflation.
Because nominal GDP is in dollars, flipping a Big Mac that cost $2 in 1994 but $10 in 2024 results in massive gain in GDP but nothing is actually gained in the real economy. Service and actual produce is exactly the same.
Of course I do. But you missed what I said: “the US is indeed more energy efficient in growing GDP than China”. I highlighted the subtlety this time.
AssassinsMace
Lieutenant General
It literally does not work mathematically as I've shown before.
It's not ridiculous whatsoever because China has way more manufacturing and way more people.
"Real world" is in nominal dollars, not PPP or "real income".
That's not what GDP is.
GDP cannot be represented as some function of time g(t)? Then how is it a mathematical object?
Calculating GDP is a matter of adding things up. You can certainly use it in a time function, but attempting to do so in order to argue that electricity consumption over time must go up is not coherent. Variables affecting GDP are not fixed and of course the premise that you cannot expand an economy without expanding energy consumption is also not true.
This entire conversation has been increasingly silly because there are plenty of criticisms you can make of the US economy without trying to argue that US economic data just "makes no sense".