[nocar]

As an environmentalist, I have read many critical views on the meaning of GDP (gross domestic product), and how it measures economic activity rather than human well-being.

Still, I have a specific question to the economically knowledgeable people on this forum. I sort of know that all buying and selling is counted. Does that go for houses too? Anytime a house is sold (not a new-built one), this adds to the GDP? So if people move a lot, GDP goes up?
If house prices go up, GDP goes up? And then the people in charge of a nation's economy can be proud?

Americans tend to move a lot more than the Swedes, for example. Can part of the difference in GDP per capita be explained by Swedes buying fewer houses due to less moving (allowing for more stable communities)?

I am rather intrigued by the world view of economists, and I really want to know the details of their measurements.

How do economists collect the data for GDP anyway?

Nocar

[Licho]

http://en.wikipedia.org/wiki/Gross_domestic_product

[JoeW]

There are really two ways to calculate GDP:
1) Sum of all incomes
2) Sum of all products

In the case of the buying and selling of existing homes, I would think that this should not be counted in GDP. No product has been created.
New homes, however, are an additional product that has been created, and therefore should be counted. But what should be counted? The building materials are already counted when they're sold to the builder because they are finished products, aren't they? So perhaps just the cost of labor to build the home should be added to GDP.

In the end, I think that using method #1 to calculate GDP involves a lot less thinking about semantics.

[JoeW]

Looking at it from an income standpoint, the capital gain on a home is income, so the realization of profits from rapidly increasing home prices (even for existing homes) must add to GDP, because the profit is really income.

[Mercani]

GDP definitely doesn't measure human well-being correctly.

If your house gains value, GDP rises. But you're still living in the same house !

If your house burns during a great fire, does the GDP go down? How is this taken into account?

[jaakkeli]

$this->bbcode_second_pass_quote('Mercani', 'I')f your house burns during a great fire, does the GDP go down?

[nocar]

Hey, it is really wonderful to get answers this way, thank you!

But I am still struggling to understand what goes into GDP, and how the specific instance of different rates of moving house will affect (or will not affect) a difference in GDP.

As a non-economist, I am not even sure what "capital gain" is.

Let's take a house-owner who has lived for 10 yrs in the same house. Bought it for 200.000 Usdollars, now sells it for 600.000 because she and her family has decided to move to another city, and because housing prices has taken off upwards. Is her capital gain 400.000? Shouldn't inflation subtracted ? And in reality, she has paid more than 200.000 for her house, because of interest? So what is her capital gain, which is income, which is entered into GDP?

Next step is buying a new house. She finds an equivalent house and pays 600.000 dollar for it. She has not increased her wealth at all, still live in the same sort of house (but of course she has really spent lots of many on moving vans and such, which I suppose is income for someone else thus enters GDP - let's disregard that). Is she still considered as having made a capital gain, as if she did not have to invest her money right away?

nocar