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Has the formula for GDP ever changed?

The basic formula — consumption plus investment plus government spending plus net exports — never has, but the US in 2013 made a big change to its GDP accounting when it added both artistic creation and research and development to the total, which it had never done before. The change came because the international standards, the System for National Accounting, changed in 2008 and the US wanted to make sure its statistics would remain comparable to the rest of the world’s (this means the rest of the world has also or is also making these changes).

Those changes started including intangible things like the production costs on movies or a drug company creating a new treatment as investment, rather than intermediate costs. In addition, the BEA also started counting defined benefit pensions differently, adding them to GDP when workers recieved the payouts, not when employers paid money in.

The US isn’t alone in tweaking its formula. European Union regulations recently started allowing countries to include prostitution and the sale of illegal drugs in their counts of economic output. Britain, Italy, and Spain will all be changing their GDP calculations, but France has decided to stick with more traditional accounting.

Likewise, Nigeria recently changed how it calculates GDP, adding in previously uncounted areas like telecommunication and online sales. With that one change, the country became Africa’s biggest economy.

All of these GDP formula changes from around the world emphasize that the measure is much less black-and-white than it may seem. All kinds of activities that create value in the US economy that are not counted. Drugs and prostitution are included in that list of things that go uncounted, but so are a lot of other things: volunteer activities, unreported tips, and under-the-table work, for example. It also doesn’t include government transfer payments, like unemployment insurance and Social Security checks.

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