As an ex-magician (hopefully, I get back to doing that soon), I’m always interested to know how people are deceived. It’s also one of the reasons why I like Medicine because you always ask yourself what could be causing a lab test to be falsely increased or what’s this thing that might be behaving like an infection (without being one). And so I was curious when a friend made a post about his friends comments on the “Singapore is the richest” article circulating around. It parallels what happens often in the field of biomedical research as well, the idea that a certain research finding, though not necessarily false, could be interpreted in a few ways.
Now, all I know about economics is that if you run out of money, print more!* So here’s Mr Isaac Chua explaining how the statistic doesn’t actually mean we’re all really rich.
“Decided to post this because it seems like many are misinterpreting the figures. Perhaps it’s due to the misleading title.
In the article, Singapore tops the GDP per capita list.
Yet, the gross domestic product (GDP) is the “market value of all officially recognized final goods and services produced within a country in a given period.” (Wikipedia) [Me : feel free to read further on Wiki]
It has nothing to do with personal incomes or wealth.
GDP is measured in several ways, and one of them is the expense method: GDP = C + G + I + (X – M).
C = Consumption
G = Government spending
I = Investment
X = Exports
M = Imports
A high GDP may come from high consumption, which could indicate that people are generally rich (or taking lots of debt). But it can also come from high government spending (such as for infrastructure) or investment (investment in here is not your own personal investment, but investment that companies make in property, machinery, etc.). A country that also has a high net exports (i.e. exports > imports) also has a high GDP. A high GDP may indicate a lot of money and goods are changing hands among people in the country, and out of the country.
So GDP has nothing to do with personal incomes or wealth. They may be correlated, but they are not the same thing.”
*Kidding, even I’m not that dumb. However, I do not doubt that there might just be genius who figures out a “right way” to do it.