Studies of Economic Change

Gross domestic product

In general the gross domestic product is considered as variable which is determined and controllable by economic measures. Economic growth would be the correct solution to decrease the unemployment rate. To prove this statement the parameters of the gross domestic product are analysed in detail. It is the factor of population, employment, hours worked and labour productivity.

If it is noted that a factor is not variable it does not mean that political actions have categorically no affects: Of course it is possible for example to influence the development of the population by ensuring a good future for the youth or the economic growth by a reasonable fiscal policy. Instead it means that these factors are affected by overriding "laws" in the long-term. Political actions only cause changes in the short-term. Assuming that the economic measures are optimised already the factors are based on the following "laws":

1. The growth domestic product (GDP) is determined by the social structures. Industrialised countries are subject to an economic life cycle which is characterised by decreasing growth rates due to the "law" of diminishing marginal utility during the saturation phase. (Additional growth leads to less additional utility.)
   (GDP = Function of the "law" of diminishing marginal utility:     not variable)
2. The development of the population depends on the birth rates and mortality rates. Because of the law of large numbers it is based on statistical phenomena. The population is predictable for a long period.
   (Population = Function of statistics:     not variable)
3. The labour force participation (LF) as share of the working people to the population is variable within the demographic development as only a part of the employable civilians work actually. Only children and the elderly can definitely not be expected to work.
   (Labour Force = Function of demographic development and political will:     variable)
4. The hours worked are in principle a matter of free choice. They are determined by the collective bargaining parties and the legislative. There is no natural law which dictates the hours worked except the necessity to sustain the people's basic needs.
   (Hours worked = Function of political will:     in principle variable)
5. The labour productivity depends on the scientific and technical development which is accelerated by high demands. This means high demands support a evolutionary development.
   (Productivity = Function of the idea of the evolution theory:     not variable)

Consequently the gross domestic product is influenced by its own "laws" and cannot be controlled by economic measures if the political conditions are optimised already. But as we have learned at school an equation has to have at least one variable. So only the employment and the hours worked are left as variable. Therefore the equation has to be changed.