Is GDP growth good for standards of living because it's GDP growth or because of the factors that cause GDP growth?

GDP = Consumption + Investment + Government spending* + (Exports - Imports**)

A higher GDP implies people are able to afford greater amounts of goods and services, businesses are able to invest in future growth and wealth creation, government can offer more services, and people can trade for more goods they desire that are not produced domestically.

A growth in GDP necessarily means that at least one of these things increased in the net aggregate to a greater effect than the others were reduced- meaning that while one factor, say investment, may have declined, consumption or government spending or trade must have grown at an even greater rate than the declining factor, so the economy must be wealthier overall.

Whether these things are 'good' is a normative statement that can't be answered by economics alone, but I doubt many people would be willing argue a wealthier society is bad.

*A word on government spending. At first glance one might think that an increase in government spending shouldn't be counted for the purposes of measuring wealth in a society since government derives its ability to provide services from taxation and debt. However, this is accounted for by GDP, since an increased taxation rate on individuals will leave them with less disposable income thus reducing the factor of consumption, an increased taxation rate on corporations will leave them with less to invest with thus reducing the factor of investment, and an increase in tariffs will result in less trade. So we know that increasing government spending alone doesn't distort GDP to the effect that increasing government spending = higher GDP, since an increase in government spending implies a reduction in the other factors to a net of 0 effect overall on GDP, similar to how the balance of trade in a global scale always amounts to 0- they're both closed systems. Thus a higher GDP must come from true wealth creation.

**A note on imports. Again at first glance this calculation seems to imply imports hurt GDP, but what is actually happening is that imports are counted as consumption, so the purpose of subtracting imports from the equation is to avoid doubly counting imports as both a factor of consumption and trade.

/r/neoliberal Thread