In Chapter 21 we learn that GDP measures the value of goods and services that are bought in markets, so it excludes:

  • Household Production
  • Underground Production
  • Leisure Time
  • Environmental Quality

In an effort to solidify this concept in our minds, think of this:

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If I take the time to mow my own lawn, the value of my production does not show up in GDP. BUT, if I hire someone else to mow my lawn (and if that person reports the income earned correctly to the IRS), the value of that person’s production show up in GDP.

The question is, why don’t we measure all lawn mowing as part of GDP? Stated another way, why doesn’t the value of all production show up in GDP?

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