Methodology of GDP Calculations: Theoretical and Practical Approaches

The article focuses on the distinction between theoretical and practical approaches to GDP calculation. One of its main provisions is that all costs in the economic society are ultimately aimed at the production of final goods. The theoretical approach takes into account only direct labour, while the practical approach takes into account the costs of both living and past labour embodied in capital goods. The difference is explained, on the one hand, by the special nature of participation of capital goods in the creation of the value of a new product, on the other hand, by the need to have reliable estimates of the produced product. It is demonstrated that the special participation of past labour in the creation of a new product leads to a temporary shift in the cost of new products by the year of production of the capital goods, which does not allow obtaining correct estimates of the produced product in any of the years of use of the capital good. At the same time, taking into account the costs of both living and embodied labour makes it possible to have accurate estimates of the product produced throughout the entire period of use of the capital good, with the exception of the production year of the capital good. The practical approach is linked to the presence in the GDP composition the value of goods which are not directly related to the welfare – gross accumulation, which requires adjustments of the obtained GDP estimates before using them to estimate the well-being of the members of the economic society.