Here’s why:

·       GDP Counts Services, Not Just Goods

Services like teaching, policing, and regulatory oversight are treated as economic output because they provide value to society.

·       Valuation Method

Since these services aren’t sold in a market, their contribution to GDP is estimated by the cost of providing them, mainly wages and benefits of government employees.

·       Criticism

Critics argue this inflates GDP because it assumes government spending equals value created, even if efficiency is low or results are minimal.  This is a long-standing debate in economics about whether government activity should be measured differently.

Closing

Counting government payrolls as economic output creates a dangerous illusion of prosperity.

When bureaucratic expansion is treated as growth, we reward inefficiency and mask the proper drivers of wealth—innovation, productivity, and voluntary exchange.  GDP should measure value created, not dollars spent by decree.  It’s time to demand reform: policymakers and economists must develop metrics that distinguish genuine economic progress from mere government consumption.  If we want a clearer picture of national prosperity, we need to stop celebrating size and start measuring substance.