Another and more relevant point is how the non-market production is valued - which is typically at market-determined cost. If the cost is administratively determined (as in central planning) the concept of monetary value of non-market production is pretty much meaningless - it simply means it is as much as government says it is. Of course, the problem is not limited to central planning, it also exists in transfer pricing (i.e. the value of goods exchanged between subdivisions of a corporation) - which is de facto determined largely through corporate policy i.e. how much corporate bosses say it is.
The problem is that if most of what is within production boundaries (i.e. carried out by institutional units which by definition are within those boundaries) is the non-market production (i.e distributed via a transfer system of one sort or another) - there are no effective means of pricing the value of that production. Its value is pretty much what the administration says it is. At the most, this is the cost the administration incurs in producing this output, which is already lowered through administrative control of wages - but often also through externalization (e.g. shifting some of the services or even production of goods to the household sector).
So the bottom line is that absent market pricing, it is really difficult to compare output (or rather "value added") to that under a market system.
That is why central planning systems used material output rather than "value added" (which is a financial concept) to measure economic performance.
Wojtek
On Fri, Sep 10, 2010 at 11:10 AM, SA <s11131978 at gmail.com> wrote:
> On 9/10/2010 10:17 AM, Wojtek S wrote:
>
> [WS:] I would not use the GDP as the basis for measuring socialism,
>> because
>> it reflects mainly the volume of market transactions and defines away all
>> non-market transactions as being "outside production boundaries."
>> Socialism
>> was not about marketization of society (as capitalism is) but about
>> "material development" largely bypassing the market (that is why they had
>> central planning.) Therefore, a better metric would be "material
>> progress"
>> with the reference point at the onset of socialism.
>>
>
>
> This isn't correct. GDP doesn't only include market transactions in its
> production boundary. When a state-employed doctor in the British NHS
> provides a free medical service (or an American doctor at a VA hospital),
> the value of the service is counted in GDP. The same is true if a factory in
> a centrally-planned economy produces a car or if the state produces a
> bridge.
>
> SA
>
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