The GDP is not invariant to the “Sound of Music” case: a widower marries his children’s governess. Before the wedding, her work was paid, and it counted towards the GDP. After the wedding she puts in the same work, or more, and her implicit pay is probably higher, but she is completely invisible to the GDP.
Similarly, when a company aqcuires a supplier, the flow of products and cash between them stops counting towards the GDP. Conversely, if Target creates a real estate company and starts paying rent to it (Bill Ackman’s idea when he was Target’s largest shareholder), a few billion dollars would show up in the GDP from nowhere.
The GDP is an accident of the granularity of the economy. All things being equal, a more vertically integrated economy will have a lower GDP than a more granular one.
Similarly, when a company aqcuires a supplier, the flow of products and cash between them stops counting towards the GDP. Conversely, if Target creates a real estate company and starts paying rent to it (Bill Ackman’s idea when he was Target’s largest shareholder), a few billion dollars would show up in the GDP from nowhere.
The GDP is an accident of the granularity of the economy. All things being equal, a more vertically integrated economy will have a lower GDP than a more granular one.