In the more detailed version of the hypothetical (i.e., the careful econ textbook version), it's explicitly stated that the wife continues spending the exact same amount as before, and she was already a live-in maid.
Welfare has improved - the husband and wife have all the same goods and services as before (a house paid for by the man, which is cleaned by the woman), and they are now having sex (which is presumably welfare improving). Yet GDP has gone down $25k.
GDP measures the value of all the stuff and services we produce.
No, it doesn't. If you believe it does, I have a great stimulus package: ban joint bank accounts for married couples and require the higher income partner to pay a salary to the lower income partner.
This will certainly increase GDP. Could you explain how this would have any effect on anything else?
GDP is a flow. So is personal income. GDP is the dollar value of the stuff we sell. The flip side of that is that this is how much income we earned. You can dispute this, but it's what it means. http://bit.ly/HYokZe
Your example is flawed for the reasons I mentioned. You have to include the opportunity cost.
Welfare has improved - the husband and wife have all the same goods and services as before (a house paid for by the man, which is cleaned by the woman), and they are now having sex (which is presumably welfare improving). Yet GDP has gone down $25k.
GDP measures the value of all the stuff and services we produce.
No, it doesn't. If you believe it does, I have a great stimulus package: ban joint bank accounts for married couples and require the higher income partner to pay a salary to the lower income partner.
This will certainly increase GDP. Could you explain how this would have any effect on anything else?