Net Domestic Product - NDP

There are ways to measure the performance of an economy. They represent the value of goods and services created by an economy during a set time period...excluding the production used to replace older stuff that's ready to get thrown out. You’ve heard of GDP, Gross Domestic Product? Well, Net Domestic Product is GDP’s lesser-known sibling.

Think about a family with two kids. They both want to make it big in Hollywood. Think: the Baldwins. Or the Hemsworths. Or the Wahlbergs.

One kid becomes a huge movie star. Gets tons of attention. Lots of press. Shows up on all the red carpets and in the gossip columns. The other kid becomes an indie star. Stays mostly in the shadows, but gets some attention from critics and snooty film fans who like black and white flicks with subtitles.

GDP is the big-budget, star-level Hollywood Econ stat. NDP is the cult-favorite indie stat.

GDP tracks the value of all the final goods and services produced in a country during a period of time. Everything gets counted. However, some of that production represents items meant to replace broken down or obsolete products.

Say you run a candy bar manufacturer and your nougat spinner breaks down. You buy a new one. That replacement spinner gets counted in GDP. But not in NDP. You use the machine to make your signature product - Smooth Nougat Sandwich Snaps. That production gets counted in both GDP and NDP. It’s newly-made stuff, not products for replacement.

In accounting terms, this cost for replacement products gets tracked as depreciation. GDP includes those figures. NDP leaves them out. There's another distinction to mention, another sibling, toiling away as a Broadway understudy in a musical version of The Hulk.

That third sibling is Net National Product.

Net Domestic product counts all the final products and services produced inside a particular country. Leaving out the replacement production, of course. Net National Product counts the final products and services made by citizens of a country...no matter where it takes place. NDP looks at where it happens. NNP looks at who makes it happen.

So the unknown Hemsworth brother gives a performance as the Musical Hulk at a theater in Sydney. The Hemsworths are Australian, and he’s performing an Australia. That gets counted as both NDP and NNP.

Now Little Hemsworth moves the production to London. It gets counted as NNP, but not NDP. It's produced by an Australian... but not in Australia. Now you see what economists think of Little Hemsworth’s theater career. Whether or not performing as a singing Hulk on London’s West End will impress his brothers...well, that’s a different story.