Straw man alert!! Krugman tries to convince us that these other economists are counting capital gains as GDP growth… when they’re not. They’re merely (correctly) suggesting that booming house prices led folks to borrow against their houses and… wait for it… “spend”. Which they did. And it’s documented. And last time I checked, “consumption” (aka, “consumer spending”) accounted for about 2/3 of GDP. This is neither controversial nor debatable.

I have no problem with Krugman in general… but it seems like he’s just twisting others’ views in order to nitpick in this article. (Must have been a slow economics news week.)

Contrary to your assertion, I don’t think there’s any confusion on the topic here. The arguments that “recent GDP growth is somehow artificial” has nothing at all to do with “asset price increases”. Rather, it has to do with debt creation driving demand (as opposed to “core,” non-debt driven demand). I’ll be so excited when the economics profession learns how to model debt into the workings of our economy. Until that time, we’ll remain lost in the financial wilderness.