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1/8
Good article, although I think the argument as to whether or not GDP is a good measure of economic performance largely misses the point. Of course it isn't, but no measure can be. GDP is a proxy for certain kinds of economic activity, and not only... https://www.ft.com/content/647345d5-6d35-4d20-9be7-50918f5b1617
Good article, although I think the argument as to whether or not GDP is a good measure of economic performance largely misses the point. Of course it isn't, but no measure can be. GDP is a proxy for certain kinds of economic activity, and not only... https://www.ft.com/content/647345d5-6d35-4d20-9be7-50918f5b1617
2/8
do we not know or agree what economic activity to include in our measure, but we're not even sure how to measure whatever we decide to include.
But as any mathematician can tell you, that doesn't make the GDP measure worthless. It can still be used comparably as long as...
do we not know or agree what economic activity to include in our measure, but we're not even sure how to measure whatever we decide to include.
But as any mathematician can tell you, that doesn't make the GDP measure worthless. It can still be used comparably as long as...
3/8
the relationship between the GDP measure and whatever it is we "really" want to measure is unbiased and consistent. Last year's US GDP, for example, doesn't meaningfully measure the total value of goods and services produced last year in the...
the relationship between the GDP measure and whatever it is we "really" want to measure is unbiased and consistent. Last year's US GDP, for example, doesn't meaningfully measure the total value of goods and services produced last year in the...
4/8
US, any more than this year's does, but as long as we can assume that the relationship between the GDP number and the "meaningful" measure of the total value of goods and services produced last year is consistent and unbiased, the growth rate of the former can give us a...
US, any more than this year's does, but as long as we can assume that the relationship between the GDP number and the "meaningful" measure of the total value of goods and services produced last year is consistent and unbiased, the growth rate of the former can give us a...
5/8
reasonably accurate assessment of the growth rate of the latter.
Similarly, if we assume that Canada's GDP measure is "misstated" in a way that is consistent with that of the US, we can also meaningfully compare Canada's GDP with that of the US. https://carnegieendowment.org/chinafinancialmarkets/60114
reasonably accurate assessment of the growth rate of the latter.
Similarly, if we assume that Canada's GDP measure is "misstated" in a way that is consistent with that of the US, we can also meaningfully compare Canada's GDP with that of the US. https://carnegieendowment.org/chinafinancialmarkets/60114
6/8
The problem comes when we compare two GDP numbers in which the relationship between the GDP measure and "real" economic activity, is inconsistent, or whose biases are changing substantially over time. In that case GDP comparisons can be distorted and often meaningless.
The problem comes when we compare two GDP numbers in which the relationship between the GDP measure and "real" economic activity, is inconsistent, or whose biases are changing substantially over time. In that case GDP comparisons can be distorted and often meaningless.
7/8
This means that GDP comparisons between countries with very different institutions, different ways of measuring growth, different ways of capitalizing expenditures, different balance sheets and different types of credit growth are much less useful and often a waste of time.
This means that GDP comparisons between countries with very different institutions, different ways of measuring growth, different ways of capitalizing expenditures, different balance sheets and different types of credit growth are much less useful and often a waste of time.
8/8
This should be pretty obvious, but as long as precision matters more to economists than accuracy, they will continue to use GDP data, which can be formidably precise, in ways that are sometimes appropriate and other times clearly inappropriate.
This should be pretty obvious, but as long as precision matters more to economists than accuracy, they will continue to use GDP data, which can be formidably precise, in ways that are sometimes appropriate and other times clearly inappropriate.
