Saturday, January 30, 2016

The Kling/Sandwichman Convergence

Arnold Kling follows up Sandwichman's recent post with Why Measure GDP? One of the commenters there, Kevin Dick offers an intriguing proposition:
It would be interesting to see to what extent the free market would provide a substitute for the GDP as an index if the government stopped tracking it. 
This brings up another possibility for GDP that is somewhat related to (4) and (5)–as an input into individual and consumer economic planning. 
I imagine the market could probably find a more optimal index (or array of indices) given the chance.
I don't share Dick's confidence that the "free market could probably find a more optimal index" but the idea of a privatized GDP

Noah Smith Economic growth isn't everything

"We should remember that growth isn't the same thing as improvement in life satisfaction; the former is actually a lot easier than the latter. "

Agreed. But FIRST we should remember that economic "growth" is only an analogy, as Simon Kuznets, one of the "founding fathers" of national income accounting, pointed out some 65 years ago. The economy doesn't "grow" -- it changes. What "grows" -- or more properly, increases -- is Gross Domestic Product (GDP), which is an index, that is an indicator of economic activity, not a measurement. The difference between index and measurement is that the latter requires unambiguous, stable physical units.The GDP on the other hand, is constructed out of selected components and tabulated in units whose value changes from period to period.

So GDP is not a literally a measurement and increase in GDP is not literally growth. What are the consequences of such semantic sleight of hand? "Growth" has a positive connotation. Children grow. Flowers grow. Thus "growth is good." If growth is good than it is bad to oppose growth. The politics of pseudo-growth is to marginalize any objection to whatever can be cloaked in the magic mantle of growth.

Peter Victor video