It is certainly true that some people make too much of GDP, but those numbers can be pretty helpful for answering certain research questions. Let’s not throw the baby out with the bath water.
To continue on your metaphor, it’s not clear to me if there is a baby worth saving there at all. Even if there is, the baby is submerged in an enormous cesspool of filthy and toxic bathwater that’s been poisoning us in very nasty ways for a long time.
To be clear, you are suggesting we might not lose anything by giving up measuring and using GDP figures? I’ll side with the majority of the economics profession… they aren’t perfect but they mostly use GDP data in a reasonable way.
Just so we’re on the same page, could you explain what it would look like if economists’ collective wisdom were actually so bad that you would agree they use GDP data in an unreasonable way?
Because you can’t just look at the fact the top economists all agree—they’d do that even if the field were collectively garbage. There has to be some real-world entanglement which would reveal the failure of their ideas, and I want to know what you expect such a failure to look like.
I’m a sociologist*, and there is nothing sociologists like to do more than point out where economists go wrong. So if GDP was a worthless figure, I expect the real world entanglement that one of my fellow sociologists would have convinced me of that already.
I’m not saying economists never overinterpret GDP figures, and I’m not saying the consensus of macroeconomists is always correct.
Though I think we might both be better served by quitting conversation and reading actual experts (I don’t claim to be one) I would like to make sure we’re on the same page about the implications of your criticism. Are you not saying that it is essentially worthless to attempt to study economic growth or business cycles empirically because the data is so poor?
*if you can be one without having completed your dissertation yet.
I’m a sociologist, and there is nothing sociologists like to do more than point out where economists go wrong. So if GDP was a worthless figure, I expect the real world entanglement that one of my fellow sociologists would have convinced me of that already.
This sounds to me like a case of mistakenly thinking “someone would have noticed!”. What exactly would sociologists have noticed and hasn’t happened? Remember, “my echo chamber in academia agrees with me” doesn’t count as evidence!
And, FWIW, sociologists (and a lot of the left in general) do complain about GDP—they’re the ones spearheading the push to use alternate metrics like “Gross National Happiness” and other things. I think a lot of them are nutty, but at least they’re identifying values that need to be looked at.
Though I think we might both be better served by quitting conversation and reading actual experts (I don’t claim to be one) I would like to make sure we’re on the same page about the implications of your criticism.
But I have read the experts! Top economists like Greg Mankiw, Paul Krugman, and Scott Sumner blog and lay out their arguments in detail, and their (economic basis for making their) arguments are exactly as I have portrayed them! Sumner in particular believes (mistakenly imo) that nominal GDP is a crucial measure.
Krugman certainly relies heavily on measuring real GDP growth and equates it with progress. And James_K, who claims to be an economist, just came out of the woodwork and endorsed exactly what I’ve accused economists of, though asserting (with a basis I’m shaking) that they don’t really make that big of a deal out of GDP.
Are you not saying that it is essentially worthless to attempt to study economic growth or business cycles empirically because the data is so poor?
With the currently studied data, yes, though with different measures, better progress could be made. In the past I’ve suggested measuring non-cash and non-market production, subtracting certain “bad” activities from GDP (i.e. things which represent a response to destruction, as it’s indicative of merely replacing some capital with other capital), measuring product degradation in calculating CPI, and using insulin as a better inflation gauge.
if you can be [a sociologist] without having completed your dissertation yet.
Hey, I’m fine with calling you one if you’re fine with calling me an engineer despite just having a bachelors and years of field work but not a P.E. license.
I agree that GDP is imperfect. If it were easy to perfect then it would have been done already. Should more resources be devoted to the issue? Probably. I support the use of multiple measures of wealth and well-being. But I do think that when GDP goes up, that usually indicates good things are happening. Other indicators usually track it.
I’m not trying to deny you’ve noticed a problem, I just think that you’re overstating it because even though GDP is imperfect, there is still a lot to be learned from empirical research that uses it.
If we’re going to do metaphors, then yes, you’re right, but we also have to make sure we’re not drinking the bathwater. The bathwater is for bathing, not for drinking. GDP should be used a very rough cross-country comparison, not as a measure of how well the economy’s general ability to satisfy wants changes over short intervals.
Interestingly enough, I was arguing roughly your position a few years ago. But now, seeing how economist deliberately prioritize GDP over the fundamentals it’s supposed to measure, I can’t even justify defending it for purposes other than, “The US economy is more productive than Uganda’s.”
It is certainly true that some people make too much of GDP, but those numbers can be pretty helpful for answering certain research questions. Let’s not throw the baby out with the bath water.
To continue on your metaphor, it’s not clear to me if there is a baby worth saving there at all. Even if there is, the baby is submerged in an enormous cesspool of filthy and toxic bathwater that’s been poisoning us in very nasty ways for a long time.
To be clear, you are suggesting we might not lose anything by giving up measuring and using GDP figures? I’ll side with the majority of the economics profession… they aren’t perfect but they mostly use GDP data in a reasonable way.
Just so we’re on the same page, could you explain what it would look like if economists’ collective wisdom were actually so bad that you would agree they use GDP data in an unreasonable way?
Because you can’t just look at the fact the top economists all agree—they’d do that even if the field were collectively garbage. There has to be some real-world entanglement which would reveal the failure of their ideas, and I want to know what you expect such a failure to look like.
I’m a sociologist*, and there is nothing sociologists like to do more than point out where economists go wrong. So if GDP was a worthless figure, I expect the real world entanglement that one of my fellow sociologists would have convinced me of that already.
I’m not saying economists never overinterpret GDP figures, and I’m not saying the consensus of macroeconomists is always correct.
Though I think we might both be better served by quitting conversation and reading actual experts (I don’t claim to be one) I would like to make sure we’re on the same page about the implications of your criticism. Are you not saying that it is essentially worthless to attempt to study economic growth or business cycles empirically because the data is so poor?
*if you can be one without having completed your dissertation yet.
This sounds to me like a case of mistakenly thinking “someone would have noticed!”. What exactly would sociologists have noticed and hasn’t happened? Remember, “my echo chamber in academia agrees with me” doesn’t count as evidence!
And, FWIW, sociologists (and a lot of the left in general) do complain about GDP—they’re the ones spearheading the push to use alternate metrics like “Gross National Happiness” and other things. I think a lot of them are nutty, but at least they’re identifying values that need to be looked at.
But I have read the experts! Top economists like Greg Mankiw, Paul Krugman, and Scott Sumner blog and lay out their arguments in detail, and their (economic basis for making their) arguments are exactly as I have portrayed them! Sumner in particular believes (mistakenly imo) that nominal GDP is a crucial measure.
Krugman certainly relies heavily on measuring real GDP growth and equates it with progress. And James_K, who claims to be an economist, just came out of the woodwork and endorsed exactly what I’ve accused economists of, though asserting (with a basis I’m shaking) that they don’t really make that big of a deal out of GDP.
With the currently studied data, yes, though with different measures, better progress could be made. In the past I’ve suggested measuring non-cash and non-market production, subtracting certain “bad” activities from GDP (i.e. things which represent a response to destruction, as it’s indicative of merely replacing some capital with other capital), measuring product degradation in calculating CPI, and using insulin as a better inflation gauge.
Hey, I’m fine with calling you one if you’re fine with calling me an engineer despite just having a bachelors and years of field work but not a P.E. license.
I agree that GDP is imperfect. If it were easy to perfect then it would have been done already. Should more resources be devoted to the issue? Probably. I support the use of multiple measures of wealth and well-being. But I do think that when GDP goes up, that usually indicates good things are happening. Other indicators usually track it.
I’m not trying to deny you’ve noticed a problem, I just think that you’re overstating it because even though GDP is imperfect, there is still a lot to be learned from empirical research that uses it.
Oh boy, we should bring Taleb in here.
If we’re going to do metaphors, then yes, you’re right, but we also have to make sure we’re not drinking the bathwater. The bathwater is for bathing, not for drinking. GDP should be used a very rough cross-country comparison, not as a measure of how well the economy’s general ability to satisfy wants changes over short intervals.
Interestingly enough, I was arguing roughly your position a few years ago. But now, seeing how economist deliberately prioritize GDP over the fundamentals it’s supposed to measure, I can’t even justify defending it for purposes other than, “The US economy is more productive than Uganda’s.”