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We’re Measuring the Economy All Wrong

• larrik 8y ago
  "The financial crisis remains the most influential event of the 21st century." Uh... I think 9/11 may disagree. The financial crisis didn't spawn wars and ISIL.
  • maxxxxx 8y ago
    At least in Western societies the financial crisis will have a much bigger impact than 9/11. A lot of people learned that the system that was supposed to reward people that do the right things does not work that way and lost faith in it. That enabled the rise of nationalist parties, Trump, Brexit and others. We will see how things will work out but I think there is a good chance that the world will change a lot in the next decades because the financial crisis made clear that the system doesn't work for the regular guy.
    • toasterlovin 8y ago
      From my reading of right wing media, it seems like terrorism and immigration are much larger contributors to the rise of nationalism.
      • maxxxxx 8y ago
        I am not that much into conspiracy but I think economic anger and pain is being redirected against "others" by powerful people. Trump is a good example for this. Same in silicon valley. Instead of going against income inequality people talk about diversity, LGBT and other things that don't threaten the power and income of the owning class.
        • toasterlovin 8y ago
          I don't think working class people actually care that much about income inequality. But I do think they care about competing for jobs with people who don't even speak the native language. And I do think they care when they see things on the shelves at Walmart which are now made in China, but which used to be made at the local factory. FWIW. Just my read on the situation.
          • maxxxxx 8y ago
            I think they care about feeling secure in their life. I think most people do that. In the current economy they don't feel secure so you can explain that with foreigners, capitalists or something else.
        • nemo44x 8y ago
          I'm not into conspiracies either but just follow the money. Who is endowing universities with billions of dollars? And what types of social issues / humanities do these universities teach to kids and which ones due they tend to ignore?
      • _jal 8y ago
        If you're economically trapped in a precarious position, shouting about immigration and terrorism (by the Other) is far more effective at scaring people into falling in line. It is lifeboat "reasoning" at the tribe level.
        • toasterlovin 8y ago
          The issues the working class has with large scale immigration are legitimate. Econ 101: adding more supply of some thing (labor) will reduce the price of that thing (wages).
          • maxxxxx 8y ago
            Another econ 101: some group taking an increasing share of a more or less fixed pie will cause others to get less.
            • toasterlovin 8y ago
              They're separate issues. It is not coherent to argue that one problem isn't a problem because another problem exists.
              • maxxxxx 8y ago
                You are 100% right. What I tried to say is that some powerful people are trying to channel economic anxiety into explanations that don't threaten their own power. Being angry about immigration or diversity doesn't really threaten billionaires but being angry about inequality does. So of several problems the propaganda machine picks the most convenient.
          • munificent 8y ago
            > Econ 101: adding more supply of some thing (labor) will reduce the price of that thing (wages). Econ 201: Immigrants are consumers too. Adding more demand for some thing (consumers of products) will increase the price of that thing (wages of producers). Almost everyone agrees that growing the economy is good. When a child is born, we don't lament how that infant will be driving down wages when they reach adulthood. There is nothing different about immigrants. They are full participants in all sides of the economy. The real reason that immigrants are a threat to American workers is because they will accept shittier jobs. They drive down quality of the average job because they are more willing to suffer. But that's not a problem with immigrants, it's a problem with our worker protection laws and how they are enforced. Neither immigrants nor non-immigrants should have to pee in cups to avoid leaving the assembly line, work full time without benefits, have unreported workplace-caused injuries, etc.
  • mc32 8y ago
    It’s from the opinion column. Not sure of his economics credentials. So take it for what it is, an opinion piece.
    • larrik 8y ago
      Reading further into the article, this wasn't my only "wait, what?" moment...
  • sillyquiet 8y ago
    While I get where you are coming from I would argue (and anybody alive and paying attention to the region during the 1990s would likely agree) that 9/11 was a symptom of the ongoing issues in the Middle-East (largely due to fallout from colonization and Cold War politics), and not a causal event. That is not to say the response to 9/11 didn't throw gasoline on the fire.
    • massysett 8y ago
      You could say the exact same thing about the financial crisis when it comes to being a symptom rather than a causal event.
  • qaq 8y ago
    That would be fairly US centric view there are a lot of countries that were not touched by 9/11 but very few (if any) not affected by the financial crisis.
    • toasterlovin 8y ago
      I think the argument would be that 9/11 has had follow on effects on global politics.
  • deleted 8y ago
    [deleted]
  • jpollock 8y ago
    The financial crisis had a broader reach around the world than 9/11 did. 9/11 made it harder for me to fly, but the financial crisis cost friends jobs.
    • randomdata 8y ago
      I would say that losing a job is better than being bombed (in reference to the wars mentioned by the parent). Naturally, it all depends on your perspective. If you were in a safe nation, then losing a job is a big deal. Of course, the financial criss was a financial crisis because all of the money poured into tech and commodities and not much else. Given the tech-focused nature of this site, our perspective is going to be skewed by that time being one of the most prosperous periods ever (the late 90s probably has it beat).
    • scotty79 8y ago
      9/11 main impact is cementing USA image as unlikable, cowardly, irrational jerk of a country that can happily ignore international community and start two wars (three, if you count fake "war on terrorism") because of one random act of vioilent human stupidity. Global cultural impact of 9/11 and what followed is huge. And crisis... You can always make more money.
      • jartelt 8y ago
        Many people in the US never travel internationally and don't really follow international politics. If you are from the states stay within the states, why would you care if other countries think the US is a bully and a jerk? Outside of knowing someone who went to war after 9/11, 9/11 probably didn't affect your day to day much after a year or two. I imagine this is the case for many people in the midwest and south. If you were a factory worker in Indiana, it probably hurt a lot to lose your job in the recession and see your home value plummet. If you were supposed to retire in 2008, you also saw your 401k plummet as well. You may not have even fully recovered your net worth at this point. That would be something that weighs on you everyday.
        • 8y ago
  • sonnyblarney 8y ago
    9/11 didn't really spawn ISIL either. ISIL is really a function of the Arab spring, spawned by a general popular Arab uprising, which was spawned by a singular uprising in Tunisia, spawned by a single man committing suicide, spawned by Manning's blind cable releases. The financial crises was global, and nearly brought the American economic system down, I don't think people realize how close we came to serious disaster. The President handed out 1 Trillion dollars in 'magic dollars' to quelch the system it was crazy. It affected everyone in the world. Almost every American was directly affected. 9/11 surely the biggest geopolitical event.
    • dajohnson89 8y ago
      >spawned by Manning's blind cable releases. Genuinely curious, do you have any good sources that explain how the cable releases triggered this set of events? I understand that Manning/Assange have jeopardized some US intelligence efforts (and lives), but not aware of any greater fallout beyond a handful of compromised operations and deaths (no small feat, but smaller than ISIL).
      • _jal 8y ago
        I'm going to have to see some more flesh on those bones, too. This is a curiously strong claim about bright-line causality in a very large, very messy series of events with many actors.
        • sonnyblarney 8y ago
          The leaks 'lit' the Arab Spring which had a lot of momentum, and ISIL is an artifact of the Arab Spring. Obviously conditions were there. The later is not in much dispute, the former just not more widely known. https://psmag.com/news/tunisian-activist-describes-mannings-leaks-helped-topple-dictator-65243 https://psmag.com/news/tunisian-activist-describes-mannings-... https://medium.com/@ifikra/chelsea-manning-and-the-arab-spring-1907fec77df1 https://medium.com/@ifikra/chelsea-manning-and-the-arab-spri... http://www.worldaffairsjournal.org/article/wikihistory-did-leaks-inspire-arab-spring http://www.worldaffairsjournal.org/article/wikihistory-did-l...
  • ArchTypical 8y ago
    > I think 9/11 may disagree Only in the US, which is arguable. Every person in the US is affected by the 2008 events every month. 9/11 is hardly a blip in most of the US, outside of the lukewarm media attention about tangentially related eventualities. Americans get very upset when they don't opt-in to risk and end up being exposed to violence unwittingly, but that's life. It's no more or less tragic than when you get diagnosed with cancer. 40k people die in car accidents each year. 5-10k die of a terrorist attack almost 20 years ago. It's immoral to worship one single tragedy that pales in comparison to those ongoing. I live with the solace that those who are born after 9/11 will have a saner perspective.
  • seppin 8y ago
    "wars and ISIL" are a big deal for the < 1% (0.4) of Americans serving in the military, and for the people living in these countries dealing with armed insurgencies, but 2008 had an impact on hundreds of millions of Americans beyond taking off their shoes at airports.
• sddfd 8y ago
  I agree we're measuring things wrong, here are only two examples: - it's good for a company to sell a ton of crappy cloths that don't last long and the production of which has terrible environmental impact - it's good to produce a ton of low quality eggs and sell them
  • anonuser123456 8y ago
    "low quality" by what standard? Someone bought them, so they must have met the standard of the purchaser. Sure, externalities are a problem, but the ability of the market to deliver quality doesn't seem to be.
• thanatropism 8y ago
  I know it's fashionable both to lionize Piketty and criticize him as a huckster. But he did play really fast and loose with statistics in his best-seller.
  • maxxxxx 8y ago
    Isn't that pretty much the standard in economics? Whatever I read about economics they all seem give data their own convenient spin instead of admitting "I don't know".
    • tonyedgecombe 8y ago
      There seems to be a fine line between politics and economics.
    • yborg 8y ago
      Isn't that pretty much the standard in any research? It's pretty pointless to publish a bunch of data and state as your conclusion "gee, I don't know what any of that meant, lol". As long as you aren't actually making up data to fit your thesis (which surely happens) or completely ignoring data contrary to your thesis, I don't see an issue. If someone doesn't agree with it, they can publish their own argument with supporting data.
      • maxxxxx 8y ago
        In physics there is a lot of data that shows that there must be something other than regular matter but physicists still admit that they have no clue what it is. I am not an economist but from what I read economists show the data and then always have an explanation for it. Maybe they should stop at the data?
    • thanatropism 8y ago
      No, no. I don't mean that he forces the interpretation of data. That's par for the course. He makes numerous data gathering errors that all seem to make his conclusion stronger. Example: http://piketty.pse.ens.fr/files/capital21c/en/media/FT23052014c.pdf http://piketty.pse.ens.fr/files/capital21c/en/media/FT230520...
• aargh_aargh 8y ago
  This is a political opportunity. If the current statistic is misleading, build your political platform on a new statistic that better represents reality and commit to improving it.
• lukeschlather 8y ago
  > The unemployment rate has also become less meaningful than it once was. In recent decades, the number of idle working-age adults has surged. This is a pretty significant error in the article. The Brookings blog post specifically talks about men rather than adults. U6 unemployment is has fallen to the same level it was prior to the dot-com crash. There's a solid argument that looking at U3 rather than U6 understated the severity of the great recession, but by any sort of unemployment metric the great recession is over. https://www.brookings.edu/blog/up-front/2016/08/15/men-not-at-work-why-so-many-men-ages-of-25-to-54-are-not-working/ https://www.brookings.edu/blog/up-front/2016/08/15/men-not-a... https://www.macrotrends.net/1377/u6-unemployment-rate https://www.macrotrends.net/1377/u6-unemployment-rate The Brookings blog post also makes no attempt to compare unemployment/marriage rates among men and women, so its entire tone is severely misleading since it's basically trying to paint a simple equalizaton between women and men as a crisis.
  • Delmania 8y ago
    I'd goal shift at this point and argue unemployment isn't as useful an indication anymore. I'd say underemployment and wage growth are better indicators of the economy. It's great people are working again, but if those people are working at jobs they are overqualified for or working at jobs that refuse to pay them enough to live, I'm not sure that's useful.
  • whatshisface 8y ago
    >a simple equalizaton between women and men as a crisis. Going from 100/0 to 50/50 is a crisis, for at least 25% of the population.
    • vec 8y ago
      I think this is the wrong way to look at it. It was never actually 100/0. Homemakers did (and still do) a large amount of informal and uncompensated labor that doesn't show up in the employment statistics. In essence, employees used to be paid wages that allowed them to cover their living expenses with enough left over to pay for a full-time live-in nanny/chef/housekeeper/social secretary/etc. (in the form of their spouses). We're moving to a world where it's more acceptable for men to choose to be homemakers and more common for women to have professions other than homemakers, both of which are good. But we've also moved from a world where the typical family had one income and one adult's full-time labor to support the household to a world where the typical family has two incomes and zero adult's full-time support without an equivalent jump in standard of living that would allow them to comfortably hire out for all the previously uncompensated labor. In other words, typical working age adults used to only have one full-time job (as either a homemaker or a member of the formal labor force). Now adults of both genders have a full-time formal job plus a part-time job maintaining the household but without the equivalent real income increase that would imply. That's the crisis.
• roenxi 8y ago
  Interesting and related note; the link between energy and GDP has been steadily decoupling at a brisk pace since 1970 [1]. I might be mis-remembering, but I ran the numbers on this and I recall the trend being fairly steady up to about 1970. There are two ways to spin that; the first and usual way is that we've entered an enlightened new era of services and efficiency where we do not need energy to achieve desired outcomes. The negative spin is that from 1970 GDP growth ceased to be a strong indicator of real improvements. Maybe the difference is made up in embedded energy in imports; but the US population isn't behaving like a group experiencing exponential growth. Given the industrial base currently in existence, even 2% growth should be crazy improvements on quality of life. Like, for everything an ordinary person had 10 years ago they should have 1.2 things now. Instead the situation could be interpreted as a slow-burn voter revolt brewing against the establishment who run the country. Or I could be clueless. [1] https://www.eia.gov/todayinenergy/detail.php?id=10191 https://www.eia.gov/todayinenergy/detail.php?id=10191
  • Retric 8y ago
    (GDP growth) - (population growth) is what results in individual quality of life improvements. A 1% population growth rate makes a huge difference to that 2% growth number. US was under 2/3 the population in 1970 on top of that stuff like cellphones, cars, etc really have significantly improved. But that stuff generally uses less power to do the same things.
  • atq2119 8y ago
    This is a very interesting link. Note that the strongest decline in energy intensity in the disaggregated graph at the bottom is in transportation. That certainly speaks for efficiency as an explanation. As for the growth story, well. The ordinary person 10 years ago didn't have a smart phone. That's a pretty significant impact on our way of life. Whether it actually improves the quality of our lives is a different question.
  • tim333 8y ago
    There are probably diminishing returns to how much energy improves your life. Once you've heated/cooled your house and powered your car and some gadgets what more do you really need energy wise?
• rayiner 8y ago
  > Look around, and you can see the lingering effects of the financial crisis just about everywhere — everywhere, that is, except in the most commonly cited economic statistics. So who are you going to believe: Those statistics, or your own eyes? Not an auspicious start, David. People believe lots of things that aren't true, for example that crime is going up. That's why reliance on objective measures is crucial. Of course, the larger point about using the right measures is well taken. But switching to new measures to validate your preconceived gut feeling is fraught with peril. For example, labor force participation rate, which measures the non-institutional population 16 and older, is down to 62% from a peak of 67% in 2000: https://www.bls.gov/opub/mlr/2016/article/labor-force-participation-what-has-happened-since-the-peak.htm https://www.bls.gov/opub/mlr/2016/article/labor-force-partic... (from 67% to 62%). Is it because discouraged workers are leaving the workforce? Not really--the labor force participation rate of high-school and college-aged people (ages 16-24) is down dramatically. But the rate among those aged 25-55 is down just a few points.
  • lavrov 8y ago
    The point that he's making is not that individual observation should trump objective measures, but the epistemic claim that if what we perceive contradicts those measures, it's worth interrogating the validity of those measures. I don't think that the particular example that you're giving is "fraught with peril". Note the lack of an upper bound on the labor force participation rate that you cite - 16+ includes people of retirement age, whereas the measure given in the article shows that the official unemployment rate for men 25-55 is just 1/3 of the "true" unemployment rate that includes disaffected workers. This is significant.
    • byproxy 8y ago
      It was pretty interesting (and disquieting) to see a linear trend. I don't know how the statistics are gathered, but I wonder if they separate those who wish to/need to work from those who don't. For those who have given up searching, that is.
      • rory096 8y ago
• maelito 8y ago
  We should talk more about the frame in which this "economy" is having ups and downs. That frame is cheap fossile energy. It's about to collapse.
  • AnimalMuppet 8y ago
    First, it's been about to collapse for decades. We keep being about to run out of oil. For my part, I think there's a lot more fracking that will happen if the price rises much farther. Oil therefore may rise a bit, but will continue to be available at a non-ruinous price (speaking purely economically here). Second, renewables are close to being able to take significant load off of fossil fuels. Already coal use is declining (at least in America), and not because coal got scarce or expensive.
• saidajigumi 8y ago
  Funny enough, the proposals here remind me an article on site metrics I read recently. To rephrase the relevant bit, "99.9..% uptime is highly misleading if a small number of your customers are simply down all the time." Unemployment has a long-known flaw cited in the article, especially relevant in this economy: the significant number of adults who have simply given up looking for work, considering it hopeless, and who are therefore not counted in the unemployment statistics. Any metric gives you just a tiny, keyhole-like view on the world. A big part of the battle is then to understand what your metrics are blinding you to.
  • makmanalp 8y ago
    This is a nice connection and it's a kind of what's known as a structuralist argument - what you're saying is that the approach of "uptime is uptime is uptime" is wrong, and distribution of /where/ downtime happens actually matters a lot. Economics did run into similar issues with GDP because it assumed for a long time that "money is money is money", until it found out that just because both Iraq and Vietnam have similar GDPs doesn't mean that they're at all equivalent - one is heavily dependent on oil and has few development prospects, the other has a wealth of productive know how in a ton of different areas (shameless plug, I work on this tool): Iraq http://atlas.cid.harvard.edu/explore/network/?country=108&partner=undefined&product=undefined&productClass=HS&startYear=undefined&target=Product&year=2016 http://atlas.cid.harvard.edu/explore/network/?country=108&pa... vs Vietnam http://atlas.cid.harvard.edu/explore/network/?country=239&partner=undefined&product=undefined&productClass=HS&startYear=undefined&target=Product&year=2016 http://atlas.cid.harvard.edu/explore/network/?country=239&pa... Each node here is a specific product being exported "significantly" for a country of that size. --- So by a similar argument you could look at how similar the population that goes in and out of unemployment (seems likely to me) is every year, and what that implies about policies and job opportunities in the US.
• makmanalp 8y ago
  Disclaimer, not an economist but work with a bunch of them. Of course, economists are already hyper-aware of focusing on a single measure and of all these issues with specific indicators, and surprise surprise, we have a wealth of alternatives that are published and are freely accessible all the time: e.g. the BLS already releases all manner of alternative unemployment statistics (see "discouraged workers"): https://www.bls.gov/news.release/empsit.t15.htm https://www.bls.gov/news.release/empsit.t15.htm e.g. for income inequality, a crude but well known measure is the Gini index which measures how dispersed incomes are in a population: https://fred.stlouisfed.org/series/SIPOVGINIUSA#0 https://fred.stlouisfed.org/series/SIPOVGINIUSA#0 e.g. Consumer price index is another approach measuring access to basic goods: https://www.bls.gov/charts/consumer-price-index/consumer-price-index-average-price-data.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri... Household net worth is another one that the article mentions. The matter of which number is chosen as the official measure of "goodness" is the real issue and that is a political matter, and because depth of public (and shockingly often policymaker!) discourse on the matter is stuck at "did the thing go up or down". I'm dubious that switching to a different indicator will solve the problem per se - perhaps make it harder to game.
  • Fellshard 8y ago
    Sowell speaks extensively to these types of shenanigans. It's certainly more politically selected and manipulated than economist-chosen.
  • jumbopapa 8y ago
    If I've learned anything about economics it's that Newton 3rd Law basically applies to anything an economist says.
• mabbo 8y ago
  In most statistical analysis, it's useful to throw out the outliers before calculating the results. For example, many latency metrics on websites use the 99th percentile or "P99" as a measure of success. If we throw away the top 1% of incomes (and the bottom 1% as well to be fair) how well has America actually recovered from 2008? I can't imagine it looks nearly as good.
• crazygringo 8y ago
  > Almost a century later, it is time for a new set of statistics. It’s time for measures that do a better job of capturing the realities of modern American life... Fortunately, there is a nascent movement to change that. A team of academic economists... has begun publishing a version of G.D.P. that separates out the share of national income flowing to rich, middle class and poor. I'm 1,000% for the idea of a statistic that captures a more holistic view of economic improvement. The problem is, nobody's come up with a single number that feels ideologically neutral, because there's no agreement on what the "right" level of inequality is. GDP is a sum you can't argue with (and easy to argue that more = better, even if not always true), and likewise unemployment is a percentage you can't argue with (and easy to argue that less = better, again even if not always true). But even if we separate out GDP by class... it isn't clearly actionable. There's no obvious equivalent of "more = better", because it's clear that wealth increases should be spread out, but it's not clear they should be spread out equally. The puzzle piece that seems to be lacking is some kind of rigorous justification for what the right level of inequality is in a society. But no political scientist, economist or philosopher has yet developed/proved that in any way that people generally accept. We can't measure the economy all "right" until we collectively decide what "right" even is.
  • Gustomaximus 8y ago
    'Median GDP' is a good version of GDP to give a somewhat balanced view of a typical citizens share of the pie. Also, we need to stop expecting a single number to track. Any metric will always be flawed or managed. People need financial literacy and critical thinking to see the picture from altitude or I suspect many will be easily manipulated via relevant powerbrokers touting message appropriate single statistics.
    • crazygringo 8y ago
      A median would do a great job of not being affected much by the top 1% or even 10%... ...but at the same time could be virtually unaffected by bringing the bottom 5% completely out of the worst poverty, which some people argue is the top priority, so I'd be worried about adopting this. I think we do need a single number though. As soon as you have multiple metrics, nobody knows how to balance them anymore. And it's infinitely easier and more realistic to ask our 'intelligentsia' to develop a more easily digestible metric, than to somehow turn all citizens into financially literate critical thinkers. Most people are too busy earning their salary to support and raise their families, to be able to spend the significant time investment required for that kind of critical financial thinking. It's too much of a burden to ask.
• deleted 8y ago
  [deleted]
• dandare 8y ago
  I have no evidence, only gut feeling, but I believe the "threat to Western liberal democracy" as defined by "Trump, Brexit, and rise of populism and extremism" is not caused by the Credit Crunch but by the decade of Rusia's poisoning the public discourse with its fake news factories and troll farms.
  • kevin_thibedeau 8y ago
    America has plenty of homegrown fake news factories and troll farms. They've been haunting AM radio since before the web.
  • toasterlovin 8y ago
    FWIW, it's incredibly patronizing to dismiss the political concerns of half the population by essentially saying that they're rubes who have been duped by the Russians.
    • dandare 8y ago
      Is my comment really patronizing and dismissing?
      • toasterlovin 8y ago
        It is. And, FWIW, Russian bots/trolls/whatever seem to have been as equally active in pushing left wing issues as right wing issues.
        • AnimalMuppet 8y ago
          But "the rise of populism and extremism" can equally well apply to the left. My personal opinion is that the economic crisis make things worse, and made a lot of people discontent with the current system, but that Russia has been very busily trying to make them more discontent, and trying to push them either to the right or left extreme. The concerns are real, the problems are real, but the trolling is making things considerably worse in terms of political stability.
• AckSyn 8y ago
  Not to repeat other posters who've pointed out some glaring errors I'll just say that when you can't wrap your head around the facts, you change the meaning of things to back up your beliefs. This is irresponsible "journalism", especially for an opinion piece.
• CzechTech 8y ago
  So, is this the final stage of the Trump Derangement Syndrome or does it get even worse?
• fullshark 8y ago
  Funny that The NY Times is now making this point. This was a standard Republican talking point during the Obama years which they have now abandoned post Trump.
  • adventured 8y ago
    Without exception, when the administrations change, the talking points always instantly change as it pertains to the hilariously biased media outlets. The day after the election, they either pretend issues no longer exist, or they aggressively focus on issues they were previously intentionally ignoring, depending on who wins. It's political story weighting. The US doesn't have any large, objective media organizations, they're all political party operatives entirely in the bag for their party. CNN for example is like some kind of insane clown tripping on acid these days, with its commentators routinely saying the craziest shit I've ever seen out of the mainstream media (eg calling for the President to be coup'd by the deep state, or openly advocating for political violence). Once upon a time, they actually had a good reputation for objective news reporting.
• breatheoften 8y ago
  I’ve been thinking a lot about the fundamental flaws in economic metrics — there is just absolutely something missing in the current concept of actuarial efficiency — which is I think the only kind of efficiency that economists are equipped to talk about. There is 0 value given to the experience of visiting a natural space or to forests which take thousands of years to grow which quite literally could not be reconstructed for any amount of money (for example) ... we need something more at a philosophical level from economics than we are getting. I’ve been pondering a two dimensional monetary system — dollar amount representing how much you want something and another number for representing how much it costs the world for you to have it ... the one dimensional notion of value claims to merge these things but it clearly does not — investment which produces growth by satisfying ever more wants _should_ hit a point of diminishing return far sooner than our current metrics are able to represent ... if we had a 2d monetary system where pricing models were segregated, actuarial efficiency could be arranged to mean something entirely more meaningful than the current optimization paradigms can ever hope for ...
  • clavalle 8y ago
    What this breaks down to is that not everything that is valued can be expressed in hard currency. The idea that hard currency is a universal lingua franca is deeply flawed and you've hit on a very good example of one area that is starkly apparent.
    • deleted 8y ago
      [deleted]
    • dv_dt 8y ago
      One thought is that we can value a wide range of social and environmental qualities using quantitative monetary models. It's imperfect, but our system doesn't even go as far as explicitly attempting to do that on a systematic basis. There are a lot of people doing work in this area under all sorts of different terms, but trying to tie in those missing qualities. Terms that might yield interesting reading are: loop economy, circular economy, doughnut economics, sustainable economics (though that seems to be slowly fading as a term..) https://evonomics.com/ https://evonomics.com/ is not a bad place to read to at least start getting some introductions to some of the people trying to push a rebuilding of our basic economic suppositions.
• chadbaud 8y ago
  Another interesting datapoint is medicaid enrollment. It's WAY up. If you look at it over the last 18 years: 2000: Enrolled: 31,743,700 | % of country: 11% 2010: Enrolled: 50,314,600 | % of country: 16% 2018: Enrolled: 73,355,220 | % of country: 22% Although there was an expansion in Medicaid in 2009, these numbers are still showing there are more people who can't afford the basics.
  • ProAm 8y ago
    Isnt a lot of this an effect from Obamacare? Forcing every American to purchase insurance significantly changed the insurance landscape in America for people both with and without insurance.
    • chadbaud 8y ago
      Yup. That's a lot of the growth between 2000 and 2010. I guess a better indicator would be the growth between 2013 (post Obamacare boom) and today. That has gone from 56,533,472 to 73,355,220.
  • adventured 8y ago
    Any other developed country provides free healthcare to its people, it's cheered and called a human right. The US does it, and it's used as proof that the US is collapsing. Under your premise, if the US moves to universal healthcare it implies total economic collapse. Medicaid didn't exist in 1960, that doesn't mean things were great for poor people back then, it was in fact far worse (see the homelessness and poverty rates back then, they were nearly twice what they are today). The US barely had any social safety net 50 years ago. Now it has one of the best social safety nets in the OECD and it keeps getting larger and more inclusive. So which is it? Do you want free healthcare for more people, or do you want to take that away from everyone so we can pretend nobody actually needs it? Beside that, healthcare expenses per person have roughly tripled in 20-25 years. Even the immense US median income levels - among the highest on earth - can't sustain that rate of increase. It's hardly an issue of affording the basics: when healthcare costs an average person $10,000 per year, it's clearly far outside the realm of being a basic. In which developed country can poor people afford that healthcare cost? None. The middle class in most developed countries can't come close to affording $10k per person in healthcare expenses per year. Countries like Britain, Finland, New Zealand, etc. are at less than half that cost. About half of the EU would fall under Medicaid's income line.
• debacle 8y ago
  There's this thing, I don't know if it has a name, but it's certainly a post-scarcity idea: The people who spend the most capital (money/time/talent) measuring/sciencing a thing will always be the people who can profit from that thing the most, and they will measure/science it in the capacity that provides the highest returns. Lots of other people will measure/science the thing, but they either will have their own agenda or do the measury/sciency part less good.
• jfaucett 8y ago
  What I think people like the author who are arguing about inequality are missing is that inequality is not the fundamental issue or put another way I think that tackling it is the wrong goal to have. For instance, if we are all rich, it doesn't matter if some even richer people can have flying cars and homes in the sky. In fact, I would prefer this scenario to a perfectly equal situation in which everyone lives in the same abject poverty or almost as bad, we have a crawling rate of innovation and don't get around to making market ready medical devices, human-AI biosembiotic interfaces, etc. for another century or so. Our goal should be to increase wealth in general and ensure that the median wealth per capita increases or steadily increases for various segments of the population. Ideally, you would have faster median expansions in lower income segments of the population but in my mind, even if the top %1 had an increased wealth per annum of say 0.05% and the lowest had a lesser increase of 0.02%, I would still prefer that (assuming we've controlled for PPP, inflation, etc) than a system where the poorest increased at 2% a year, the richest dropped -2% and our overall economic productivity declined or stayed roughly the same year after year. Overall, though I agree with the author in that too much emphasis (in the news at least), is put on GDP. Its still a useful indicator of productivity in an economy and from an investment perspective, but there are as he rightly mentions many qualitative properties left out of this one measurement. Which is kind of always the case is it not? Every time we measure something it measures a specific thing which we decide to interpret in a particular way, its funny how often we generalize that act to areas for which the original measurement was never designed.
  • toasterlovin 8y ago
    Inequality doesn't matter, in theory, but it does matter in practice. Like it or not (and I don't like it, FWIW), people measure themselves against other people. A large delta between the rich and the poor shouldn't matter, as long as the poor are doing well enough, but it does matter. We are social animals who evolved in small communities. There is a built in sense that many of us have that those doing better should share with those doing worse. And when things get too out of line, it undermines political instability.
    • jfaucett 8y ago
• jotjotzzz 8y ago
  This country has $21 trillion in debt. With this current administration (Trumpy and previous administrations before him) have been ignoring this swamp-filled problem. So much so that in August, the current administration added $214 billion to the deficit. We are on our way to adding $1 trillion a year to this country's deficit. $1 trillion is an insane number: http://www.pagetutor.com/trillion/index.html http://www.pagetutor.com/trillion/index.html We are now over a 105.4% Debt-to-GDP ratio. If you as a citizen make $1 and spends $2, you're officially bankrupt! The U.S. government can measure all it wants, but we cannot continue to ignore the current situation. The reason Trump got elected in the first place was that his constituents thought he would be the man to address the "swamp." But nope.
  • jungturk 8y ago
    > If you as a citizen make $1 and spends $2, you're officially bankrupt! Not exactly, if I've got resources banked to cover the gap. Unfortunately, the resources we're selling to cover the present excesses are the tax receipts of future citizens, and they would probably prefer to have those funds to cover other priorities.
    • WkndTriathlete 8y ago
      Bear in mind that if the US decides to print $21 trillion dollars it wipes out its entire debt. Granted, all your dollars would be buy about 1/20th as much as they did before, but the US would be debt-free. (There are other problems with printing $21tn dollars that I'll leave to actual economists to point out.)
      • jotjotzzz 8y ago
        Overprinting is called hyperinflation. People lose trust in the currency because they are worthless. It has happened before. https://en.wikipedia.org/wiki/Hyperinflation https://en.wikipedia.org/wiki/Hyperinflation
    • jotjotzzz 8y ago
      You're talking about assets vs. liabilities. Unfortunately -- we are racking up more liabilities.
• monochromatic 8y ago
  Trump’s economy is doing fantastically well—better find a different way to evaluate it!
  • KillerRAK 8y ago
    Thank you -- this had to be said. Political discourse is useless here in this echo chamber.
• guerby 8y ago
  From Dean Baker: http://cepr.net/blogs/beat-the-press/does-france-s-economy-need-to-be-renewed http://cepr.net/blogs/beat-the-press/does-france-s-economy-n... " For prime-age workers (ages 25 to 54), according to the OECD, France's employment rate is actually slightly higher than in the United States, 80.4 percent in France, compared to 79.3 percent in the United States." https://stats.oecd.org/index.aspx?queryid=36324 https://stats.oecd.org/index.aspx?queryid=36324 Unemployement rate 25-54 year old is 8.1% in France and 3.3% in the USA. So less than half the "unemployment rate" for less people working relative to this population. A few decades worth of "inactivity" rise explaining this result (in french but graph subtitles in english): http://guerby.org/blog/index.php/2010/01/31/211-larry-summers-lit-mon-blog http://guerby.org/blog/index.php/2010/01/31/211-larry-summer... Ask your friend studying economics wether they know this data point or not. :)
• cwyers 8y ago
  It's Goodhart's Law: "When a measure becomes a target, it ceases to be a good measure." Too many people are incentivized for the metrics to look good to trust the metrics anymore.
  • da_chicken 8y ago
    Yeah, this is it exactly. Goodhart even discovered it in the context of economics: https://en.wikipedia.org/wiki/Goodhart%27s_law https://en.wikipedia.org/wiki/Goodhart%27s_law The Lucas critique is the other commonly associated one: https://en.wikipedia.org/wiki/Lucas_critique https://en.wikipedia.org/wiki/Lucas_critique
• resters 8y ago
  The idea of overall economic output will always be an important abstract measure of the economy, but it completely ignores most of the ways that economic policy intertwines with politics. I think the biggest danger in how we analyze the economy is that we need to be aware that many of our leaders have an incentive to always report good news about the economy. The core idea behind policies intended to increase employment, credit availability, etc., is that the government should act to help actors in the economy become more leveraged. Or in other words, that a higher output can be achieved if risk premiums are kept in check through policy action. Why? Because a bunch of unemployed, suffering people will eventually lead to a political revolution, and so political stability is a significant driver for economic stability and long-term planning. Arguably, long-term planning is the bedrock of the financial system. It allows trading between the present and future, and arbitrage between possible futures. Political risk/instability adds an additional cost to long-term planning. So as a result we have welfare economics, targeted both at individuals and firms. The political notion of social welfare is used by planners to create a set of meta-strategies that benefit the recipients. The problem is that when you connect politics to economic policy you end up with groups that gain status (and power to influence the policy) as a result of the policy. So the policy changes and groups of beneficiaries compete for rents. Why did the 2008 financial crisis happen? Because economic policy-makers believed that they understood the safe bounds for certain systemic risks within the system. They ended up getting those bounds wrong, and so it came to pass that a lot of other "normal" risks were drastically mispriced once the bounds were exceeded, since their prices had been based on the assumption of asset price stability. The rest of the details have to do with the many other mechanisms that suffered a cascade of failures due to the bounds set by regulators being exceeded. Normally, firm insolvency/failure can act as a circuit breaker to stop the effects of a price correction from spreading to the rest of the economy... but the key point is that the pricing assumptions were baked into the rules themselves, so securities of mortgage backed securities were allowed to be treated as underwriting capital by financial institutions, etc. Sadly, there is no free lunch. Growth-oriented policy will always contain some core assumptions about system invariants that are not necessarily actually invariants. The time horizon for policy mistakes is longer than the typical term in office for those making the rules, so there is no incentive to adopt a more risk-averse view. Of course, what has happened since 2008 is that the financial system has once again figure out ways to use cheap credit to make profits with little apparent risk. But just as it was the case before 2008 there are still many assumptions about systemic risk baked into the pie. So this article is timely because of Trump's economic populism and the apparent rise of left-wing economic populist candidates. The article calls for more populist economic metrics. But what is not explicitly stated by the article is that the reason for this is simply to reduce the risk of populism-driven economic shocks that might exceed the bounds baked into the core assumptions used by the regulatory regime. In other words, there is a call to reformulate the metrics so that they better reflect populist sentiments, and the corresponding implication that policies ought to shift to make these metrics show "good" numbers. This article comes as part of a series of statements by former Fed and Treasury officials warning that the tools are not adequate to address a future crisis. Since a crisis will come in the form of significant price corrections, and since the interventions post 2008 prevented a lot of price corrections that were probably appropriate, we can infer that a future correction will be larger than the one in 2008. Combine this with rising tides of economic populism, and it is clear why all of these experts are suddenly calling for a fundamentally different approach. They must be quite convinced that the next correction could bring massive social and political upheaval that dwarfs what we have seen post 2008 with Brexit and the rise of Trump. Note that a map of the US shows that most counties are "red" and likely find the economic populist message of Trump highly appealing and relevant. Economic populism is dramatically more widespread now than it was in 2008. But prior to 2008 real estate price appreciation in a lot of historically red states led to feelings of affluence and contentment with the status quo. I've argued separately that GWB allowed the real estate bubble to grow a few extra years to help sell the war on Terror. The GSEs (primary underwriters of most mortgages) were not held accountable for failing to produce financials for several years in a row during that time. So policymakers are now realizing that none of those tools to make people feel complacent are at the ready when the next correction comes, and they are fearful of the political consequences which are nearly inevitable at this point unless measures are put in place now.
• pastor_elm 8y ago
  Seems shortsighted to imply these are all metrics related to lingering effects of the financial crisis and not the actively intended results of corporate decision making post crisis. People are rich enough to buy $1000 phones every year and CRVs instead of sedans. That's all that matters.
• partiallypro 8y ago
  I always find it amusing when people of either party persuasion suddenly find qualms with economic metrics when their guy isn't in office. Republican leaning people did it under Obama, and now Democratic leaning people are doing it under Trump. Because neither could explain the grown that was happening when their opponent was in office. I've seen the drum beats of "GDP is irrelevant now" from the Left ever since Trump won and the GDP numbers have generally been above estimates. Stats have become political footballs. Economist have always known GDP isn't perfect, but it is the best measure we have or that has been devised. That is taught in the first few economic courses if you become an econ major when you're covering GDP.
• solomon_ 8y ago
  Are there any examples of economic metrics that factor in the cost of environmental externalities? For example, what is the economic value of our coasts and how do you account for their destruction, by sea level rise, when calculating the cost of manufacturing and the value of any resulting economic activity.
• jklein11 8y ago
  This article points out that there is a large portion of the labor force who has given up looking for work. This may be anecdotal, but I can't think of a single person that I know that is unemployed and not looking for a job/further education/caregiving. I know people who are underemployed or are the proverbial life long student. Am I just in my own little bubble? What do these people do with their days?
  • jelly 8y ago
    As was mentioned in an article [0] linked in another comment, men who are unemployed and have given up are typically low self-esteem and susceptible to depression. If you've met one, you won't hear them say they've given up. [0] https://www.brookings.edu/blog/up-front/2016/08/15/men-not-at-work-why-so-many-men-ages-of-25-to-54-are-not-working/ https://www.brookings.edu/blog/up-front/2016/08/15/men-not-a...
• OliverJones 8y ago
  Inequality started to get bad around 1980 or so. That's when my generation ("boomers", we're called, or maybe the "worst generation" to compare us to the WWII "greatest generation") decided that taxation was theft and younger people should suck it up and pay through the nose for their own college and housing. We've been successful. We've grabbed all the cookies. Some of those cookies could have gone for education, for infrastructure, and other things. Some of them could have gone into urban development to make sure the growing population had decent living quarters. Some of them could have gone into paying for sensible oversight of pharma, finance, and other vital business. But no. Those cookies are mine, MINE I tell you! And you can't have any. And by the way, no new apartment buildings in MY neighborhood. We're too special to have any riffraff who can't afford to pay most of a megabuck for a place to live. <irony><snark /></irony>
  • finnh 8y ago
    I agree, but there's plenty of blame to go around ... In particular, I think the "greatest generation" also bears heavy responsibility as they, after all, filled out the ranks of the AARP during the 80s.
  • zackmorris 8y ago
    I'm kind of in the same boat, Gen X born 1977. I grew up under Reagan, thinking he was "the president" because he looked and sounded like "the president". But over time I learned (mostly from my parents) that most of what Reagan was selling was a bill of goods. The "greed is good" mantra of the 80s didn't accelerate progress, it stifled it. In reality, the major public works that formed the American infrastructure we take for granted today were built when my grandparents' generation was in its prime, starting with the end of the Great Depression in the late 30s and ending sometime around the late 60s when it became fearful of the counterculture and began trying to outlaw all of the alternate routes to enlightenment (sex, drugs and rock & roll). The 70s was a battle of philosophies between the Archie Bunkers of the world and disillusioned youth that had good reason to no longer trust authority (the Vietnam war). My generation had great stuff in the 80s like Star Wars and Nintendo, but it also got saddled with just awful stuff like AIDS and the war on drugs. So we grew up naive and sheltered (what I imagine the 1950s to have been like) until the hedonistic days of the late 90s when some of the best of us were lost to excess. Then we lost the 2000s to the dot bomb, the global war on terror and finally the housing bubble. I don't feel like Gen X really got a foothold until Obama's election. So we've generally had little or no say in politics or our economic situation our entire lives. Gen X may very well be one of the most disenfranchised and lost generations in modern history. AAAnnnddd that's why I think the economy stinks. The best and brightest minds of my generation got snowed under by ADHD drugs and work in tech now, making money for rich people. The ones that know what's going on get mocked by the pretty people - the Paul Ryans of the world, the modern day snake oil salesmen. The populist wave washing over the world right now might be seen as a total accident if one doesn't have the context I've described above. There's a relentless, untiring machine of sexism/racism/classism that seduces the unwary with colorful notions like trickle down economics, which don't stand up to scrutiny. And unfortunately I see a lot of "the government is the enemy" propaganda popping up on Hacker News because of its indentured servitude to the wealthy and their libertarian talking points. If you want to fix the economy, it's so trivial as to almost be a joke. Just do the opposite of everything we've done since 1980. Raise taxes on the rich, publicly fund healthcare and education, empower the disenfranchised. When you remove the terror from people's lives, they'll work in harmony together and we could have things back on track in 5 or 10 years. Europe's doing it. Australia has an $18 minimum wage. And since none of this is likely to happen in the US, ask yourself who stands to profit in a culture of angst. Which slippery officials do marginalized people elect, which extractionary industries profit, which people/plants/animals are tread over by multinational corporations too big for any government to control? If you grok that, then you have a glimpse into the indignation of Gen X.
• 40acres 8y ago
  Definitely agree with the premise here. GDP is up, employment is up, stock market is up. But inequality is growing by day, market consolidation is becoming more and more of a problem, and most Americans are not invested in the stock market, let alone have an extra 1,000 to open up a mutual fund. Our economic statistics are way too broad and just don't account for the inequality in today's economy.
• squozzer 8y ago
  I've taken economic stats with a grain of salt for some time - one because I think after the Carter presidency, the executive branch had a huge incentive to fudge the stats. The other because macro numbers such as CPI and unemployment rates only tell a high-level story, not the one that mattered - which is, what is happening to ME? But it should be hypothetically possible nowadays to compute a useful individual CPI based on individual buying habits. Same goes for taxes - it should be possible to determine how much of one's spending power goes to taxes - income, sales, inclusive taxes such as excise/VAT, etc. Regarding jobs, it might be possible to develop an "employability" stat based on one's current job, age, and maybe location.
• RobertSmith 8y ago
  "Continuous economic growth and expansion in our finite world is not a must. In fact, the current global economic situation still presents a great opportunity to give nature a rest … to reduce stress, to have more free time, to become more secure and self-reliant, and to improve the quality of our lives." - https://medium.com/brewingthoughts/bhutan-an-economy-of-happiness-22462a702c9d https://medium.com/brewingthoughts/bhutan-an-economy-of-happ...
• Latteland 8y ago
  A lot of these misleading single value statistics seem to come down to we need a histogram. Money, comp, stock earnings go to different groups of people at very different amounts.
• suff 8y ago
  ... and using adverbs wrong as well. YSWIDT?
  • jmulho 8y ago
    ... and using acronyms wrong as well. DYSWIDT?
• ada1981 8y ago
  I’ve been saying this for years, we need new KPIs. For the US, I propose 3 major indexes of Life, Liberty and Happiness. Each of these could accommodate a large number of sub-indexes from a variety of political perspectives. For example, Liberty might include a metric for access to safe, legal and affordable abortion while Life might contain numbers on actual abortions performed. Life: mortality rate, birth rate, life expectancy, health spending, etc. Liberty: drug laws, gun laws, people in jail, freedom of press, etc. Happiness: mental health, life satisfaction, depression, etc. Thoughts? What measures would you include?
• jumbopapa 8y ago
  Beginning of the article negates any point he tried to establish further along. It screams that if the election would have gone the other way that he wouldn't be writing it.
• thomasmarriott 8y ago
  "The system is insolvent. No one knows what to do next — except repeat the insanity till the next bubble blows. That'll be the one. The big one." — Gekko, Wall Street 2, 2010 #thewayoutisup
• ufmace 8y ago
  > The United States elected a racist reality-television star who has thrown the presidency into chaos. And now I want to stop reading. Okay, I still finished it. But it really turns me off to sell a lie by constantly throwing one-off assertions of it into random unrelated places, where it is supposed to feel out-of-place to notice it and argue against it.
• chrisweekly 8y ago
  GDH ("Gross Domestic Happiness") might be a better single metric to track.
• arendtio 8y ago
  Extremely simplified this sounds like a typical Median vs Arithmetic Mean issue to me.
• HIPisTheAnswer 8y ago
  Yep. All public property and govt granted leases forego capital depreciation. Since most of the planet falls in this category, it is being plundered while only accounting for the sale of the bounty, without considering the loss of real capital (old forest, clean river/ocean/lake, etc). And a dollar/franc/baht/pound is a mass measure unit of gold. And a BTC is debt (promise of future computation) without a creditor, which ultimately means it is worth nothing, when the price forbids the ponzi from going on.
  • HIPisTheAnswer 8y ago
    Typo: debt without a debtor.
• known 8y ago
  https://en.wikipedia.org/wiki/Social_mobility https://en.wikipedia.org/wiki/Social_mobility is not measured in economic metrics