Diane Coyle

A work in (need of) process
Gross Domestic Product is a concept so massive, so convoluted, so compromised by exceptions, patches, algorithms and definitions, that only a handful of people in the world fully understand it, and that does not include the commentators and politicians who bandy it about, daily. “There is no such entity out there as GDP in the real world, waiting to be measured by economists. It is an abstract idea.” That sets the tone of Diane Coyle’s excellent and show more sympathetic examination of GDP. Then it’s on into the impenetrable forest.

Inconsistencies abound. If you care for your child, it doesn’t count in GDP. If you take in neighborhood children, it does. If you paint your bedroom, it doesn’t count. If you hire the kid next door, it does. Technology and technical improvements don’t count much, because we don’t know how to measure and incorporate them. Even in the mid 90s, we knew that technology was actually trimming inflation by 1.3%, but that was never acknowledged. This is the black hole of GDP, as tech becomes huge.

A special conundrum comes from the soaring financial sector, which makes money without actually producing anything. Accounting for that has evolved from “Alice and Wonderland” to “statistical mirages” that warp the GDPs of many nations. Financials account for nearly 8% of US GDP, but the way we account for them overstates their heft by 20-50%. For example, both borrowing are lending are considered productive businesses, and their numbers pad GDP both ways, using the same funds.

Coyle stays focused, giving us an overview that is understandable (as well as frustrating). She does it by structuring her book as history, showing how economies and GDP have evolved over eras. There are diversions, but they are mentions of societal changes, wars and the like, which made GDP evolve the way it did.

There is so much wrong with GDP, it’s hard to plough a straight row through. Coyle shows great skill in not following tangents, like how bizarre the Consumer Price Index (CPI) is or how inaccurate unemployment rates are. The unemployment rate only accounts for those receiving benefits. Once those are exhausted, you’re no longer unemployed (Only 59% of working age Americans are employed vs the 7% unemployment rate). Yet major decisions are based on that index’s relation to GDP. As for CPI, it excludes “volatile” energy and food, which are the most common and frequent purchases, far more important than say, personal computers. This same kind of inaccuracy is the standard in computing GDP.

I do get annoyed at the tiresome economists’ argument (made here by Coyle) that technology has improved so much, it has massively reduced the effective costs of many things. That is only partly true. Computers do have much more memory for far less money today, but the systems and software are now so complex that the base unit cannot be compared to prior art. You could not operate a computer today equipped they way they were 25 years ago; they are essentially completely different tools. So we need to rebase the equivalence. Similarly with cable tv. Yes, we have 200 channels today, but if you don’t want 200 channels, too bad. You pay for them anyway. It doesn’t matter that they each cost 30 cents a month instead of 75. The monthly $60 today is not necessarily better than the old $6 for 15 channels. Rebasing is required. The same goes for GDP itself. It constantly needs rebasing as our society evolves, or it becomes a(nother) near meaningless number we rely on totally, which is the case today.

The economy is a fluid concept, and Coyle says we just need to keep refining GDP to work with it. One day, we’ll figure it out – and then it will be instantly obsolete again. Lifetime employment for economists.

David Wineberg show less

Clearly intended for those of us on the outside the profession of economics looking in, and hoping to make sense of an important but not readily explainable topic: how GDP has been measured since World War II, and how that should change to be more accurate and effective. They are timely topics, and Coyle doesn't dumb them down, so I learned some methods beyond the basics. However, I still came away struggling to understand why so much geopolitical influence should be placed on a measure that show more this title has demonstrated is so outdated and overly subjective. show less

ВВП, конечно, не секс, но обсуждается это короткое слово тоже часто и жарко. Некоторым политикам этот показатель так нравится, что они с разной степенью успешности пытаются его удваивать. Многие исследователи, наоборот утверждают, что мерить им и опираться на него в show more долгосрочном планировании уже старомодно.

Действительно, показатель придуман не вчера, он обладает интересной историей, в том числе в части применимости его странами социалистического блока. Порожденный условиями военного времени, он в прямом смысле заточен на оценку промышленного производства и плохо видит сферу услуг. Стояние в пробках подстегнет ВВП темпами потребления бензина, но качества жизни оно точно не улучшит.

Что же тогда использовать и как оценивать благосостояние общества? Койл знакомит с альтернативными показателями и утверждает, что откалиброванный ВВП еще может послужить измерению промышленного роста, но для полноты картины правительствам придется расширять инструментарий. show less

GDP is maybe the most widely used macroeconomic statistics, but even for many economists it is a black box. The book gives the brief history of what is now called the system of national accounts, talks in depth on changing definitions and how they affect the final figure. How to account for services? What if the quality of the product changed? Can we really compare Swaziland and Switzerland? What is the value of Google search or Wiki? Will the GDP be replaced with gross happiness index or show more other measure? These and other questions answered in a form of easily readable (thus a bit dumbed down) book. show less