Rebelling Against Economics
Vox has an article about what alcohol poisoning costs the United States each year.
I don’t mean to make light of death by alcohol poisoning but I’ve seen a series of articles like this over the past years and they always rub me the wrong way because they seem absolutely joyless with their overfocus on economics and costs. They can cover far less harmful stuff like “Here is what deciding to play hooky on the first nice day of spring costs America each year” or “Why that random weekday beach trip with your lover cost the economic 6 billion dollars.”
These articles seem to create the impression that we should all be about economics and the bottom line all the time while completely ignoring the stuff that makes being human great and fun and interesting.
What is with this overfocus on economics? What is wrong with a random day off every now and then to recharge or spend time with a lover even if it is not wise economically or business wise? What is with this never ending trend of explaining everything with economics and dollars instead of less tangible benefits?
Note: I am not a crank. I might be a poet at heart though.
What you’re seeing is the absurd commitment to the idea that there is a RIGHT way to do things, and that if we can just figure that out, then we’ll all know how to live. It isn’t so much about economics though, although that’s one way that this cultural obsession manifests itself. It’s present everywhere, as if living in a world in which we accept that some people do things differently than other people just isn’t good enough. A pox on it all.Report
Yeah I agree with all of this. It might not be limited to economics but I seem to notice it most in economics (or pop economic) writing.Report
It comes up there a lot, but if you look, this desperately aggressive mindset – that there is a right answer DAMMIT – is everywhere. It exists among the audiophiles obsessed with figuring out the best way to listen to music. It exists among the runners obsessed with figuring out the right way to run. It exists among the photographers who are sure there is a way to generate a perfect image. It never ends, and it never simply stops at, “This is the way that I LIKE to do things.” It’s always, always, always, “This is the way TO do things.”Report
I agree completely. Let’s get stink-o!
Also, have a few of these frozen BigGulpcicles that I fried in transfat. They’re delicious and you can’t eat just one.Report
I would advise a blogger against making the affirmative statement “I am not a crank” for the same reason I advise my clients to avoid volunteering the statement “I’m telling you the truth!” on the witness stand. For example, consider this cautionary epistolary message from well-beloved popular media:
Report
(Just busting your chops a little bit, @saul-degraw.)Report
I was about to say “That’s the joke…..”Report
Dear Mr. President:
There are too many states nowadays.
Please eliminate three.
I am not a crackpot!
–Abraham SimpsonReport
To be fair Abe, he was only against recognizing Missouri.Report
It’s the same reason that a top 10 list of movies is probably going to be about the 10 that has the highest gross. As Protagora$ said, “Money is the measure of all things.”Report
Here’s what I’ll say about the person who puts together that particular list: at least they’re offering us a substantive measure with objective answers. We might disagree of course, for a thousand different reasons, but at least that particular person is giving us something more substantive than, “Here are the ten movies I like the most with a mountain of bullshit shoveled on top explaining why my favorite things happen to also objectively be the ten best.”Report
I’d prefer “Here’s the 10 movies I liked the best and why”, because it might contain some I’d like to see. “Here’s the ones that made the most money” would only be useful as films to avoid (e.g. Star Wars VII: Luke and Wolverine vs. the Avengers.)Report
How about Vader vs. Rodan?Report
Wait, what? Where do you keep seeing these lists that are simply ranking movies by grosses – and more importantly, why are you reading them?
If I look at Metacritic’s lists for the year (yes, of course it’s shorthand, since it aggregates) I see very, very few megablockbusters on there (and the ones that are – X-Men, Guardians, and Planet of Apes – are clustered under “Sci-Fi, Fantasy, and Superhero” films – AKA, “films that have big ol’ effects budgets that need recouping, so they get pitched at a wide demographic with the deepest pockets”). I see a bunch of foreign films, I see indies, I see a bunch of stuff I never heard of that I doubt were anywhere near the top-10-grossing.
I guess what I am saying is, if you are reading pieces that are based on grosses (or reviewers that seem to only track with grosses), then read different reviews.Report
Forgot to add the link:
http://www.metacritic.com/feature/best-and-worst-films-of-2014Report
I have to sign on with Glyph. Most of the Top 10 lists I see are by critics being thoughtful and not caring about Blockbuster like A.O. Scott or Dana Stevens or Richard Brody.Report
How much of that is signaling on the part of critics that they don’t go for the big blockbusters that everyone else does?Report
Vik,
If Zero Motivation can pull awards at Tribeca, then not as much as you think. That film definitely was a blockbuster. Dil Se as well (yeah, that’s a much older film).
I will grant you that most critics aren’t the most technical of people — the video wizards who did yeoman’s work on DS9 or Dr. Who aren’t going to get their due from “film critics” anytime soon…
But nobody’s turning down a movie because it was too much of a hit.Report
Vik,
so, um, what I’m saying is that film critics have exposure to the world’s list of blockbuster films. And while some of our blockbusters are honestly “in the running” … most aren’t. (Abrams’ First Star Trek, the Avengers — bloody good cinema).Report
Eh, I don’t know that it’s signalling. Or not much, anyway. Part of it is that I would expect critics to be more versed in film, whether through formal film history and theory education, or on-the-job training.
Now, the on-the-job-training in particular does carry with it its own distorting risk, which is that the reviewer has seen so, so many cookie-cutter films of X type (say, effects-heavy blockbusters) that he or she begins to reflexively hate movies of that type and can’t even appreciate a particularly well-done example any more; and/or becomes predisposed to undeservedly elevate things that are NOT cookie-cutter X’s, regardless of their actual quality, simply because it’s not yet another cookie-cutter X which he/she is by-God-sick-to-death-of-seeing.
But that’s not signalling. That’s eating ice cream for every meal and getting sick of it so that even a crappy wilted salad starts to look really good.Report
Glyph,
yes. Steadicam makes my head hurt… (it does that to everyone, though).
The problem with critics is that they really can’t afford to disagree with what’s popular at the time. Thus they resemble a herd, which can kick out people with unpopular opinions.
I’m not afraid to call Dogtooth (an Oscar Nominee for Best Foreign Language film) — as a downright blah movie that it’s not really really worth spending the time to see it. And that’s far from the worst movie I’ve ever seen.Report
… and I have the damned name wrong. that’s not steadicam — when someone is deliberately swaying the camera back and forth. Snorricam? maybe?
not my field, i get the terms confused.Report
The shaky, handheld camera that was a Bochco trademark?Report
Mike,
yeah… I think. I haven’t seen any of those tv shows… but what I was watching was swaying back and forth Constantly. It’s worse than being seasick (not that I’ve ever been seasick).
Film makers have a real tendency to try things to “look different” — even if they’re qualitatively worse than other ideas.
Cyrus and other mumblecore films can really, really be shitty too. (I can understand wanting dialogue to not be polished… but when people sit around trying to phrase things, you’re diluting the punch of what they have to say. KISS, short sweet and simple — it’s standard rhetoric and excellent storytelling).Report
I actually find it a bit obnoxious, too, though mostly for a different reason: it’s usually disingenuous. Which is to say I think that the main thing they don’t like about alcohol poisoning is the thing you don’t like about alcohol poisoning. The focus on dollars and cents serves two functions:
1) It puts an objective face on a value judgment. (this ties in to @sam-wilkinson comment)
2) It justifies external intervention by pretending it’s about externalities (in this case, dollars and cents).
I consider it disingenuous because I believe that most of the time, if you could demonstrate that [Bad Thing X] actually saved society money, theirs views of BTX would not change a bit. As often as not, you’d probably be criticized for reducing human suffering to a monetary value.Report
Well that too…..Report
I think a prime example of this is smoking. There is evidence that smokers save society money on net (partly because dying is expensive for everyone and smokers are more likely to die before collecting Medicare and Social Security, but only after paying into the system for close to the maximum amount of time), but it’s not like people will change their mind on smoking because of that.Report
All I know is that people frowned upon my campaign to take (fattening, diabetes-causing) candy from babies and replace it with (slimming, money-saving) ciggies.Report
Oh? Last I checked smoking was a growing phenom around the world.
If we really cared…Report
@kimmi The number of smokers is growing (from 721 M in 1980 to 1 B in 2012), but the global smoking rate has plummeted (from 26% to 18.6%) in that same time frame.Report
@glyph
https://www.youtube.com/watch?v=zQGik1hdDLEReport
I don’t mean to make light of death by alcohol poisoning but I’ve seen a series of articles like this over the past years and they always rub me the wrong way because they seem absolutely joyless.
Heh…Report
The word that comes to my mind instead of “joyless” is… lifeless. Which given the issue I don’t know is an awesome substitute, or a terrible one.Report
We just had the “Deadweight loss of Christmas” season, and you decide to throw down the gauntlet when an article fails to see the lighter side of alcohol poisoning?Report
What are your views on the Deadweight Loss of Christmas? You should write a guest-post!Report
Vox has it covered!Report
Yes, those were the first articles that came to my mind when I read this post.Report
Japan has a similar problem.
http://www.theguardian.com/world/2015/jan/05/nine-people-choke-to-death-eating-rice-cakes-in-japan
Nine people died choking to death eating rice cakes. Another 13 are in serious condition.
How many people have to die before we should do something?Report
I’m not surprised. Ever try to eat one of those things? I’d rather eat the box they come in.Report
I’d sooner own a gun.Report
You’re probably thinking of the dry puffed rice cakes sold as diet food in the US. Mochi is completely different. It’s moist, chewy, sweet, and has a texture that isn’t really comparable to any other food that comes to mind.Report
The texture is why it’s dangerous: if you swallow enough to fill your throat, it forms an air-tight seal.Report
Sam and Will have this on target. The other point is that, this “study” isn’t taken in context. I see this a lot in advocacy articles, especially in Consumer Reports and such. OMG XX number of people/kids/yadda yadda died/were injured. If you look at the number of negative results over the total population you find the data yawning…..
Let’s do that for the Vox article: 6 deaths a day, 365 days a year. Almost 2200 folks died of alcohol poisoning in a year! Crisis! Dividing by the total population of the US-let’s say 300M, you get .000007333.
This public health menace is surely something we need to devote a maximum effort to fix!Report
Well, that’s not precisely what Saul is on about in my reading. He is more using the article to rail against the tendency to reduce every issue or question to, “yeah, but what’s the bill?”
But since we are complaining about the actual Vox article itself, let’s be more specific, because I think it’s doing something even worse than simple no-context alarmism. It is “attempting” (if I were less kind and willing to ascribe malice instead of carelessness, I might say “pretending”) to provide “context”, but instead slipping around amongst multiple related concepts, presenting the illusion of complete context while really being super-sloppy.
We start out talking about deaths from alcohol poisoning and say we will find out what THAT costs; but by the time we get around to costs, we’ve rolled in other sets and concepts like “excessive drinking”, motor vehicle crashes, criminal court costs, had a glance at domestic violence, and implied that hungover people don’t always get the most work done (shocking, I know).
IOW, 2200 deaths probably didn’t cost the U.S. economy billions of dollars, either. I thought Vox was supposed to be better than the old media, but this looks like the same old crap to me.Report
Vox wasn’t bad on Ferguson in August, though I haven’t really read it since. However, neither was the Washington Post, so perhaps that’s more evidence that Vox is basically the old media with different spacing and use of various font sizes: do well with big stories, but when things are slow, create their own news.
Somewhat relatedly, the Jim Rome hubbub reminds me why I frequently long for a time before the internet.Report
As I don’t follow the sporting events, I was unaware of the Jim Rome hubbub (bub). That’s pretty hilarious. I hope they don’t find his corpse somewhere, skull smashed in by “what police say appears to have been a tuba“.Report
what a fantastic hashtag.Report
Milan Kundera, of Unbearable Lightness fame, wrote a wonderful little novel called Slowness that, when I think about the world of internet news and culture, the length of the “news cycle,” such as it is these days, and the rush for clicks, I think of fondly.Report
Somewhat relatedly, the Jim Rome hubbub reminds me why I frequently long for a time before the internet.
I don’t know anything about this Jim Rome hubbub, but if it’s what led to me seeing that video of Jim Everett flipping over a table, I’m all for it.Report
Hubbub? That’s barely even a blip. One of these days, the Good Humor Men of the world are going to do something about Rome’s frequent riffs about how it’s the perfect job for adults who like kids a bit too much.Report
different rhetorical strokes for different rhetorical folks. though generally speaking the “[bad] policy x has $$ cost attached to it” is a supplement to whatever emotional tactic is employed. it can provide a deeper context – and avenue of persuasion – beyond “this is bad and makes me feel bad and you should feel bad too”, but generally it’s a supplement. if someone is really into building opera houses for dolphins, the cost will “only” be xyz; if they’re really against said project, the cost is a “staggering” xyz.
this kind of cost stacking is secondary to the initial emotional foothold.Report
As others have pointed out, your beef is not with economics. Your beef is with explanatory journalism.Report
As imperfect as it may be, quantification is really the only way to make rational decisions about complicated trade-offs. The alternative is to make those decisions based on your ideological prejudices and how they make you feel. Due to various cognitive biases, this can lead to really dumb choices that fail any sort of rational cost-benefit analysis by orders of magnitude.
And sure, people doing the quantifications can always put their thumbs on the scale, or even just make honest mistakes. But the nice thing about quantification is that you have to show your work, which means that people on the other side can check it, point out errors, and come back with their own quantifications. The alternative is a bunch of people yelling at each other about whose intuitions are better.Report
Brandon,
bear in mind that humans aren’t really accurate or precise with continuous math, either, though (this is an issue with self-report). You might do better measuring Spearman’s correlation rather than Pearson’s, if you’re looking at how much people like particular political candidates, for example.
Not all mathematical measures need to be reduced down to dollars and cents, and often that can obscure more than it actually helps, particularly if you’re simply saying “flu costs more than Ebola, we should spend more on fixing flu than Ebola” (in which case, you’ve lopped off entire scads of variation between the two issues…)
Nonetheless, I’d rather see dollars and cents at least mentioned.Report
But it doesn’t quantify everything — it ignores an entire aspect of decision making, because it isn’t easily boiled down to money.
Take a less loaded example — playing hooky from work on the first nice day of spring. Sure, it might “cost” America 63 trillion dollars or whatever (obviously made up number!). But what’s it worth?
If I skip work, I’m saying “This day off is worth one of my vacation days, which itself is work X dollars”. My day off might cost, in productivity, X dollars to America. But I gain X dollars in happiness.
But there’s no “The first day of spring cost X million man-hours in work, but earned X million man hours in enjoyment”. There’s no balance to it.
Someone’s cost is someone else’s earnings, somewhere. Talking about it in crude money terms can be useful, but some times it’s just someone just dropping a thumb on the scale — “it’s immoral AND expensive!”.Report
Agreed. We might be saying “playing hooky from work stimulated the economy by XYZ, and cost the economy YZX in work-hours. Further, it cost us AbC in increased traffic, because people don’t coordinate very well without trying”Report
As I said, people who disagree are free to come up with alternative estimates, and show why theirs are better. I don’t really see anyone doing that for people skipping the occasional day of work, because there’s not really a political angle there or anything much at stake.
And there are ways to estimate how much people value intangibles. For taking a day off work, you might start by looking at people who actually do lose money for taking days off work. For example, I used to work at a job where I had no paid vacation. I could take time off, but a week off would cost me a week’s pay. This isn’t going to be perfect, of course, but it gets you a good ballpark figure.
Granted, I don’t know whether this article actually even exists, or if it does what exactly it said.Report
Brandon,
I guess to me the critical parts are that your costs are my profits, and vice versa. So sure, the costs of excessive alcohol are really high.
But what is the economic benefit of a thriving alcohol business in America? Production, sale, knock-on effects (let’s have a beer and then go to the movies! Or a beer then buy nachos here!).
That’s what I mean by imbalance. If we’re going to reduce it to cold hard cash, you gotta do both sides.
Frankly, I’d have been happy enough just to see a rough estimate of the booze business’ actual size next to the alcohol poisoning costs. Same way you might say “2000 cases of disease X, out of 400,000 exposed in an article about some disease” — it gives that missing economic perspective. If booze costs the nation 500 million a year, but the booze business itself is a 20 billion a year industry — that gives me an economic perspective to place those ‘costs the American economy X’ numbers in.
While the amount in the article is a lot of money to me, I’m not an industry. My yearly salary is a lot of money to me, but the company I work for finds it a pittance against their bottom line.
I think throwing in some numbers for perspective would help.Report
I tend to disagree with, I think (have only read about half of the comments), everyone here.
The “cost of X” meme, when done accurately, is good reporting primarily because it is almost always data that counters a political narrative that X behavior by people/businesses little or no impact save for those directly involved.
As a counter example that you might be more sympathetic to, Saul, consider the data often reported on in 2009/10 of what the cost of uninsured people going to the emergency room was — which was important data to have since you had one side claiming that all of the newly insured funded healthcare would be a new and currently unrealized expense.
The other reason, which I have written about here before, is that until necessary death reaches a level that effects you personally — either by proximity, price tag, or lack of convenience — you just don’t care that much. (You as in everyone, not you as in Saul.) And soul of a poet or not, that’s just the way we’re all hardwired.Report
On the one hand, having objective measures makes it easier to convince people that there’s A Real Problem and we need to Do Something.
On the other hand, sometimes having objective measures just lets people convince themselves that the problem isn’t actually that hard to fix and might not even be a problem at all.Report
Isn’t there a third thing objectives measures do: provide us with objective information about the objective world? Isn’t there a wee bit of utility in doing so?Report
Depends on what you want to achieve. If your objective is to convince people that alcohol should be illegal then maybe saying “alcohol costs so-many dollars” is not as good an idea as you think, because someone might say “really? I figured it would be more than that. Guess it’s not as much of a problem as we thought!”Report
So it’s a “you’ve got your objective data and I’ve got mine” sorta thing?
Then either there is no such thing as objective data, or objective data can be used by people to promote their own interests. The first seems wrong. The second trivially true.Report
It’s not that the data is wrong. It’s that when you present people with actual data they have a nasty tendency to come to a different conclusion than you want them to.
If you say “the cost of dealing with all the criminal prosecutions from the recent riots is five thousand dollars for each taxpayer in the city of Ferguson”, then maybe the shopowner whose business was burned to the ground would say “that’s cheaper than what happened to me, next time arrest ’em all and let the DA sort ’em out”.Report
Jim,
I don’t disagree, so I’m not sure what we’re disagreeing about. Maybe it’s this: that all of us make decisions and judgments on limited and incomplete information is just a fact of life. That person A will draw a different conclusion from the evidence presented by person B is just a fact of life. That evidence plays a role in determining the specific decisions and judgments some people make is just a fact of life. That others make decisions and judgments with less than the readily available evidence is also a fact of life.
It’s also true that some people will present a limited set of evidence to compel others to agree with them.
It still seems to me that evidence (and I view valid arguments and of course sound arguments as included in the set of things called “evidence”) is the only way to get past misinformation and to make justifiable decisions and judgments. And usually, the more a person knows, the less certain their decisions and judgments are.Report
I don’t know what we’re disagreeing about either, but you started this off with a snarky rejoinder so I figured you would have a better idea than I did.
“evidence (and I view valid arguments and of course sound arguments as included in the set of things called “evidence”) is the only way to get past misinformation and to make justifiable decisions and judgments.”
Ah, there it is! “arguments” are not “evidence”. Not even sound, valid ones. Not even super-sound extra-valid ones that people would totally agree with if only they weren’t holding on to silly false-consciousness epistemic-closure Just-World secretly-racist foolishness.Report
Not even super-sound extra-valid ones that people would totally agree with if only they weren’t holding on to silly false-consciousness epistemic-closure Just-World secretly-racist foolishness.
Wait, did you just make an argument there?Report
I don’t see the Vox piece as being particularly emblematic of the tendency – particularly amongst what we might call the American center-left – to reduce everything to nothing but dollars and cents. The “cost” that is the focus of the majority of the piece, which really is poor for other reasons, is on the number of lives lost and on what causes alcohol poisoning. Only the last paragraph of the piece discusses alleged economic costs and, at that, it makes clear that it is not factoring in mental and emotional costs (on the other hand, it also fails to even mention that there may be benefits to binge drinking, namely that it’s usually an awful lot of fun).
And when discussing policy, economic costs are always going to be an essential part of the discussion, though by no means should they be anything approaching the only part of the discussion. But they are also at least theoretically an objective measure that, if used properly, can provide a useful starting point for discussion and debate.
The problem is the “if used properly” caveat, as others have discussed above.
My problem with the Vox piece is that it doesn’t put any of its statistics in any kind of context. 2000 people a year is significant, but in a nation of 300 million people, how does it compare to other causes of death? What is the proposed solution, and what are both the economic and non-economic costs of that solution? How likely is that proposed solution to actually reduce the problem, and by how much? Simply put, why is this not only a problem, but a problem that warrants a high priority?
It says only 30 percent of alcohol poisoning deaths list alcoholism as a contributing factor, but why should we assume that to be a reliable indicator of how often alcoholism actually is a contributing factor – after all, how easily can a coroner determine if someone was or was not an alcoholic, and what incentive do they have to investigate that issue with sufficient thoroughness? Making this statistic particularly questionable is that 3/4 of alcohol poisoning deaths occur in people between 30 and 64, who make up only about half the population over 15 years old. I seriously – like, seriously – doubt that people in that age group are 50 percent more likely to be regular binge drinkers who are not alcoholics than 15 to 29 year olds. The reverse is almost certainly true, though.
What’s especially disappointing about the Vox piece, though, is that it is literally nothing more than an uncritical regurgitation of the CDC “report,” which is really just a glorified press release. It had been my understanding that Vox’s raison d’etre is in part a rejection of the practice of journalists being little more than stenographers, but this piece is just pure stenography.
The economic costs claim is actually worse than pure stenography. Regarding the alleged economic costs, the Vox piece states “The CDC calculated those costs by looking at health care and criminal justice expenses, costs of motor vehicle crashes and losses in workplace productivity.” But the actual “report” proclaims (embarassingly, for its position) that 70 percent of those “costs” are the estimated lost workplace productivity of the deceased. That’s a terrible claim for several reasons, not least of which is that lost workplace productivity of the deceased is usually about the least of our concerns with someone dying prematurely. It’s also a terrible claim because it assumes employers don’t replace a deceased person – this isn’t “lost productivity because of sick days,” or even “less efficient use of employee time,” it’s lost productivity presumed because the worker no longer exists at all. The only way such a claim would at all be useful would be if we were literally at zero unemployment.
Etc., etc.Report
It’s also bizarre to isolate the costs simply of deaths literally due to alcohol poisoning – people drinking themselves to death. Those costs are horrific (especially for those who die, to whom the “costs” spoken of in the article are rather irrelevant). But for the rest of us, the costs of alcohol consumption are much more varied than that. An alcohol poisoning number doesn’t account for the costs of drunk driving, or the costs to productivity or to family health of functional or dysfunctional alcoholism. Et cetera. The variety of issues is almost beyond listing in one place. So yeah, not Vox’s best piece of work.
This works against Saul’s point to some extent I think, and as someone who likes to tip a pint or a glass as much as the next guy, it is one I have a bit of basic sympathy to: just the idea of being obsessed by the costs of all our pleasures isn’t much fun. (I’m not sure Saul’s problem is so much with the quantification thereof, though maybe it is, as much as that accounting for costs is a drag.) But at the same time, at some level we need to be cognizant of the costs of our pleasures, and certainly we should be aware of the costs of excessive (and, unfortunately, even just moderate) alcohol consumption. I’m guessing Saul would acknowledge this.Report
@michael-drew The Vox piece does a terrible job of making this clear, particularly given the article’s title, but according to the CDC “report,” the $223 billion figure nominally covers ALL “excessive drinking” costs, of which 70% is lost productivity due to alcohol-related deaths (not just alcohol poisoning). So that’s another thing the Vox piece screws up.Report
Ugh. I had a nagging doubt that that was really what was going on, but based on the title and a quick skim that’s what it sounded like. Turrble.Report
I’m broadly an admirer of what Vox has done so far, but since it seems like it’s bash-Vox day (and by all means, it’s a constant-content-update internet publication, so there are going to be bashable things), I figure why not join in?
This correction is just a supremely lame and lazy one to have to run. And they don’t even admit it’s a correction, even tough the actual author of the cartoon in question never appeared in the original item, and the name of a guy who included it in a different piece did.
Lame.Report
“What is with this overfocus on economics? ”
I agree with this over-focus. It is like we have one measure and try to force everything into it. Reminds me of the story of the drunk looking for his keys under the streetlight.
Even in economics itself, dollar measures are becoming quaint and old fashioned. As computers, software, the Internet and virtual reality continue to replace the old physical/service economy with zero marginal cost productivity and non rival goods, dollars spent is becoming irrelevant.
I would not be surprised if a hundred years from now school children laugh at our age for the absurd paradigm that dollars and GDP measures progress and regress.Report
What paradigm? Dollars measure units of goods and services or potential goods and services. GDP measures the total amount of goods and services produced in an economy over a given period of time.
What is this everything that we are trying to force into these measures? And more importantly, who is this “we?”Report
If every published story about the health of the economy quotes GDP figures, people naturally assume the latter is the most important measure of the former. It’s like batting average and pitcher wins, which way too many people still think are much better measurements than they are.Report
Stories that want to say something about the level of economic activity in an economy, use GDP, because that is what GDP measures. However, stories about the economy also quote unemployment numbers, inflation, trade data, the level of taxation and government expenditures, manufacturing activity, measures of capital market activity, etc.
If there is evidence somewhere of GDP reductionism, I haven’t seen it. And I read economic news and analysis all day, every day for my job.Report
@j-r
None of the replies to my comment seem to be aimed at my main point, so I will assume I need to rephrase.
My point is that in a world of near zero marginal cost and non rival goods, GDP is an absurd measurement even within economics. This is the paradigm I was assaulting. As we replace goods with significant marginal costs and a rivalrous nature with goods that are the opposite we will see not just GDP disappear from the radar screen but actively consume what was previously on the radar.
Does this make sense?
GDP doesn’t measure nearly free goods which become increasingly used and increasingly free. Economic progress measured in GDP a doesn’t work as we approach free. And we are increasingly approaching free in the major innovative areas of the economy. Gains in welfare are showing up as reductions in the standard measure which used to work reasonably well.
My guess on the future is that economists will come up with a new, better paradigm to measure improvements in human prosperity. This will then be obvious once someone solves the paradigm. Even school children will take it for granted.Report
“It is like we have one measure and try to force everything into it. ”
What the hell else are we supposed to use, then? Energy output of power plants? Lines of code written? Episodes of television programs?
“the Internet and virtual reality continue to replace the old physical/service economy with zero marginal cost productivity and non rival goods, dollars spent is becoming irrelevant.”
I dunno about you, dogg, but the guys who keep the CAD software running still get paid dollars and the boss most certainly trades between IT contractor firms based on the dollars spent.Report
My point, Dogg, is that the marginal cost approaches zero, allowing the program once written and built to be reproduced at near zero marginal cost in a non rivalrous manner will cause GDP measures to miss virtually all of the value constructed if the app is distributed free to six billion people. And that is where we are heading.
Economic progress from the standard of material welfare goes up as the price approaches zero, but the GDP a shows it as a loss as things which used to be expensive and scarce become free and ever present.
The nearly zero marginal cost, non-rivalrous portion of the economy is where most of the action and innovation are. This is where entrepreneurs focus their attention.
People now spend hours a day doing near free marginal cost activities (often user generated) on Facebook, Twitter, you tube, Pandora, and games.
Supposedly economists try to measure this with inflation adjustments. But these become absurd. Imagine the true size of the economy if we counted every smart phone as an expensive camera, a personal accelerometer, a mobile phone, a computer superior to the supercomputers of twenty years ago, a stereo, a calculator, a high definition video camera, a gaming system, a video conferencing room* and so forth. Every smart phone today contains the components of hundreds of thousands of dollars of in early nineties technology. It shows up in the numbers just as a phone and contract.
Or consider email. Let’s say twenty five years ago that a personal correspondence cost fifty cents all in. Now we send hundreds of millions of texts, email, tweets, Facebook posts, comments etc per day (and half of all traffic on Internet is computer to computer, also not measured). Not only do we not count these at 50 cents each, what we do count is reduced or replaced with the new communication. I no longer send letters at 50 cents a pop to my mom.
Every year GDP a is becoming more misleading. I believe human welfare is advancing significantly faster than we can measure. Gains are perversely showing up as net losses when all is considered.
Economists and pundits go on about a great stagnation. They are not looking in the right place.
They need a new paradigm and a new measurement system.
* my company built video conference rooms at a cost of about a half million per location in the late eighties or early ninetie., each staffed with personnel to manage it. I now have a better and more convenient system embedded for free in my phone and tablet. GDP measures the loss of these video conference rooms and the teams no longer managing them and misses entirely the half a million dollars in capability a hundred million people just gained.Report
“will cause GDP measures to miss virtually all of the value constructed if the app is distributed free to six billion people. ”
If I distribute my app for free to six billion people then what benefit did I get from it? Will someone give me free beans because of it?
“My guess on the future is that economists will come up with a new, better paradigm to measure improvements in human prosperity. ”
Yeah, they’ll stop using the childish definition of “property” as “a physical thing that I physically hold in my physical hand” and start thinking of it in terms of bundles of rights, and they’ll assign value to that bundle of rights. (which was actually the case all along, but up until recently reproduction of information required physical artifacts, so we got used to thinking that the physical artifact was what held the value.)Report
Jim,
Think in terms of marginal cost for the next unit produced. If it costs ten million bucks to produce but can be distributed at near zero marginal cost to billions of people, it approaches free. This allows the production team to buy their beans and the cost still approaches nada. It also leads to superstar incomes and inequalities — even as it raises living standards. In other words it looks like what we see today but can’t measure well.
Also consider the sharing forums which are developing. People like sharing their output for free. Half the top ten websites are user generated. Wikipedia, YouTube, Facebook. We are shifting to a near free economy and missing the value added in our measurement system. Hundreds of millions of people are spending hours a day producing and consuming at near free.
In the seventies I could buy one album a month for ten bucks. Now, for ten dollars I can subscribe to a library of millions of albums at better quality and convenience. It shows up as less spent on music, but I gained a library of music superior to every radio station in the metro area. And the whole time, economists are bemoaning the great stagnation. WTF?Report
@roger
This is one of the more important things said about GDP:
The man who said that was Simon Kuznets, and he invented GDP. Economists have always understood what GDP was and wasn’t good for, its everyone else who seems to have the problem.Report
see above for my point.Report
James,
how well does GDP cover the underground economy?Report
http://pvponline.com/comic/2014/12/01/no-sale
Let’s just Make Up Data! Have Fun Guys!Report
I think what you’re reacting to is not so much excessive economics as bad economics.
The cost item that seems to be causing you the problem is the “lost productivity” one. And it should indeed bother you because that has no business being included in a social cost estimate.
The problem is exactly the one you identified – a lot of actions with monetary costs have intangible benefits that would be nearly impossible to quantify with sufficient reliability. For that reason the standard approach when estimating social cost is to assume that any costs people inflict on themselves are offset by some benefit and not count them. This is relevant to productivity loss because productivity is priced into the labour market, meaning that if a worker harms their productivity, they are ultimately only harming themselves. If a worker enjoys heaving drinking (or skiving off work occasionally) over getting that promotion, that’s not really the government’s business.
Including internal costs (costs people inflict on themselves) is inherently paternalistic, it is implicitly assuming that the people being studies cannot weight their won interests properly. If someone wants to make that claim they should do so explicitly, not hide behind their math.Report