
We’re Measuring the Economy All Wrong - chollida1
https://www.nytimes.com/2018/09/14/opinion/columnists/great-recession-economy-gdp.html
======
breatheoften
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 ...

~~~
aaavl2821
There is a concept in economic theory for what you're discussing, the concept
of "externalities". There are definitely ways of measuring these things. But
you are right, measures of externalities aren't really considered when people
in government / business / the press talk about the economy

I think that's a shame, because externalities can be measured (not perfectly,
probably much less accurately than current economic measures -- but something
is probably better than nothing). And people care about them -- arguably,
today people are more concerned politically with externalities than
traditional economic growth. But the dialogue regarding these externalities is
generally driven by emotion rather than facts, because no one is really
incentivized to do thorough objective research on them at a really large scale
(tragedy of the commons)

~~~
breatheoften
I think “externalities” is close to the concept I want to capture with the
second dimension, but I want to bake this concept into the pricing model in
such a fundamental way that it can’t be ignored. Suppose the second dimension
of price in my thought is an approximation of the “total external cost” — this
metric undergoes market and actuarial optimization but the domain in which
these barks are traded reflects a different set of overall constraints than
are captured by the inflationary dollar monetary system. As a rough example,
let’s say the inflation model for the “bark” currency is tied to the total
number of tree years on the planet (I don’t think this would be the right way,
but just trying it as a conceptual example). So there are roughly
num_tree_years “barks” in existence growing at something approaching num_trees
per year. Lets say as more trees are planted or time passes that every human
is allocated a proportional share of “barks” commiserate to the “bark” growth
rate (or loss rate if trees are cut down faster than they are growing). So the
currency reflects an externality in a shared way that is also quantitative ...
if someone wants to cut down an old growth forest to build a car park, they
are gonna need to find a lot of people willing to loan them “barks” to pay for
it as they will have to compensate the global balance for all the barks they
remove — in addition to seeking the traditional investors who will loan them
money for construction on the traditional basis of their sense of the likely
desirability-profit of the parking garage ...

This “barks” toy example is definitely not the precise idea I want to capture
and not at all fully fleshed out — but suppose a more developed version where
there is a mechanism for estimating the externality costs of any transactions
and where there are different rules that apply when paying for the
“externalities cost” vs paying for its dollar price ...

~~~
aaavl2821
I think it's an interesting concept. As I think about it, we already have a
weak version of this in the form of lobbying and political organizing. If a
company wants to destroy an old growth forest to build a parking lot, in many
areas they need permits / zoning etc. People who would suffer if the forest
were destroyed -- people who live nearby, environmentalists, etc -- can raise
money and lobby, or organize politically, to make their case, as can those who
would benefit -- the company building the parking lot, maybe some neighbors
who value more parking more than they value the environment.

I think the issue with this system is that generally the groups imposing the
externality are more organized, and often wealthier, than the groups who
suffer from it (tragedy of the commons again). Getting the trees cut down may
be priority #1 for the company, and opposing it might be priority #30 for a
few hundred people. Priorities that low are effectively zero, since most
people dont even have time to handle their important priorities

I feel like your idea could potentially tip the balance in the favor of the
"commons" by imposing a higher upfront cost to the creator of negative
externalities, but I can't really put my finger on whether that is true.

------
OliverJones
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
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.

------
lukeschlather
> 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-a...](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.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.

~~~
Shivetya
this whole article is purely leading the charge for how Democrats are going to
down play the increase in market, lower jobless numbers especially among
minorities, and reports of general good will in the small business area.

Schumer only recently decided he wanted GPD reported differently for the same
reason politicians always want to change the measuring stick, because current
numbers don't support the message they want the public to hear.

It is very evident we are going to get swamped with all sorts of "new
economics" and "fair economics" stories leading up to 2018 because the current
numbers being reported look that good. The key is filtering this political
campaign driven noise.

~~~
thinkling
The article's argument is that the numbers commonly used do not reflect
reality accurately anymore. And your response doesn't engage with the
specifics of what the authors says is going on, instead you respond "la la la
la, I can't hear you, it's all just spin, la la la".

------
makmanalp
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-
pri...](https://www.bls.gov/charts/consumer-price-index/consumer-price-index-
average-price-data.htm)

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
Sowell speaks extensively to these types of shenanigans. It's certainly more
politically selected and manipulated than economist-chosen.

------
rayiner
> 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-
partic...](https://www.bls.gov/opub/mlr/2016/article/labor-force-
participation-what-has-happened-since-the-peak.htm) (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
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
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.

~~~
smogcutter
> 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.

Indeed they do. The rate you most commonly see tries to measure unemployment
in the active labor force. If you're not actively looking for work, you're not
counted as unemployed. There are other measures which do count "discouraged
workers" and others not usually included. They're much higher.

~~~
byproxy
Yea, I was talking about further filtering "discouraged workers", or those
who've given up searching for work. I think it'd be interesting to apply the
"wish to/need to" filter to those who are employed, too!

This article[1] gets into a bit, but

"Some men choose not to work and can afford not to. That’s great, Furman says.
But for many, probably most, dropping out of the work force not only means a
lack of income but also a loss of the dignity that comes with not working."

still sounds like conjecture, to me.

[1]: [https://www.brookings.edu/blog/up-front/2016/08/15/men-
not-a...](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/)

------
roenxi
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
(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.

------
saidajigumi
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
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&pa...](http://atlas.cid.harvard.edu/explore/network/?country=108&partner=undefined&product=undefined&productClass=HS&startYear=undefined&target=Product&year=2016)

vs

Vietnam
[http://atlas.cid.harvard.edu/explore/network/?country=239&pa...](http://atlas.cid.harvard.edu/explore/network/?country=239&partner=undefined&product=undefined&productClass=HS&startYear=undefined&target=Product&year=2016)

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.

------
crazygringo
> _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
'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
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.

------
larrik
"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.

~~~
sonnyblarney
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
>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).

~~~
sonnyblarney
The Manning leaks helped spawn the Arab Spring for a set of upside down
reasons. Manning had no understanding of what he was doing, nor could anyone
expect the outcome. Moroever, the leaks did not show the Americans 'being
evil' to the world, in fact, just the opposite: the leaks showed thousands of
professional diplomats doing their mundane jobs in a difficult and complicated
world. Given how many cables were leaked, and that nothing explosive came out
of that making the Americans look particularly evil is a real testament to the
professionalism of the American diplomatic corps.

What the cables did however - was demonstrate to regular Arabs how deeply
corrupt their _own_ leaders were. Basically, they saw the Americans trying to
appease, nudge, console, 'do the best they could' with some corrupt folks.

I'm sorry to not have direct sources, it was years ago when I was abroad,
paying attention to all of this. Edit: I added a couple of sources below, it's
not a conspiratorial view.

~~~
stale2002
Oh, that's pretty cool then. At least it informed people about how bad their
leaders were.

------
cwyers
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
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)

------
40acres
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.

------
ufmace
> 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.

------
squozzer
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
"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-
happ...](https://medium.com/brewingthoughts/bhutan-an-economy-of-
happiness-22462a702c9d)

------
aargh_aargh
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.

------
jumbopapa
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.

------
thanatropism
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
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".

~~~
yborg
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
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?

------
jklein11
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
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-a...](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/)

------
guerby
From Dean Baker:

[http://cepr.net/blogs/beat-the-press/does-france-s-
economy-n...](http://cepr.net/blogs/beat-the-press/does-france-s-economy-need-
to-be-renewed)

" 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-
summer...](http://guerby.org/blog/index.php/2010/01/31/211-larry-summers-lit-
mon-blog)

Ask your friend studying economics wether they know this data point or not. :)

------
mabbo
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.

------
chadbaud
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
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
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.

------
Latteland
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.

------
debacle
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.

------
maelito
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
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.

------
pastor_elm
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.

------
solomon_
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.

------
sddfd
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
"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.

------
chrisweekly
GDH ("Gross Domestic Happiness") might be a better single metric to track.

------
known
[https://en.wikipedia.org/wiki/Social_mobility](https://en.wikipedia.org/wiki/Social_mobility)
is not measured in economic metrics

------
ada1981
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?

------
arendtio
Extremely simplified this sounds like a typical Median vs Arithmetic Mean
issue to me.

------
suff
... and using adverbs wrong as well. YSWIDT?

~~~
jmulho
... and using acronyms wrong as well. DYSWIDT?

------
jotjotzzz
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
> 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
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
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)

------
partiallypro
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.

------
resters
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.

------
HIPisTheAnswer
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
Typo: debt without a debtor.

------
monochromatic
Trump’s economy is doing fantastically well—better find a different way to
evaluate it!

~~~
KillerRAK
Thank you -- this had to be said. Political discourse is useless here in this
echo chamber.

------
fullshark
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
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.

------
dandare
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.

~~~
toasterlovin
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
Is my comment really patronizing and dismissing?

~~~
toasterlovin
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
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.

------
jfaucett
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.

~~~
mdorazio
I'm confused by how your desired situation is compatible with a capitalist
market. If everyone is rich, prices just rise to the point where everyone
isn't rich anymore. Unless we're talking about a post-scarcity or post-labor
economy, which isn't really useful to guiding economic policy today.

~~~
jfaucett
> If everyone is rich, prices just rise to the point where everyone isn't rich
> anymore.

Rich and poor are always tied to purchasing power which itself is tied to
productivity, efficiency and innovation within an economy. (as well as the
traditional price theory, demand/supply, etc.) I used rich/poor because those
are simple terms everyone can understand more easily than PPP or Genuine
Savings, etc. (however, wealth is a better term I should have probably used in
its stead)

For instance, the phone you can buy and hold in your hand today for $200 is
vastly more powerful than the most expensive IBM mainframes of just 20 years
ago - A CEO of those times could not even afford the simple phone many refuges
have in their Rucksacks these days. Are they rich because of this? It depends
on what particular measurement for "rich" you are using.

To answer your question. Yes, ceteris peribus if everyone gets more money
instantly (i.e. money supply increases) all prices will rise accordingly and
there is a net null effect, however, and this is key, if that increase is in
wealth i.e. capital assets, productivity, everyone is better off and prices
will increase according to traditional demand-pull.

~~~
mdorazio
Great, wealth is a much better term to be using here, but you're still hand-
waving away the method by which increasing capital assets, productivity, etc.
would happen under a capitalist free market. The traditional way you increase
these things for everyone is by collective bargaining (unions) or collective
ownership of businesses (employee-owned companies). These two things are
pretty much directly at odds with American-style capitalism.

Do you think we should be aiming for something more akin to the labor
situation in Europe, or do you think there's a different method by which we
could create wealth for everyone more equally than today?

