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We’re Measuring the Economy All Wrong (nytimes.com)
253 points by chollida1 68 days ago | hide | past | web | favorite | 239 comments



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 ...


Economics has overdeveloped tools for reasoning based on price information in a "free" market of "rational" agents, and underdeveloped tools for actually valuing resources from first principles (because predicting the future, of a system involving agents, is really really hard). The former corresponds to your first axis ("how much you want it") and the latter to the second axis ("how much it costs the world to let you have it"). That's why, when facing any hard problem, the economics solution is to assume that markets will figure it out i.e. the two axis are equivalent, or that the first axis is the one we ought to work with, when making decisions (Further, whether the two should be conflated is actually a political decision, which is ignored in this sly exchange!)

The challenge is that real interactions are very different from a free market, and human agents are far from rational (for any operational meaning of rational that isn't tautological), unless in very narrow settings.

Economics doesn't have an answer to that, which is understandable, because it is a hard problem. The annoying things is when people pretend that there is nothing missing, and that everything is fine and dandy with economic metrics and tools. (EDIT: Economics is nowhere close to the physical sciences in its level of empirical rigor. Comments implicitly comparing economics to the sciences only serve as proofs illustrating my previous sentence.)


> Economics has overdeveloped tools for reasoning based on price information in a "free" market of "rational" agents, and underdeveloped tools for actually valuing resources from first principles. The former corresponds to your first axis ("how much you want it") and the latter to the second axis ("how much it costs the world to let you have it"). That's why, when facing any hard problem, the economics solution is to assume that markets will figure it out i.e. the two axis are equivalent. (Further, whether the two should be conflated is actually a political decision, which is ignored in this sly exchange!)

This is not true at all. There is no conflation between "how much you want it" and "how much it costs the world to let you have it". Even the models taught in introductory undergraduate courses on economics are capable of addressing the "problems" you're describing.


Care to elaborate for the unenlighted? Constructive discussion can actually help to educate people :)


[flagged]


> It's almost as if the person commenting has no economic education whatsoever.

Unfortunately, this is par for the course for HN comment threads about economics and economic policy.

As someone who does have a degree in economics, it's as frustrating as sitting and listening to someone talk about why chemistry is broken because the Bohr model is incomplete and electrons don't inhabit shells.


Arguing from a point of authority doesn't help enlighten anybody. I have a degree in economics too, it doesn't elucidate anything for a reader or make my arguments any more correct. Your logical fallacy is here - https://en.wikipedia.org/wiki/Argument_from_authority


Then why not enunciate your argument and have a productive conversation instead of relying on logical fallacies?


the problem is less that we don't value the forest, but that we are absolutely horrible at valuing the future. our brains are designed to optimize for the present and near future. the value of the forest is spread out over thousands of years (just like the value of fossil fuels), and we just can't intuit that kind of value.

forests are like annuities (small payments forever), rather than lump-sums, but our brains respond vastly more to lump-sums. this bias is also why terrorist attacks lead to action, while vehicular deaths, which kill way more people, don't.

we have ways to objectively (if imperfectly) value things like forests, but we just don't intuitively believe in that number. for example, the concept of a carbon tax makes objective sense, but this kind of bias is its achilles heel.

(this subject came up in a number of my business school classes, which i found quite useful for learning how to think about such things)


an enlightening comment, thank you


There is a lot of research into this, especially among the Europeans. Broadly this falls under "standard of living vs. quality of life".

GDP only measures standard of living. Various economists have proposed scales that are more weighted towards quality of life.

The problem is when money is your only hammer, the only nails are things that can be measured in money.

Impact investors are also starting to look into "ESG investing" -- making their investments not on profits alone, but incorporating standardized Environmental, Social, and Governance metrics as well.


This is why I think we need to move to a non-commodity accounting of value. The crypto currencies are all a bit problematic in that they carry forward the same notion of commodity exchange. When the tech is so much more flexible, why not explore new (or old) metaphors.

I have a project which map the gift economy onto web-of-trust style key distribution. Moving the value from a numerical token, to relations between people, seems like a step in the right direction. https://www.wired.com/2014/07/document-coin/


> 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.

This is a different kind of problem than you think. It's not that we don't value it, it's that the value is diffuse. Every person in the area values the forest an average of $100, there are a million people in the area, therefore the value of the forest "should" be a hundred million dollars.

The problem is that the government has to fill a budget hole and there is a logging company that would pay ten million dollars to log the forest. The government could also get the same money by reducing the defense budget, or replacing some government employees with less expensive contractors, or replacing corporate income tax with VAT so international corporations have to pay their taxes, but all of those groups have better lobbyists than the public at large. So the public (and the forest) loses.

But the problem wasn't that we couldn't calculate the value, it was that knowingly destroying ninety million dollars in value in order to have ten million somewhere else is a thing that happens when you have a collective action problem like that, because the value destroyed is spread across a million people and none of them have enough incentive or power as an individual to stand up and stop it.

So the problem isn't the valuation, it's how do we solve the collective action problem?


You allow that there exists some metric capable of capturing the diffuse value — so — why not bake that diffuse value into the monetary system and ensure that it must be paid for the transaction to legally occur? That’s why I’m proposing a second dimension in the pricing model. To tear down the forest — you have to compensate the collective for the externality you are 'taking' from the diffusely benefiting party ... that “payment” to the collective is a real-world transaction that has to happen as part of the rules for legal transactions and the payment has to be tendered in units of this second dimension of the pricing model which approximates the 'diffuse value' of the resource. This 2nd dimension of price is distinct from the value realizable by some possible private owner and is conceptually proportional to that which is being “taken away” from the commons by the removal of the forest ...

I’m not sure exactly what the rules for this shared resource currency would look like but I think there is room in the design space to integrate the shared resources available to humanity into a pricing model that would be more explicit and coherent than what we have now. I'm imagining a monetary system which includes a diffuse resource value for all resources -- with transaction rules updated so that trade/consumption became a two dimensional exchange involving two private parties, and the diffuse account. For the transaction to be legal, it must preserve the 'value' of the world's 'diffusely owned resources' either by not consuming anything or by the issuance of a 'debit' from the defuse balance of one of the parties (no creditor for that -- it just disappears, but the point is that the party has to have sufficient diffuse value credit to be able to destroy the required amount of diffuse value) ... I think the design space of rules governing production/inflation/transactions of diffuse value units could yield a lot of flexibility for helping to encourage that actuarial optimization over the transaction space be likely to efficiently produce broadly meaningful uses for resources -- perhaps more so than the setup we have now ...

The greedy could still act in their own self interest but would by design be more constrained in how they harm the rest of us and the relative amounts of harm of different practices would be more easily discernible as part of the public record and understanding ...


The issue is there isn't really a second dimension there -- it's all value that can be measured in money. There is a number of dollars at which it actually does make sense to log the forest. The problem is that the government allows it happen for much less than that amount.

Setting explicit prices may help in theory, but there are two major problems. The first is that the price is inherently subjective. There are no market transactions to look at to see what "forest continues to exist" is currently trading for. It's the existing state and self-perpetuates without anybody having to do or pay anything until such time as someone actively expends resources to change it. So at best you're speculating, and choosing the wrong value -- whether too low or too high -- is costly. Too low and we haven't solved the existing problem, too high and we can't have a transportation system because no one can mine steel to build trains or cars or ships. So accuracy matters, but accuracy is expensive. Getting the valuation right is a detail-oriented labor-intensive process.

And in theory we already have this. It's supposed to be the job of our representatives in the legislature to do this. Which brings us to the second problem, which is that because the value is subjective, we still have the collective action problem. The logging company lobbies to have the value of the forest set low, the diffuse general public doesn't strongly object, and we're back to square one.

One of the strong options to solve at least some of this is to require all budgetary issues to be put up for public referendum. Not just "entire government budget, yea or nay" but at the line item level. The government proposes to sell the forest to the logging company for ten million dollars, yea or nay? Then the public votes nay and the legislature has to come up with the money some other way.

Naturally that isn't very popular with lobbyists because then the public tends to vote down the harmful but politically expedient revenue generation methods, so there is always strong lobbying pressure not to do things like that, and we're back to the collective action problem. It also has the general direct democracy problem of people not having enough time to evaluate issues carefully, but in principle there shouldn't have to be that many different or complex revenue generation methods. The existing tax code is unnecessarily complex and people could plausibly make time to understand a much simpler one -- which would also remove a large number of the existing harmful carve outs for groups with strong lobbyists.


Perhaps the problem is using money as a tool for valuation?


> Perhaps the problem is using money as a tool for valuation?

What do you propose to use instead?


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)


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 ...


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.


Very interesting! Though I wasn't watching closely I think I saw a real-world example of your concept on (I think) BBC News yesterday. Forgive me if this is not wholly accurately retold:

It was about about unsustainable fishing on a large trawler that could set out about a million fishing hooks a day, and catching everything.. large tuna, sharks, etc. They then projected globally; this is the dominant way we go about fishing, and with it halfway this century our oceans will be empty of fish.

Then they brought the example of - I believe - Irish fishermen, who some years ago and seeing hugely diminishing returns, decided on a different system whereby scientists would determine beforehand the minimum shoal size that would lead to sustainable growth of the fish population. The fishermen would then be free to catch the remainder of the population, and divide it amongst themselves based on stake in the game.

This 'share' determines their yearly quota. If next year the total shoal population had grown, their 'share values' had increased. This modern fishing method apparently worked perfectly, and every year they have bigger returns, catching almost as much as in 'old times'.


An important example would be a family with children where both parents could work but do not have to. From the GDP POV, it is a huge boost to have a second parent earning an income, even if most of the additional monies end up dedicated to the costs of outsourcing some parental duties. A stay at home parent might be producing as much or more value to the family, while not contributing to the GDP at all.


It is with considering what the GDP would be if you eliminated most rent-seeking businesses and there was a much broader spread of technical know-how across society (gardening, electrical repairs, plumbing, workshop experience, cooking and other home skills).

If we wasted less and took better care of the environment around us, the costs to society would be less, this could be measured as a decrease in spending and a shrinkage of the GDP. You wouldn’t buy new clothes as often if you could maintain your existing wardrobe, and you wouldn’t buy electronics or appliances as often if you could extend the lifespan of your current electronics. Basically there wouldn’t be as big a drive for consumerist spending patterns and this could be measured, by a decrease in the GDP which would of course cause financial markets to panic.

My thoughts on this are far from complete, but that said, I don’t think our market system is really all that efficient from a tangible resource allocation perspective. It might be highly effective from the perspective of the financial and insurance industries, but the assets they hold are intangible, and the market is probably over-optimized for allocation of intangible resources simply because there is more money to be made there. That is still an optimized market for the allocation of resources with the highest rate of return, but maybe it is time to ask ourselves if that is still to our benefit?


But I like not having to cook, garden, repair electrical equipment, or otherwise waste time doing things I don’t enjoy.

I am meaningfully richer and have a more fulfilling life because I don’t have to do those things. Why don’t you think it makes sense to incorporate them into measures of societal wealth?


What this breaks down to is that not everything that is valued can be expressed in hard currency.

The idea that hard currency is a universal lingua franca is deeply flawed and you've hit on a very good example of one area that is starkly apparent.


One thought is that we can value a wide range of social and environmental qualities using quantitative monetary models. It's imperfect, but our system doesn't even go as far as explicitly attempting to do that on a systematic basis.

There are a lot of people doing work in this area under all sorts of different terms, but trying to tie in those missing qualities. Terms that might yield interesting reading are: loop economy, circular economy, doughnut economics, sustainable economics (though that seems to be slowly fading as a term..)

https://evonomics.com/ is not a bad place to read to at least start getting some introductions to some of the people trying to push a rebuilding of our basic economic suppositions.


Yes! I like Doughnut Economics by Kate Raworth. She is also doing real well inspiring government officials with her ideas and visions.


These are interesting terms and ideas that I have never encountered before. Thank you!


In purely economic terms it's easy to appraise natural spaces and forests. Some of that real estate is privately owned, and is occasionally purchased by wealthy individuals and foundations who intend to keep it undeveloped. So we have a history of comparable sales which can be used to estimate the value of other parcels, including government owned parks.

I know some people are uncomfortable with placing a monetary value on nature. But it's a useful exercise because it forces us to be explicit about what we consider important rather than discussing vague platitudes.


> I know some people are uncomfortable with placing a monetary value on nature. But it's a useful exercise because it forces us to be explicit about what we consider important rather than discussing vague platitudes.

Read this article for insight into what's wrong with exactly that approach: https://www.ribbonfarm.com/2010/07/26/a-big-little-idea-call...

More broadly, the problem with trying to be explicit about what we value is that any specification will almost always be broken, due to the "fragility" of value: https://www.lesswrong.com/posts/GNnHHmm8EzePmKzPk/value-is-f...


Sorry for the throwaway comment — but I have to say the lesswrong link above is the most interesting internet rabbit hole I’ve come across in a long time! Wow - thank you!!


Those are interesting articles, however they don't directly address my point nor do they provide practical alternatives.


Markets should be kept out of certain spheres. E.g. Justice, Healthcare and protecting the planet are three of them.

There are better ways of determining the relative value of nature than using the amount a rich man is willing to pay to save it as a proxy.


Then you're not speaking in economic terms and it's a pointless conversation. If you're trying to say how much a national park is worth, you need to speak economically. Saying a given parcel is "worth" $1 million doesn't mean you should sell it for any amount more than that. You can still think it's a bad idea in the long term to sell for ten times what it's "worth."


You can still talk in economic terms by estimating value in others ways, e.g., using scientific models based on replacement rates, etc.

I think that parent comment is spot on in saying that value determination based on what people are willing to pay for it, does often come not even close to the real/potential value of complex resource systems. Of course all estimations are still grounded in base prices of less complex resources.


/\ This thread is great for illustrating the article in real time.

Some people want to be able to put things in purely economic terms to be able to relate the current situation to the past, some want language to reflect the current crisis of natural resources, and then the conversation gets side-tracked by semantics.

The semantics are important, but lens-crafting makes conversations difficult, especially when meta-comments like this one further detract from the goal.

Important note: insulting myself, not any of the posters above.


There's a really interesting topic in sociology called "commensuration": in short, the ability and willingness to view one thing as commensurate or equal in value to another.

Sometimes we want to compare complicated but very different things, so we are motivated by need (e.g. politics) to collapse a thing with multi-dimensional values into a thing with a single-dimensional value, so it can be compared with another thing (e.g. via price).

We are willing to engage in commensuration in some areas of life (e.g. this mountain forest is worth $1.2B) but not others (my child is worth $X).

What's interesting to me is the space that is incommensurable--the values in life that we deem so important and so sacred that we are unwilling to bend or collapse the multi-dimensional value of a thing into a simplified "price". This is where economics fails to model life and value properly.


Commensuration seems like a very interesting concept. I would wager that sociologists could actually observe different sets of commensurate things by asking questions with respect to different units of value. E.G. -- asking participants if they are willing to trade a thing for dollars vs asking them if they are willing to trade a thing for, say, trips to europe. The units don't fundamentally change the relationship between the concepts but I would guess have a good chance of altering the way people respond to surveys.

This non-associativity of commensuration seems like an example of a kind of valuation phenomenon that perhaps a two-dimensional pricing system could better approximate -- even in the presence of actuarial optimization ...


>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.

It's perfect for the purpose its used though: to justify policies that transfer more wealth and power to the rich, and to not give a crap about externalities...

>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

If you have your own private island you don't care about some state park...


And if people fight and sue each other that adds considerably to the GDP figures but decreases human happiness. Vague though it is I think approximately tallying happiness is quite a useful way to go. That way the forests are valued and the troll lawsuits not.


This is like going from real numbers to imaginary numbers. Thus: Imaginary Money. I have $Billions of imaginary dollars...

In all seriousness: It's not surprising that it's difficult to project human values onto a single dimension. This is an interesting concept, but seems very challenging -- it would take mass cultural change to take effect.


A 2d monetary system sounds interesting. Would there be parallels with complex numbers?


complex numbers are not interesting because they are 2d; otherwise we would just use xy coordinates instead of bringing in this whole sqrt(-1) business. Complex numbers are useful because the definition of complex multiplication fundamentally says something about rotations.

If you start at 1+0i and multiply twice by 0+1i, you end up at -1+0i. If you try to imagine this in the xy plane (where we pretend x and y are currencies) then this would mean that multiplying a positive amount of one currency (1x + 0y) by a positive amount of another currency (0x + 1y^2) would put you in debt (-1x + 0y). This would be a very strange property to have in your currency!


I can't believe people in this thread are talking about denoting currency in complex numbers. I'm trying to imagine how I would explain this to my grandmother.


Yes, go into the complex plane because the phenomena somehow mirrors a circle or sphere.

But there is definitely something lacking from reducing everything down to a one dimensional measure. For instance, there are many pieces of real estate improvements that ought to be torn down and replaced with new improvements (homes, commercial buildings, etc). But the economy rarely offers incentives or even the abilities to tear down and rebuild - despite the huge benefit construction is to an economy. For things like this, I conclude the economic system is not closed. It’s not creating a self sustaining relationship between all participants.


The person you're responding to wasn't arguing against this 2-dimensional currency idea. They were explaining that it would make no sense to model as complex numbers.

A lot of the confusion in this thread seems to come from people believing that the main idea of complex numbers is that they are just pairs of real numbers.

That is wrong -- pairs of real numbers are just pairs of real numbers. Complex numbers are pairs of real numbers with a particular multiplicative structure.


I made it clear I agreed.

I should have added that it only becomes circular if you add the point at infinity. Otherwise it’s more similar to a plane. But yes, it’s not simply x,y numbers when you assume y^2=-1. The geometric interpretation of the complex numbers matters, and you have to do it correctly. Gets very hard to imagine quickly.


Well, what does multiplying two values of currency mean at all?


It means nothing. That's why it doesn't make sense to model with something that was invented specifically as a way of multiplying pairs of numbers. That's the entire point of the message you're responding to.


Why should there be? Complex numbers are pairs of real numbers with a particular multiplicative structure. Do you have any reason to expect this structure to be relevant for currency?


Hey, it was just a thought that crossed my mind. I agree that it doesn't make much sense without further thought (hence the question). For one, because complex numbers don't have operator < so you can't tell whether a transaction can proceed or not. If complex numbers can be applied in a monetary system, then it will probably be in a more complicated manner than substitution of amount of money -> complex number.


We already do! Human work is the real component, currency is the imaginary component. Currency is made up book keeping that eventually cancels out once everyone has settled their exchange of labour.


One has to be careful with this line of thought. If I spend all my money on necessities or have to work 80 hours a week to sustain myself, then I can't visit that forest unless I live so close that visiting costs me almost nothing in terms of time or money.

It's possible for there to be slippage between GDP and whatever metric you imagine, but they're well connected.


There is value to be had from a forest other than visiting it. That includes the things we can learn from its ecosystem (e.g. antibiotics developed from jungle fungi that are going extinct); improved air quality; and impact on climate, erosion, etc.


I was just responding to the parents' particular example, not trying to come up with a complete theory of the value of forests.

That said sick and dead people and climate change are typically not good for GDP.


Sadly, they are. GDP is a measure on transactions. Most of the things you mention have substantial transactions coupled to them. GDP is a good indicator of opportunity for rent-seeking in an economy, which is directly linked to the opportunities of the financial class.


The argument that you are making has been a named fallacy in economics for over 150 years: https://en.wikipedia.org/wiki/Parable_of_the_broken_window.

But aside from economic theory, everyone who has ever cared for a sick relative should have the evidence to see that it doesn't raise GDP. Yes, you spend money on healthcare. That's good for the doctors you buy from. But you give up time at work, you give up vacations, you cut back elsewhere. Every cent that you spend on that healthcare isn't going to wherever else you would've spent it. This isn't a counter-intuitive finding. It's just common sense.


It’s a cost for the individual but not a cost for the corporation whose cut corners are responsible for the illness. What’s good for profits isn’t necessarily good for health, even if in the big picture and long run what’s good for health is good for the economy as a whole.


Often true. But not relevant to whether it increases or decreases GDP.


Unless it increases GDP in the short term (higher profits) but decreases it in the long term (fewer people to consume goods and drive the economy).


You assume that all money would be constantly spent. Maybe in the US, but in other parts of the world people do save money for these 'unforeseen emergencies', and that money is then 'unlocked'.


In which case, GDP in the US isn't overstated because of the costs of caring for the sick. That's a bit awkward for your point of view, since the US has the largest economy in the world, and the highest per capita income of any large country[0]. Where does the GDP is overstated line apply?

[0] 10 million or more people, by my current arbitrary definition of "large".



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>


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.


> Inequality started to get bad around 1980 or so.

Do you mean returned to being bad? Inequality was much greater leading up to the great depression. The great depression wiped out a lot of the inequality that had existed. Once that had passed, and the economy restored to a more stable state, the inequality naturally came back.

By all accounts, 2008 probably should have been another depression that would have helped wipe out that inequality again. But it seems not even those on the losing end of that inequality are comfortable with living through the conditions that the equalization process results in, and thus we, as a society, took steps to maintain the status quo.


I don't know why you're blaming your generation specifically. All ages and walks of life believe this. It's called Conservatism/Libertarianism. The don't believe that if you live in a society you should have to contribute towards the betterment of society through taxes.


I'm kind of in the same boat, Gen X born 1977. I grew up under Reagan, thinking he was "the president" because he looked and sounded like "the president". But over time I learned (mostly from my parents) that most of what Reagan was selling was a bill of goods. The "greed is good" mantra of the 80s didn't accelerate progress, it stifled it. In reality, the major public works that formed the American infrastructure we take for granted today were built when my grandparents' generation was in its prime, starting with the end of the Great Depression in the late 30s and ending sometime around the late 60s when it became fearful of the counterculture and began trying to outlaw all of the alternate routes to enlightenment (sex, drugs and rock & roll). The 70s was a battle of philosophies between the Archie Bunkers of the world and disillusioned youth that had good reason to no longer trust authority (the Vietnam war).

My generation had great stuff in the 80s like Star Wars and Nintendo, but it also got saddled with just awful stuff like AIDS and the war on drugs. So we grew up naive and sheltered (what I imagine the 1950s to have been like) until the hedonistic days of the late 90s when some of the best of us were lost to excess. Then we lost the 2000s to the dot bomb, the global war on terror and finally the housing bubble. I don't feel like Gen X really got a foothold until Obama's election. So we've generally had little or no say in politics or our economic situation our entire lives. Gen X may very well be one of the most disenfranchised and lost generations in modern history.

AAAnnnddd that's why I think the economy stinks. The best and brightest minds of my generation got snowed under by ADHD drugs and work in tech now, making money for rich people. The ones that know what's going on get mocked by the pretty people - the Paul Ryans of the world, the modern day snake oil salesmen. The populist wave washing over the world right now might be seen as a total accident if one doesn't have the context I've described above. There's a relentless, untiring machine of sexism/racism/classism that seduces the unwary with colorful notions like trickle down economics, which don't stand up to scrutiny. And unfortunately I see a lot of "the government is the enemy" propaganda popping up on Hacker News because of its indentured servitude to the wealthy and their libertarian talking points.

If you want to fix the economy, it's so trivial as to almost be a joke. Just do the opposite of everything we've done since 1980. Raise taxes on the rich, publicly fund healthcare and education, empower the disenfranchised. When you remove the terror from people's lives, they'll work in harmony together and we could have things back on track in 5 or 10 years. Europe's doing it. Australia has an $18 minimum wage.

And since none of this is likely to happen in the US, ask yourself who stands to profit in a culture of angst. Which slippery officials do marginalized people elect, which extractionary industries profit, which people/plants/animals are tread over by multinational corporations too big for any government to control? If you grok that, then you have a glimpse into the indignation of Gen X.


> 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.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.


I'd goal shift at this point and argue unemployment isn't as useful an indication anymore. I'd say underemployment and wage growth are better indicators of the economy. It's great people are working again, but if those people are working at jobs they are overqualified for or working at jobs that refuse to pay them enough to live, I'm not sure that's useful.


>a simple equalizaton between women and men as a crisis.

Going from 100/0 to 50/50 is a crisis, for at least 25% of the population.


I think this is the wrong way to look at it. It was never actually 100/0. Homemakers did (and still do) a large amount of informal and uncompensated labor that doesn't show up in the employment statistics. In essence, employees used to be paid wages that allowed them to cover their living expenses with enough left over to pay for a full-time live-in nanny/chef/housekeeper/social secretary/etc. (in the form of their spouses).

We're moving to a world where it's more acceptable for men to choose to be homemakers and more common for women to have professions other than homemakers, both of which are good. But we've also moved from a world where the typical family had one income and one adult's full-time labor to support the household to a world where the typical family has two incomes and zero adult's full-time support without an equivalent jump in standard of living that would allow them to comfortably hire out for all the previously uncompensated labor.

In other words, typical working age adults used to only have one full-time job (as either a homemaker or a member of the formal labor force). Now adults of both genders have a full-time formal job plus a part-time job maintaining the household but without the equivalent real income increase that would imply. That's the crisis.


Not to mention that it was never 100/0 even for non-homemaker work. Lots of working class and lower middle class women worked outside the home even in the imaginary golden age of the 1950s.


>Now adults of both genders have a full-time formal job

That would require a doubling of how much work needs to be done - while possible, that's not what the grandparent was hypothesizing. Unless exactly 50% of the population wants to be homemakers, there's going to be a problem for the people who used to have a job but now don't. So, whether or not 100/0 --> 50/50 is happening, it would be a crisis for 25% if it did.


Hello, fellow Luke.

I agree that the "men not working" vs unofficial unemployment rate isn't that's helpful, but mostly because the official unemployment rate has become such a silly metric, as outlined in this (old) article from Harper's: https://harpers.org/archive/2008/05/numbers-racket/

The Harper's article may be same-song-second-verse after reading your links and the parent article, but when I read it ten years ago it made a strong enough impression on me that I remember it now.

Thanks for the macrotrends link.

Shivetya 68 days ago [flagged]

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.


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".


==the current numbers being reported look that good.==

Real wage, laborforce participation and deficit numbers disagree.


This, 100%. Also, any article that brings up the rise of far-right political parties in Europe without mentioning the migrant crisis is pure-partisan-political drivel. Whatever, so it goes.


It will be tough for Democrats to shift the narrative that way. Trump voters are not the people who would give very much attention to some new macroeconomic indicators promoted by MSNBC telling them the economy is actually in a bad shape despite the fact they are doing very well.


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

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

e.g. Consumer price index is another approach measuring access to basic goods: https://www.bls.gov/charts/consumer-price-index/consumer-pri...

Household net worth is another one that the article mentions.

The matter of which number is chosen as the official measure of "goodness" is the real issue and that is a political matter, and because depth of public (and shockingly often policymaker!) discourse on the matter is stuck at "did the thing go up or down". I'm dubious that switching to a different indicator will solve the problem per se - perhaps make it harder to game.


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


If I've learned anything about economics it's that Newton 3rd Law basically applies to anything an economist says.


> 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... (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.


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.


>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.

Using that as the "true" unemployment rate is, frankly, bullshit. The number they're citing is the OECD "employment rate"[0][1], defined as the employed share divided by the total population in that demographic. Thus it includes the disabled, stay-at-home-parents, the leisure class, those enrolled in education, and anyone else who is not working but has no desire to do so. The decline is almost entirely driven by the reduction in labor force participation rate from 97+% in that demographic in the 1960s to 88.8% today.[2] Is it unreasonable to expect males may on average voluntarily spend 3 years outside the labor force during their prime years?

If you want to count discouraged workers, use U4 — which currently stands at 4.1% vs. the U3 at 3.9%.[3] (U3 is 3.0% for the demographic in question.[4]) U6, which adds all other marginally attached workers and those employed only part-time who'd like to be full-time, stands at 7.4%.

If your concern is falling LFPR, say so. If your concern is discouraged workers, use U4/U6. But don't change the denominator on the unemployment rate from the labor force to the whole population and act like it's some huge hidden increase the authorities have been concealing from us.

[0] https://data.oecd.org/emp/employment-rate.htm

[1] https://fred.stlouisfed.org/series/LREM25MAUSA156S

[2] https://fred.stlouisfed.org/series/LRAC25MAUSM156S

[3] https://www.bls.gov/news.release/empsit.t15.htm

[4] https://fred.stlouisfed.org/series/LNU04000061


I don't agree that using the OECD employment rate is bullshit. The argument is not that at a single point, the fact that this other measure of unemployment is much higher than the standard measure shows that the economy is not healthy, the argument is that the divergence between the OECD employment rate and the standard measure indicates that the economy is unwell. If you deny this, then you're forced to argue that somehow the number of "disabled, stay-at-home-parents, the leisure class, those enrolled in education, and anyone else who is not working but has no desire to do so" has increased within the same demographic (25-55 males, so generally post-school), while wages have remained flat.


>this other measure of unemployment is much higher than the standard measure shows that the economy is not healthy

No it doesn't. Aside from it being a nonsensical measure of 'health', the overall 'employment rate' is well above pre-1990 rates (as women have continued to enter the workforce).[0]

>If you deny this, then you're forced to argue that somehow the number of "disabled, stay-at-home-parents, the leisure class, those enrolled in education, and anyone else who is not working but has no desire to do so" has increased within the same demographic (25-55 males, so generally post-school),

Of course it has. Being a stay-at-home-dad was unthinkable in 1950. Post-graduate education is increasingly common, as is mid-life career switching. I can think of many reasons why we shouldn't expect a 98% labor force participation rate from that demographic in this century.

[0] https://fred.stlouisfed.org/series/LREM25TTUSM156S


You misread my comment - I'm saying that the argument is not that the fact that this other measure of unemployment is much higher than the standard measure shows that the economy is not healthy, but that the sudden divergence over the past decade hasn't been plausibly explained by anything except an increase in disaffected working-aged males.

>Of course it has. Being a stay-at-home-dad was unthinkable in 1950. Post-graduate education is increasingly common, as is mid-life career switching. I can think of many reasons why we shouldn't expect a 98% labor force participation rate from that demographic in this century.

All of the points that you raised should not show such a sudden effect in the past < 10 years.


What sudden divergence?

https://i.imgur.com/WZaIpjL.png


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.


> 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.


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...


>Discouraged workers are a subset of persons marginally attached to the labor force. The marginally attached are those persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, discouraged workers were not currently looking for work specifically because they believed no jobs were available for them or there were none for which they would qualify.

https://www.bls.gov/cps/lfcharacteristics.htm#discouraged


True but has a common failure mode, aka "how X won the election if I don't know a single person who voted for him?". It's rather hard to directly perceive a diverse 300+M trillion-dollar economy without resorting to some aggregating measures.


>>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 know if I agree with this. I mean okay, if your house is on fire and your thermometer is showing a comfortable 75 F, you should probably question your thermometer. But in the overwhelming majority of situations, especially involving extremely complex phenomena such as a national economy, one should absolutely not trust their perception or use it to question the validity of empirical evidence that has been collected.


Here is an example:

On the first Friday of every month when the Employment Situation report is released, we get new analysis on jobs created, hours worked and hourly wages. This is great information, the only issue is that the hours and wage information is an average, not a median [2].

If economic reality changes to a point where citizens/politicians/economists become concerned with income inequality, this measure begins to lose it's significance. Average wages could increase while median wages fall. It is still "empirical evidence" but it isn't necessarily measuring what we think or want, labor force participation rates before/after women joined the workforce is an example. We should always be questioning the validity of our economic measures over time.

[1] https://www.cnbc.com/2018/09/07/us-nonfarm-payrolls-aug-2018... [2] https://www.bls.gov/news.release/empsit.b.htm


Why not? Determining how we measure the health of our economy, and implicitly, what we want to optimize for, is a political process, not simply an objective, scientific one.


I think there is another issue at stake, which is failure to report on the ground level. For many crime statistics, local precinct data is likely used. And this is also anecdote, but having lived in a transitional neighborhood, where police-community relationships have not improved, underreporting is rampant, and everyone is complicit. Criminals/low income folks don't want the hassle of police intervention. Police precincts want low numbers so that they can prove they are working effectively. Residents who might actually be interested in police intervention have the competing incentive that lower crime rates positively impact housing values. All that to say "objective measures" are hard in the cases where they are possible.


> But switching to new measures to validate your preconceived gut feeling is fraught with peril.

This was explored, but most of the article was about enhancing existing stats:

> She argues — rightly, I think — that the government should not focus on creating wholly new statistics. It should instead change and expand the ones that are already followed closely.

This is basically Anscombe's Quartet -- https://en.wikipedia.org/wiki/Anscombe%27s_quartet -- four completely different sets of points that have the same mean, variance, linear regression, and other stats but plotted out represent drastically different realities.

But instead of abstract datasets, we're saying drastically different underlying economic circumstances for different populations may be reported with the same GDP number.

So a single summary statistic "GDP is up!" without more detailed breakdowns can mean either "everyone is doing better!" or "the investor-class is making bank while everyone else is stagnant or falling behind". The point of the article is one of those seems to explain the populist anger, and our focus on the single summary statistic creates cognitive dissonance and makes the problem worse when people say to themselves "hey, this shit doesn't match what I'm struggling with everyday."


To play devil's advocate: is the fact that 16-24 year olds hold drastically fewer jobs than in the past really something that can be brushed off? On the face of it that sounds like people who would otherwise be starting their careers are not able to get a foothold, or otherwise are having to start much later than they otherwise would have. Combined with increased debt load, that statistic seems more like a harbinger of worse things to come.


>To play devil's advocate: is the fact that 16-24 year olds hold drastically fewer jobs than in the past really something that can be brushed off?

Or perhaps their parents are better off, more people are going to college, so fewer of them are forced to work menial jobs to pay the bills. I have no idea if that's true, but that's kind of the point; you have to dig deeper.


We know that the individual and family incomes for those in the lower 50% (or as much as 90%) of the income distribution have been falling (after inflation) for the last 30 years. So it's not just that their parents are better off... because they are flat to down.


I don't see that in the figures that I've gone looking for.

https://www.epi.org/publication/charting-wage-stagnation/

suggests that, in inflation adjusted terms, most workers wages are up a modest amount (6%) since 1979, while the 10th percentile workers have declined by 5% in that period.


The telling plots are figures 2&3, which show wages as stagnant, but not falling during the 2008-10 recession. That is because it plots the wages of those who are working (full time?) and does not account for employment loss or underemployment.

The employment to population ratio has fallen 5-6% over the same time period (and 10% from its peak) . It may be recovering somewhat now, but it's not part of the charts and not close to the peak.

https://en.wikipedia.org/wiki/Employment-to-population_ratio

Worse still, comparing to household income, you see that a higher employment ratio is necessary just to maintain the income. That causes childcare, prepared food, and transportation expenses to rise faster than inflation... because even if prices are constant, more people need them. That's ignoring the falling percentage of jobs with insurance and pensions that that also reduce total compensation... it also ignores stock options.


The 16-18 year old segment of that group is high school kids. In my area, it appears that there are a lot fewer jobs avaialable than when I was that age. For example, my friends and I were all "paper boys" delivering various newspapers. Now I notice middle aged people flinging the papers out of cars. We also used to mow lawns and shovel snow. Those jobs are all taken by professional landscapers. Also, many parents would rather their high school kids did school-related activities than some low wage job.


My sons all had trouble finding jobs at 16. Fewer workplaces will hire at that age. Even fast food and other basic labor hires fewer teens these days.


As long as we're arguing statistics with personal anecdotes: the dairy queen my younger kid worked at was about 80% teenager, with an attrition rate of wow!. The older kids' jobs at an upscale fast food is also easily 50%+ teenager. Both kids were pretty much hired on the spot with no previous employment.


Could it also be that programs are in place to help students so that they don't have to work while attending school?


AKA, student loans. Which create a massive economic drag for those who participate in those programs over a large portion of their working years, and delays their entry into retirement (or increases the demand on community/city/state/federal support programs when they do retire).


There were free school lunches/breakfast and Aid for Dependent Children 30 years ago... those haven't gone away or improved. If anything welfare reform in the 90s reduced low income food security. Maybe you're talking about student loans, but that seems to make the problem worse since the unemployment rate is still higher into the 25 range where they should be getting jobs from their education.

It was common for 12-18yr olds to work part time at groceries, fast food, retail, theaters, delivery to earn gas money or save for a car or college/trade. That is largely gone. Those jobs seem to have been taken by desperate adults and seniors.


> But switching to new measures to validate your preconceived gut feeling is fraught with peril.

That's literally the exact opposite of what the author did. In fact the author painstakingly laid out how the government is doing exactly what you've accused the author of doing.

There are statistics that are being ignored because it does not fit the narrative.


> the labor force participation rate of high-school and college-aged people (ages 16-24) is down dramatically

Is to be expected. Easier access to college, general push to get a degree no matter what, plus raising cost of labour (minimal wage, healthcare regulations, etc.) equals drop in participation from youngsters.


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


(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.


There are probably diminishing returns to how much energy improves your life. Once you've heated/cooled your house and powered your car and some gadgets what more do you really need energy wise?


This is a very interesting link. Note that the strongest decline in energy intensity in the disaggregated graph at the bottom is in transportation. That certainly speaks for efficiency as an explanation.

As for the growth story, well. The ordinary person 10 years ago didn't have a smart phone. That's a pretty significant impact on our way of life. Whether it actually improves the quality of our lives is a different question.


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.


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...

vs

Vietnam http://atlas.cid.harvard.edu/explore/network/?country=239&pa...

Each node here is a specific product being exported "significantly" for a country of that size.

---

So by a similar argument you could look at how similar the population that goes in and out of unemployment (seems likely to me) is every year, and what that implies about policies and job opportunities in the US.


> 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.


'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.


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.


> and likewise unemployment is a percentage you can't argue with (and easy to argue that less = better, again even if not always true).

Actually one can. Increase in productivity often comes from an increase in efficiency.

More efficiency means you have spare resources, as you can now do the same work with less effort.

What we do with these spare resources, that's a matter that isn't even discussed, they are pretty much always fully invested in furthering "economic growth" as in GDP, by investing all that spare time we now have, thanks to increased efficiency, into being even more productive for even longer periods.

But how sustainable is all of this? Can Earth sustain a population of 10+ billion humans, the majority of them working full time and for longer times, using up resources at a rapidly increasing rate?

It's a problem of thinking too short term on a global scale, everybody acts like this is some kind of race. But I don't think anybody will like what the finishing line will look like, there won't be prices there for anybody, there will be pretty much nothing.


> Can Earth sustain a population of 10+ billion humans, the majority of them working full time and for longer times, using up resources at a rapidly increasing rate?

The alternative view is that all this activity generates innovation and problem solving, which increases th carrying capacity of the planet.


But that whole view is still based on perpetual growth ideas, which imho are quite risky.

They have their place to drive expansion, and as you say innovation, but I fear we are giving it too much weight. It's a bit like the "super long-term view", we just assume that we will be constantly able to expand and grow.

What lacks in this perspective are the resource restrictions of physical reality. By insisting on constant growth, with barely any considerations for sustainability, it's very likely that at some point in the future we will end up in a resource dead end with no escape.

Case in point: Many of us realize Earth only has finite resources, the common counter-argument to that is that we need to innovate and expand into space, to get at these resources.

By just assuming "We will get there anyway, so let's keep using up Earth resources at increasing rates" we are acting rather irresponsibly because there are no guarantees we will be able to be a sustainable space-faring species.


Does it need to be ideologically neutral? The current numbers aren't ideologically neutral either...


> GDP is a sum you can't argue with

That's tone deaf. The manipulation to change how it's calculated (always upward!), means it's a sum without meaning in every major world power.


"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.


While I get where you are coming from I would argue (and anybody alive and paying attention to the region during the 1990s would likely agree) that 9/11 was a symptom of the ongoing issues in the Middle-East (largely due to fallout from colonization and Cold War politics), and not a causal event. That is not to say the response to 9/11 didn't throw gasoline on the fire.


You could say the exact same thing about the financial crisis when it comes to being a symptom rather than a causal event.


That would be fairly US centric view there are a lot of countries that were not touched by 9/11 but very few (if any) not affected by the financial crisis.


I think the argument would be that 9/11 has had follow on effects on global politics.


The financial crisis had a broader reach around the world than 9/11 did.

9/11 made it harder for me to fly, but the financial crisis cost friends jobs.


9/11 main impact is cementing USA image as unlikable, cowardly, irrational jerk of a country that can happily ignore international community and start two wars (three, if you count fake "war on terrorism") because of one random act of vioilent human stupidity.

Global cultural impact of 9/11 and what followed is huge.

And crisis... You can always make more money.


Many people in the US never travel internationally and don't really follow international politics. If you are from the states stay within the states, why would you care if other countries think the US is a bully and a jerk? Outside of knowing someone who went to war after 9/11, 9/11 probably didn't affect your day to day much after a year or two. I imagine this is the case for many people in the midwest and south.

If you were a factory worker in Indiana, it probably hurt a lot to lose your job in the recession and see your home value plummet. If you were supposed to retire in 2008, you also saw your 401k plummet as well. You may not have even fully recovered your net worth at this point. That would be something that weighs on you everyday.


I agree that in US, subprime lending crisis and what followed had more impact than 9/11. I was arguing with previous commenter that claimed that financial crisis had more impact globally than 9/11.


> one random act of vioilent human stupidity

There's a definition of terrorism i've never heard before, probably for good reason.


For me human stupidity is just fifth natural element that occasionally causes its own kinds of natural disasters.

Terrorism is one of those, but also is negligent greed or general recklessness or other things. All those cost lives and cause property damage.

When you frame it like that you can get out of atavistic mindset of ascribing agency to random things and vengfully looking for reasons why god of oceans hates you. Then you can focus on researching best ways of mitigation and prevention.


I would say that losing a job is better than being bombed (in reference to the wars mentioned by the parent). Naturally, it all depends on your perspective. If you were in a safe nation, then losing a job is a big deal. Of course, the financial criss was a financial crisis because all of the money poured into tech and commodities and not much else. Given the tech-focused nature of this site, our perspective is going to be skewed by that time being one of the most prosperous periods ever (the late 90s probably has it beat).


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.


ISIL was more created by the US occupation of Iraq and our subsequent disbanding and forced unemployment of the Sunni dominated military, a misguided attempt at a clean slate by the Bush adminstration's incompetence. This gave a large population of people with military training and easy access to weapons a lot of idle time and nothing to do but stew under occupation, add the historic animosity between the new government led by Shiites was a recipe for unrest.

Your Arab Spring argument is nonsense - ISIL was around in various names before the Arab Spring. A simple look at the calendar for the events shows this.


Not really.

ISIL and the various other groups from whence they came had no material presence until the Syrian uprising, which was part of the Arab spring. They were a small band of angry nobodies before that.

During the Syrian uprising, those groups coalesced and came to power, taking territory, getting funding, bringing in foreign fighters. Even if they had origins elsewhere, 'they came to be' during this time, in Syria.

Iraq materially comes into the picture later, when Obama withdrew American forces form Iraq, which enabled then Iraqi PM Malaki to purge government of Sunnis, deepening the rift between Sunni/Shia, as you mentioned.

Then ISIL effectively came into Iraq - as the local Sunni tribes in Iraq turned their back on their own antagonizing government, and allowed ISIL in.

If Obama had of left 10K troops in Iraq, behind the wire, giving him enough leverage with the Iraqi PM so as to be able to contain the Sunni/Shia animosity (as they had done up until that time) - then there would have never been any ISIL incursion into Iraq and the state would have remained intact.

Whatever we think about the 2003 invasion, there is no amount of 'US competence' which would completely disable small groups of dudes from forming some degree of insurgency. Any country invading any other always faces this kind of opposition.

Without Manning's cables, there wouldn't have been an Arab Spring, without that in Syria, none of us would have ever heard of ISIL. I'm not promoting or defending Manning, just indicating the course of events.


>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).


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.


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


I'm going to have to see some more flesh on those bones, too. This is a curiously strong claim about bright-line causality in a very large, very messy series of events with many actors.


The leaks 'lit' the Arab Spring which had a lot of momentum, and ISIL is an artifact of the Arab Spring. Obviously conditions were there. The later is not in much dispute, the former just not more widely known.

https://psmag.com/news/tunisian-activist-describes-mannings-...

https://medium.com/@ifikra/chelsea-manning-and-the-arab-spri...

http://www.worldaffairsjournal.org/article/wikihistory-did-l...


I thought that ISIL is more an artifact of the power vacuum brought about by the 2nd US invasion of Iraq. Admittedly, I'm not an expert in these matters, but wasn't the void in Iraq a factor in ISIS's uprising?


You seem to be linking the rise of ISIL to the Arab spring and ruling regime's corruption, without listing any related factors. ISIL was able to scale the way they did because they already controlled a good amount of territory in neighboring Iraq, which was in full-fledged civil war since at least 2006, a conflict in which the US spent significant amounts of the 'magic money' you mention.


It’s from the opinion column. Not sure of his economics credentials. So take it for what it is, an opinion piece.


Reading further into the article, this wasn't my only "wait, what?" moment...


At least in Western societies the financial crisis will have a much bigger impact than 9/11. A lot of people learned that the system that was supposed to reward people that do the right things does not work that way and lost faith in it. That enabled the rise of nationalist parties, Trump, Brexit and others. We will see how things will work out but I think there is a good chance that the world will change a lot in the next decades because the financial crisis made clear that the system doesn't work for the regular guy.


From my reading of right wing media, it seems like terrorism and immigration are much larger contributors to the rise of nationalism.


If you're economically trapped in a precarious position, shouting about immigration and terrorism (by the Other) is far more effective at scaring people into falling in line.

It is lifeboat "reasoning" at the tribe level.


The issues the working class has with large scale immigration are legitimate. Econ 101: adding more supply of some thing (labor) will reduce the price of that thing (wages).


> Econ 101: adding more supply of some thing (labor) will reduce the price of that thing (wages).

Econ 201: Immigrants are consumers too. Adding more demand for some thing (consumers of products) will increase the price of that thing (wages of producers).

Almost everyone agrees that growing the economy is good. When a child is born, we don't lament how that infant will be driving down wages when they reach adulthood.

There is nothing different about immigrants. They are full participants in all sides of the economy.

The real reason that immigrants are a threat to American workers is because they will accept shittier jobs. They drive down quality of the average job because they are more willing to suffer. But that's not a problem with immigrants, it's a problem with our worker protection laws and how they are enforced. Neither immigrants nor non-immigrants should have to pee in cups to avoid leaving the assembly line, work full time without benefits, have unreported workplace-caused injuries, etc.


> Econ 201: Immigrants are consumers too. Adding more demand for some thing (consumers of products) will increase the price of that thing (wages of producers).

Immigrants are always consumers; they also tend to nearly universally be workers. So, they're not increasing demand for products in isolation; they're also increasing the supply of workers.


Do you really believe that you can vastly increase the labor pool without it having adverse effects on labor? Even when you have natural experiments like the Black Death, which reduced the population of Europe by approaching 50% and tremendously improved the prospects of labor? So much so that it ended feudalism.


Another econ 101: some group taking an increasing share of a more or less fixed pie will cause others to get less.


They're separate issues. It is not coherent to argue that one problem isn't a problem because another problem exists.


You are 100% right. What I tried to say is that some powerful people are trying to channel economic anxiety into explanations that don't threaten their own power. Being angry about immigration or diversity doesn't really threaten billionaires but being angry about inequality does.

So of several problems the propaganda machine picks the most convenient.


I am not that much into conspiracy but I think economic anger and pain is being redirected against "others" by powerful people. Trump is a good example for this. Same in silicon valley. Instead of going against income inequality people talk about diversity, LGBT and other things that don't threaten the power and income of the owning class.


I don't think working class people actually care that much about income inequality. But I do think they care about competing for jobs with people who don't even speak the native language. And I do think they care when they see things on the shelves at Walmart which are now made in China, but which used to be made at the local factory.

FWIW. Just my read on the situation.


I think they care about feeling secure in their life. I think most people do that. In the current economy they don't feel secure so you can explain that with foreigners, capitalists or something else.


I'm not into conspiracies either but just follow the money. Who is endowing universities with billions of dollars? And what types of social issues / humanities do these universities teach to kids and which ones due they tend to ignore?


"wars and ISIL" are a big deal for the < 1% (0.4) of Americans serving in the military, and for the people living in these countries dealing with armed insurgencies, but 2008 had an impact on hundreds of millions of Americans beyond taking off their shoes at airports.


> I think 9/11 may disagree

Only in the US, which is arguable. Every person in the US is affected by the 2008 events every month. 9/11 is hardly a blip in most of the US, outside of the lukewarm media attention about tangentially related eventualities.

Americans get very upset when they don't opt-in to risk and end up being exposed to violence unwittingly, but that's life. It's no more or less tragic than when you get diagnosed with cancer. 40k people die in car accidents each year. 5-10k die of a terrorist attack almost 20 years ago. It's immoral to worship one single tragedy that pales in comparison to those ongoing. I live with the solace that those who are born after 9/11 will have a saner perspective.


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.


Yeah, this is it exactly. Goodhart even discovered it in the context of economics: https://en.wikipedia.org/wiki/Goodhart%27s_law

The Lucas critique is the other commonly associated one: https://en.wikipedia.org/wiki/Lucas_critique


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.


> 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.


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.


"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...


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.


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.


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.


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".


No, no. I don't mean that he forces the interpretation of data. That's par for the course.

He makes numerous data gathering errors that all seem to make his conclusion stronger. Example: http://piketty.pse.ens.fr/files/capital21c/en/media/FT230520...


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.


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?


There seems to be a fine line between politics and economics.


What in particular are you referring to?


Piketty's "Capital" has numerous data gathering/consolidation errors that always seem to point in the direction of making his conclusions stronger.

His theoretical remarks are so flippantly nonsensical (the difference between growth and interest rates being a secular gravity-like driver of inequality) that the data issues come across as bad faith.

A number of these were caught by the financial press at the same time.


Source?


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?


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...


From Dean Baker:

http://cepr.net/blogs/beat-the-press/does-france-s-economy-n...

" For prime-age workers (ages 25 to 54), according to the OECD, France's employment rate is actually slightly higher than in the United States, 80.4 percent in France, compared to 79.3 percent in the United States."

https://stats.oecd.org/index.aspx?queryid=36324

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...

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


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.


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.


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.


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.


Any other developed country provides free healthcare to its people, it's cheered and called a human right.

The US does it, and it's used as proof that the US is collapsing. Under your premise, if the US moves to universal healthcare it implies total economic collapse.

Medicaid didn't exist in 1960, that doesn't mean things were great for poor people back then, it was in fact far worse (see the homelessness and poverty rates back then, they were nearly twice what they are today). The US barely had any social safety net 50 years ago. Now it has one of the best social safety nets in the OECD and it keeps getting larger and more inclusive.

So which is it? Do you want free healthcare for more people, or do you want to take that away from everyone so we can pretend nobody actually needs it?

Beside that, healthcare expenses per person have roughly tripled in 20-25 years. Even the immense US median income levels - among the highest on earth - can't sustain that rate of increase. It's hardly an issue of affording the basics: when healthcare costs an average person $10,000 per year, it's clearly far outside the realm of being a basic.

In which developed country can poor people afford that healthcare cost? None. The middle class in most developed countries can't come close to affording $10k per person in healthcare expenses per year. Countries like Britain, Finland, New Zealand, etc. are at less than half that cost. About half of the EU would fall under Medicaid's income line.


I'm pro-universal health care for the US. Hell, I pay over $28,800 in health care premiums a year for my family. Not real happy with the status-quo.

What I'm saying is people are not able to afford healthcare and defaulting to Medicaid at a high rate. I think this is an interesting measurement of people who are falling outside of the planned economy. In the US, you "should" be able to afford heathcare, that's what is planned for. But, now we have almost 20% of citizens relying on Medicaid.


The Medicaid enrollment numbers are a bigger reflection of how little people are being compensated: in states that adopted Medicaid expansion under the ACA, only those making a certain percentage of the federal poverty level are eligible for the program.

In states that adopted Medicaid expansion, that usually means 100% to roughly 138% of the FPL. The FPL for a single individual in the 48 contiguous states + DC is $12,140.

Workers whose income is above the FPL cannot default to Medicaid, even if they cannot afford to buy insurance.


> In the US, you "should" be able to afford heathcare, that's what is planned for.

No, it's not. Medicaid (both the original design and the ACA expansion) is exactly a recognition that everyone being able to afford healthcare is simply unrealistic.


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.


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.


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.


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.


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.


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.


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


"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.


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


https://en.wikipedia.org/wiki/Social_mobility is not measured in economic metrics


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?


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


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


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


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

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.


> 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.


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.)


Overprinting is called hyperinflation. People lose trust in the currency because they are worthless. It has happened before. https://en.wikipedia.org/wiki/Hyperinflation


You're talking about assets vs. liabilities. Unfortunately -- we are racking up more liabilities.


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.


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.


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.


Typo: debt without a debtor.


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


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


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.


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.


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.


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.


Is my comment really patronizing and dismissing?


It is. And, FWIW, Russian bots/trolls/whatever seem to have been as equally active in pushing left wing issues as right wing issues.


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.


America has plenty of homegrown fake news factories and troll farms. They've been haunting AM radio since before the web.


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.


Inequality doesn't matter, in theory, but it does matter in practice. Like it or not (and I don't like it, FWIW), people measure themselves against other people. A large delta between the rich and the poor shouldn't matter, as long as the poor are doing well enough, but it does matter. We are social animals who evolved in small communities. There is a built in sense that many of us have that those doing better should share with those doing worse. And when things get too out of line, it undermines political instability.


> We are social animals who evolved in small communities

I agree with you. First, historically speaking, large disparities have led to revolutions and countless atrocities. Also our neural cortex isn't so highly evolved that it doesn't bow to the will of our chimp brain most of the time anyway, which is just to say we have a plethora of evolved intuitions and feelings. However, just because we have some innate biological sense of right or wrong or good or bad, that doesn't necessarily mean we should advocate for that in a normative way.

That was kind of my point. If we are going to build a better society I think it is important what normative values we strive for since we are not completely controlled by our impulses and those values will certainly have an effect on the systems we design and the relative effectiveness or lack thereof.


1. we aren't all rich. most are poor. 1/7 have trouble affording food. some people can't even get clean water. meanwhile, the rich enjoy unprecedented influence over politics, the market itself, and more luxury than they can even consume. they can afford to think long-term, whereas the poor cannot. inequality is an issue in and of itself.

2. wealth is expanding the fastest for the higher income brackets. the lower income brackets are barely holding ground.

3. i already hinted at this: relative wealth equals relative power. if everyone has $1 that they can disposably donate to a politician's election campaign, the guy with $2 has twice the influence of a person with $1. this means that the guy with $2 has a much higher chance to affect the rules of society such that their $2 becomes $3 at the expense of everyone else. this is the way things work. the higher the economic inequality, the higher the political inequality.


> 1. we aren't all rich ...

Its hard to discuss any of the things you mention since it all depends on what particular system you are looking at. If we constrain ourselves to the US system we're still going to have massive differences even within states and within counties within states. That doesn't mean many of the subjects you mention aren't issues, but you're confusing a state with a cause IMHO.

We could make ourselves all almost perfectly equal tomorrow by destroying all wealth and living as hunter-gatherers again. That wouldn't solve any of the problems you mention though. So clearly, inequality is not a fundamental issue underlying all these problems.

Personally, I think the major factors will vary depending on the context and problem domain. For access to healthy affordable foods, it could be something as complex as subsidizing or taxing various agricultural products, or as simple as removing all subsidies and tariffs and letting cheaper foreign made produce flood the markets.

With your third point, that certain people attempt to use power - which is a function of many factors not just wealth - to manipulate the laws and the system to their own advantage is something that is remarkably well documented in the political science and sociological literature. I'm not sure what the best approaches are towards mitigating this. Certainly, high degrees of transparency and accountability as well as a swift and well functioning judicial system would be my first guesses at the largest factors, based on my experiences with South American and European economic data. Personally I think the more checks and balances i.e. decentralization of the concentration of power mechanisms (i.e. ability to tax, ability to imprison, etc.) the system allows for is another key factor.


But everybody is rich relative to practically any time in our entire species existence. Ready access to clothes, food, fresh water, indoor plumbing, and so many other things are things that we take completely for granted, but they aren't a given. I would much rather be an aristocrat in ancient Greece than a poor person in America due to the ability exert your ideas, but in terms of niceties a poor American has our ancient Greek aristocracy looking like they were living in some nicely decorated slums. Ignore non-material components, and I'd take the poor American in a heartbeat.

People sometimes look to Star Trek as an example of a utopia, but think about what would really happen. Have you ever thought about the rank and file that spend their life merely taking orders from the captains and admirals, unable to ever make their way up to ever being able to be anything more than redshirts? And we're already talking about the elite there! Imagine the people that couldn't manage to get through Star Fleet! A tiny minority of elite individuals get to spend their days seeking out strange new civilizations and boldly going where noone has gone before, while the rest of society tries to provide some meaning to an empty life in a fake reality in the holodeck before going home to consume fake food from their replicator. There would be huge movements against the inequity and against the privilege of these elite. Star Trek did briefly hit on this issue, once, in the episode Tapestry. A brief clip of it. [1] A longer cut of the ending scene there. [2]

[1] - https://www.youtube.com/watch?v=LHoPLhpw2g4

[2] - https://www.youtube.com/watch?v=mGvUDvZ7KyU


... between the greek aristocracy and a poor person in america, who has more political influence? who can make political efforts that could better their position in the world more?

more importantly: who would be the one going to war if the political situation called for it?

inequality isn't something to be brushed off, it's the primary issue assuming we're a democracy. absolute wealth doesn't grant you influence.


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.


> 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.


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?


Even the poorest people in the US have electric lights that are brighter than anything even the richest of 200 years ago could have. The cost to run those lights is also significantly less as well. That is just one example of the types of things that improve life for everybody.

So long as everybody is improving their life, and can see things improving (or say they are not interested in the improvements - like the Amish)


Poor/working class today have electric lights, yes, but they also have automated scheduling systems telling them when to work, night shifts and multiple jobs, obesity and malnutrition (instead of starvation and malnutrition), dental cavities, alcoholism, opioid addiction...

The poor today have different problems than medieval peasants. Their lives are better in a lot of ways but not all ways. Medieval peasants had a much better idea of their place in the world, their relationships to their friends, family, community, and church. Today so many people are isolated and dying of depression.




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