GDP: A Brief but Affectionate History Author: Diane Coyle | Language: English | ISBN:
B00GMSUUWM | Format: EPUB
GDP: A Brief but Affectionate History Description
Why did the size of the U.S. economy increase by 3 percent on one day in mid-2013—or Ghana’s balloon by 60 percent overnight in 2010? Why did the U.K. financial industry show its fastest expansion ever at the end of 2008—just as the world’s financial system went into meltdown? And why was Greece’s chief statistician charged with treason in 2013 for apparently doing nothing more than trying to accurately report the size of his country’s economy? The answers to all these questions lie in the way we define and measure national economies around the world: Gross Domestic Product. This entertaining and informative book tells the story of GDP, making sense of a statistic that appears constantly in the news, business, and politics, and that seems to rule our lives—but that hardly anyone actually understands.
Diane Coyle traces the history of this artificial, abstract, complex, but exceedingly important statistic from its eighteenth- and nineteenth-century precursors through its invention in the 1940s and its postwar golden age, and then through the Great Crash up to today. The reader learns why this standard measure of the size of a country’s economy was invented, how it has changed over the decades, and what its strengths and weaknesses are. The book explains why even small changes in GDP can decide elections, influence major political decisions, and determine whether countries can keep borrowing or be thrown into recession. The book ends by making the case that GDP was a good measure for the twentieth century but is increasingly inappropriate for a twenty-first-century economy driven by innovation, services, and intangible goods.
- File Size: 1208 KB
- Print Length: 162 pages
- Page Numbers Source ISBN: 0691156794
- Publisher: Princeton University Press (February 23, 2014)
- Sold by: Amazon Digital Services, Inc.
- Language: English
- ASIN: B00GMSUUWM
- Text-to-Speech: Enabled
X-Ray:
- Lending: Not Enabled
- Amazon Best Sellers Rank: #18,690 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Gross Domestic Product is a concept so massive, so convoluted, so compromised by rules, exceptions, patches, and qualifications, that only a handful of people in the world fully understand it, and that does not include the commentators and politicians who bandy it about, daily. "There is no such entity out there as GDP in the real world, waiting to be measured by economists. It is an abstract idea." That sets the tone of Diane Coyle's excellent and sympathetic examination of GDP. Then it's on into the impenetrable forest.
Inconsistencies abound. If you care for your child, it doesn't count in GDP. If you take in neighborhood children, it does. If you paint your bedroom, it doesn't count. If you hire the kid next door, it does. Technology and technical improvements don't count much, because we don't know how to measure and incorporate them. Even in the mid 90s, we knew that technology was actually trimming inflation by 1.3%, but that was never acknowledged. This is the black hole of GDP, as tech becomes huge.
A special conundrum comes from the soaring financial sector, which makes money without actually producing anything. Accounting for that has evolved from "Alice and Wonderland" to "statistical mirages" that warp the GDPs of many nations. Financials account for nearly 8% of US GDP, but the way we account for them overstates their heft by 20-50%. For example, both borrowing are lending are considered productive businesses, and their numbers pad GDP both ways, using the same funds.
Coyle stays focused, giving us an overview that is understandable (as well as frustrating). She does it by structuring her book as history, showing how economies and GDP have evolved over eras.
Have you perhaps heard that some people question whether GDP should continue to dominate public policy? Or question whether economic growth should still be a top priority in rich countries? Well, the author of this book (DC) isn't having any of THAT nonsense, thank you very much. She offers here a well-written, very conservative defense of GDP orthodoxy, aside from a few technical criticisms at the margins. Unfortunately, the book omits some important topics, isn't entirely convincing in defending GDP, and may confuse the reader as to several points.
1. DC writes in a clear and engaging style throughout -- no small accomplishment, given the technical nature of the subject. She is especially strong when explaining some of the technicalities in the calculation of GDP, such as hedonic pricing, methods of adjusting for inflation, and purchasing power parity. Her argument about how GDP overstates the contribution of financial services was new to me, and very nicely explained.
2. However, the book's discussion of finance also omits an important fact: GDP does not include capital gains, a category comprising, among other things, profits earned on financial markets. That fact is extremely significant, because it explains how annual volume on financial markets can be many times bigger than global GDP (also unmentioned here). The same point therefore goes a long way to explaining how the wealthiest people make money and drive the world economy. In the US, nearly 50% of all capital gains are earned by the 0.1% of wealthiest people.
Perhaps DC didn't mention the connection between capital gains and GDP because she is simply not so interested in income inequality, especially within countries. (Her few passing references to it are all in an inter-country context.
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