This month two academic researchers showed that there were errors in the calculations behind the claim by economists Carmen Reinhart and Kenneth Rogoff that the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one [...]
(This article by Philip Green and George Gabor first appeared as a special to the Financial Post on August 16 2012). The Obama administration is considering adopting the “chained consumer price index,” as the principal measure of inflation upon which increases in payments to such things as Social Security would be tied. The Chained-CPI is [...]
Economist Fredrich Hayek, in his 1972 Nobel lecture, criticised what he called the “scientistic” approach to economics. His criticism applies today to those who over-emphasize the importance of measurement in management. He said: Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects [...]
There is a little graphic being circulated around the Internet intended to show that President Obama has recklessly doubled the total US debt accumulated since President Washington. As a piece of political propaganda it is brilliant. It implies that President Obama’s administration is worse than [...]
A “leading indicator” is supposed to forecast, or at least to help the person using it, to make a forecast. The Conference Board recently announced that it was changing its Leading Economic Indicator to address structural changes that have occurred in the US economy in the last few decades. The new indicator was released on [...]
The standard measure of wealth is GDP per capita. The chart below shows that Americans have been getting continually wealthier for decades, with a few blips here and there (source of data). The measure of wealth—Gross Domestic Product, is based on the dollar value of economic transactions. Such a measure depends crucially on the definition [...]
When I do calculations on a performance indicator, I usually do the calculation more than one way. This gives me a good check on my method, and gives me assurance that the indicator is meaningful if both calculations match. In some cases this task is simplified if there is some constraint that must be met, [...]
The US Bureau of Labor statistics calculates inflation several different ways. The mostly widely reported is U-3, and what people generally call the “unemployment rate.” U-6 has a broader definition and includes discouraged workers and those that work part time because they cannot find full time work. In the 1930’s depression many workers were given [...]
About 200 years ago Joseph Lowe said that “the interest of government, the greatest of all debtors, [is] to prevent the public from fixing its attention on the gradual depreciation of money.” It seems like the Argentinian government is doing its best to prove Lowe right. Recent reports (see here and here) suggest the Argentinian [...]
Leaders at the G-20 meeting in Korea last week agreed they will establish early warning indicators of economic imbalances. The G20 communiqué said : “We will strengthen multilateral cooperation to promote external sustainability and pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account imbalances at sustainable levels. Persistently large [...]
A few weeks ago we wrote about how the US Government Accountability Office slammed US stimulus job creation numbers. Last week the Canadian Auditor General did the same. Sheila Fraser’s report on the Canadian numbers said (emphasis ours): …the project-level information on jobs included in the quarterly reports was largely anecdotal and did not present [...]
Official inflation numbers are very low and do not correspond with the reality people face when they shop. The US Bureau of Labour Statistics reports inflation at 1.1%. This post shows year-over-year increases for basic staples such as wheat (74%) beef (18%) and coffee (27%). I have been occasionally recording food prices to do my [...]
Politicians love telling voters that stimulus spending creates jobs. Just Google “stimulus created jobs” and you will get about 3,200,000 results. For example, the Congressional Budget Office says President Obama’s stimulus package created up to 3.3 million jobs in the second quarter of this year. Arnold Schwarzenegger said Obama’s stimulus program created 150,000 jobs in [...]
Inflation is a general increase in the supply of money at a faster rate than the supply of goods and services to purchase. It is usually measured by changes in the Consumer Price Index. Could inflation be measured directly by measuring the money supply? The money supply is measured in terms of the number of dollars. [...]
What is poverty? How much stuff do people have to have before they are not considered poor? There is no iron clad definition of poverty. How do you measure the preponderance of something that is ill-defined? The lack of definition has not stopped people from measuring something they call poverty, or the poverty rate, without [...]
This week the Conference Board’s leading economic indicators were released in the US and Canada. Both forecast, according to reports, somewhat weak, economic growth in the months ahead. Nobel winning economist Paul Samuelson quipped in 1966 that “Wall Street indexes predicted nine out of the last five recessions.” Are they any better today? Are the [...]
The Fed is afraid if deflation. Investors fear inflation. And there are suspicions about how inflation is measured.
Social scientists such as economists cannot not measure what would happen if they had not executed some policy, such as an economic stimulus. And while business can gain from experimental methods used in the hard sciences, it is doubtful whether social scientists ever will.
A Singapore MP points out the weakness of the GDP, and we explain why background information is as or more important that the measurements themselves.