GDP and What We See

The United States is now said to be out of recession and to have been out of recession for a good while because the government’s reported gross domestic product has been increasing. Yet polls show that a large percentage of the population believes the country in still in a recession. An unusually high levels of unemployment and underemployment, a lower average net worth of households, a depressed market for residential real estate,  and other factors support that opinion and indicate that the economy is still doing poorly.

Various writers have pointed out the shortcomings of GDP statistics as an indicator of the health of the economy. There are significant problems with both the collection of the data and the methods of analysis. Additionally activity in the so-called underground economy of both illicit activities and otherwise legal but unreported cash transactions is not measured. Neither is activity in the fully legal and  probably much larger second underground economy of goods and services produced by people for themselves with no money changing hands – everything from home gardening and canning to do it yourself-ers painting their houses to friends helping each other with car repairs and  household wiring.  Also GDP calculations treat all types of measured economic activity as  equivalent. A given amount of money spent on a Solyndra or a Cool Hand Luke stimulus project of activity no more productive than digging holes and filling them back up counts exactly as much as the same amount spent on developing the next iPhone.

In ordinary times these and other difficulties do not prevent the GDP statistics from being useful in estimating the health of the economy. People can assume that the omissions, problems of method, and systematic errors will have about the same effect as a percentage of the whole at one time as another and use the trends in the GDP as indicators of a growing, stagnant, or declining economy. However that is acceptable only so long as the assumption is valid.  If the percentage of economic activity that is either unreported or unproductive changes significantly, the GDP statistics will give a false reading on the health of the economy.  This happened immediately after World War II when the official GDP registered a serious decline because of a decrease in government spending on the war, but the real economy saw neither a depression nor serious unemployment but rather an improvement in the average standard of living.   The earlier war time GDP was artificially high relative to the actual health of the domestic economy because so much of that GDP was spending on the war – spending which, while necessary, did not produce as much as the numbers alone would have indicated in the way of goods and services for the domestic economy. We have had something similar in reverse order in the last few years. The post-2008 GDP statistics are artificially high relative to the actual health of the domestic economy because an abnormally high percentage of the GDP has been unproductive and/or inefficient government spending which has produced comparatively less in the way of useful and desirable goods and services in the real economy. The country is thus doing worse than the GDP numbers indicate, and citizens may indeed believe their lying eyes rather than what the politicians are telling them. 

Of the Nitwits, by the Nitwits, for the Nitwits

Last week in Connecticut a young psychopath committed a horrific sequence of murders at a school. Opportunistic politicians are rushing in to demand new laws and regulations and calling the event a political game changer. Yet to those who think about political questions in terms of principles, this event or any other single event is irrelevant to the issues of gun control. The reasons for a thoughtful person to be for gun rights or for gun control have not changed since last Friday. The right of the citizens to arm themselves for self defense has not changed. The fact that guns are dangerous weapons has not changed. The danger of widespread availability of firearms making it easier for criminals or psychopaths to get weapons has not changed.  The desire of much of the political class to rule a disarmed populace has not changed. The function of an armed citizenry as a bulwark against tyranny has not changed.

In a world of principled and scrupulous politicians and thoughtful citizens, nothing in the debate would have changed, because great political controversies  would not be driven by the emotions of the moment or affected by emotional reactions to single events.  That of course is not the world of reality. In the real world we have large numbers of voters who decide who should be president on the basis of photo ops after a  hurricane  and posturing, yahoo politicians who cater  to such people -  acting as though they never before considered the possibility that nuts could get guns and commit crimes.  In the real world we have disgusting politicians and their cheerleaders in the traditional media capitalizing on people’s grief and shock over a crime and ghoulishly dancing on the graves of the victims  to push their agendas while nerves are raw. (An observer could fairly ask the Michael Bloombergs of the world “have you no shame?”, and could follow up by asking them  whether their opinion of the intelligence of the public is really as low as their behavior makes it seem.) In the real world, we have logrolling and  tub thumping – as with creating the TSA after September 11^th and now with a president who seems to promise he can prevent any psychopaths from committing crimes in the future. In the real world we have Governor Le Petomane and the boys deciding they had better pretend to do something about the problems in Rock Ridge because their phony baloney jobs are at stake.

It is easy to be contemptuous of the politicians for all the sick shows they put on, but we should not stop with that. After all, politicians wouldn’t be doing this sort of thing if they didn’t think it would sell.