A radical GDP rethink needed
This is possibly stretching the definition of ‘book’, but at 259 pages, the Bean Review of Economic Statistics certainly has the heft to be classed as one. Either way, it’s worth a post here. This is not only because it covers one of my favourite subjects, [amazon_link id=”0691169853" target=”_blank” ]GDP[/amazon_link], but also because it signals a milestone in economic thinking.
Professor Charles Bean launching his report
Since the 2009 report of the Sen-Stiglitz-Fitoussi Commission (summed up in the book [amazon_link id=”B00E32LW1C” target=”_blank” ]Mismeasuring Our Lives: Why GDP Doesn’t Add Up[/amazon_link]) there has been some policy traction for the ‘Beyond GDP’ agenda, not least because it builds on a long-standing set of critiques from environmentalists and researchers on well-being. Indeed, this week’s Economist argues for including unpaid ‘home production’ in GDP, something debated in the 1940s and campaigned for by feminist economists ever since.
The Bean Review is to my mind more radical because it questions the ‘GDP’ part. It contains considerable detail (and kindly citing some of my work) on the multiple ways conventional national income accounting is more and more a mismatch for the structure of the economy — looking at intangibles, the gap between market output and consumer surplus, the production boundary, the consequences of digitisation and lack of business model invariance of the statistics, and more.
There is a great deal of interest in the question of economic measurement now. The additional challenge to the existing statistics from the digital sector has helped with policy traction — although it does mean the GDP question is seen largely through the prism of whether mismeasurement ‘explains’ the productivity slowdown — as in this new paper by Byrne, Fernald and Reinsdorf, Does the US have a productivity slowdown or a measurement problem? These are not mutually exclusive in the way the title suggests. There’s an embarrassment of possible causes of the productivity slowdown, ranging from demographic trends to under-investment related to the crisis, and it isn’t sensible to consider that measurement issues predominate.
More interesting than how much of current measured productivity growth is due to mismeasurement is the deeper question of whether the national accounts definitions remain the best way to conceptualise a largely service-based, increasingly intangible, increasingly customized and globalized economy, while failing to measure systematically non-market activities when the production boundary is blurring, and ignoring entirely the depletion of capital in the form of infrastructure or natural capital. (That’s a rhetorical question.) The Bean Review essentially poses the same question and indicates firmly that the UK and the ONS should take the lead in the debate. I’m a stats geek of sorts, but to me that seems very exciting. As Mario Pisani of the Review team tweeted: