On the last day of April, the folks at the Commerce Department’s Bureau of Economic Analysis will announce how much they think the U.S. economy grew–or didn’t–in the first quarter of this year. This “advance” estimate of gross domestic product (GDP) will stand as the clearest indicator yet of whether the U.S. has fallen into a recession.
Until May 29, that is, when Commerce releases a revised “preliminary” GDP number. On June 26 comes the “final” first-quarter GDP, but even that won’t really be final: in a few years there will be a “benchmark revision” that changes everything yet again.
This is not a tale of bureaucratic bungling. It’s just evidence that compiling a reliable measure of all the economic activity in a country as big as this one is hard. Which is something to consider whenever you hear somebody arguing that GDP ought to be shelved in favor of some more holistic measure of economic well-being. Somebody like, say, French President Nicolas Sarkozy, who early this year appointed a high-powered task force–boasting not just one but two economics Nobelists, Amartya Sen and Joseph Stiglitz–to devise a GDP replacement. Similar “ditch-GDP” noises can be heard frequently from enlightened sorts who care a lot about the environment, health care, education and happiness.
Now, there certainly are measures of economic and societal success that we ought to pay more attention to. But ditch GDP? Perish the thought. Read more.
The column was inspired by this boing boing post, which was brought to my attention by Swampland Ana.
Now I’m certainly not opposed to the idea of creating satellite accounts on health, education, the environment, etc. that would supplement GDP but not replace it. And I didn’t really have space in my column to talk about the status of that effort. In the early 1990s the Bureau of Economic Analysis in the Commerce Department began trying to put together a set of environmental accounts to measure natural resources and their depletion. In 1995, Congress told the BEAers they had to stop until somebody did an external review of the validity of environmental accounting. The National Academy of Sciences undertook the task, and in 1999 came out with a report saying environmental accounts were a really good idea. Congress yawned. Then, in 2005, another NAS panel recommended a broader set of “nonmarket accounts.” The people at the BEA are apparently very supportive, but don’t have the money to do much about it. Meanwhile, Rob Glaser of RealNetworks is funding a Yale-based Program on Nonmarket Accounts.
Entwined with all this is the American Time Use Survey, which was launched in 2003 and is conducted by the Census Bureau with funding from the Bureau of Labor Statistics. The survey delivers previously unavailable data about how Americans spend their days, and could conceivably be used in the future to help deliver estimates of the value of unpaid household work, leisure time, etc. For a nice summing up of the cool things already learned from the ATUS, see this post by Zubin Jelveh.
The 2009 Bush administration budget removes all funding for the ATUS, so former BLS Commissioner Katharine Abraham and a few others have launched the Coalition to Save the American Time Use Survey. I would advise Congress to heed its protests, for hell hath no fury like an economist scorned.
Finally, in the column I mention German pop group Geier Sturzflug‘s 1983 No. 1 hit (in Germany, Austria, and Switzerland), “Bruttosozialprodukt” (gross national product). For those who suspect that getting a mention of this song into the pages of Time was the main reason I even wrote about GDP … there might be something to that. Here’s the video:
The chorus is
Ja ja ja, jetzt wird wieder in die Hände gespuckt
Wir steigern das Bruttosozialprodukt
Yes yes yes, now we’re spitting in our hands again
We’re increasing the gross national product
Also, some nice German person has gone to the effort of creating a YouTube video with a hilariously clunky, overly literal translation of the whole song. Enjoy.