April 27, 2013

OF COURSE, THE DATA IS ALSO SO FAULTY...:

The Misuse and Meaning of GDP, the main gauge of economic growth (Robert Shapiro, Apr 27, 2013, Daily Beast)

It's no mystery why markets and politicians track the GDP figures so zealously. Compiled by 2,000 economists and statisticians at the Bureau of Economic Analysis (BEA), GDP pulls together everything they can measure about how much American households and industries earn, consume and invest, and for what purposes.  But earlier in the week, the BEA also tacitly acknowledged that its current GDP measure lags pretty badly behind the actual economy. Earlier in the week, the Bureau released a set of changes in how it will calculate GDP which will take effect in the second quarter report to be released on July 31. The main point of those changes is to take better account of the economic value of ideas and intangible assets. Few among us today question the notion that new ideas can have great economic value. And some 15 years ago -- long before smart phones, tablets and protein-based medications -- the BEA started to study how to revise the GDP measure to better measure that value. Finally, this week, the Bureau announced that starting soon, and for the first time, when a company undertakes research and development or creates a new book, music, or movie, BEA will count those costs as investments that add to GDP, rather than as ordinary business expenses, which do not.

BEA also will apply these changes to its GDP numbers going back more than a half-century.  In the present, the revisions, in an instant, will add some $400 billion to the official accounting of the economy's current total product. Voila! Business profits also will look larger - now and for the past half-century -- because ordinary business expenses reduce reported profits, while investments do not.  Most important, the revisions tell us that American businesses and government, together, now invest just 2.1 percent of GDP in R&D - that's less investment than in the 1990s, especially by businesses.

...that it took ten years to determine that there had been no recessions after the 1987 market crash nor under GHWB.  
Posted by at April 27, 2013 2:37 PM
  

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