12 March 2013

Anything but water

  1. This paper [pdf] does a really good job at demolishing GDP as a indicator of economic activity -- or anything much of use. I used it, by the way, for my paper "Economists owe ecology an apology." Thanks very much to the 20+ people (many on this blog) who read and commented on an earlier version. Read the new one and tell me what you think. Semi-related: "The rise and fall of ecological economics" was interesting and these guys have a LOT of information on environmentally harmful subsidies.

  2. I forgot to post these articles on aid and development: UK corruption and dams in Malaysia, the importance of mobile phones to the poor, the problem of village-level corruption, and how locals can help foreigners invest.

  3. Is this a sign of a robust or dysfunctional debate? 100 definitions of sustainable [pdf]

  4. Low self-esteem in children linked to praising them for personal qualities instead of effort.

  5. Ten reasons why it's good for Venezuelans that Chavez is dead.
H/Ts to EB, RH and AT


  1. THe GDP article says the following, which I have heard in other circles: "Moreover, if air, water, or natural areas are being polluted
    any resulting damage does not enter GDP, but when pollution is being cleaned up this will increase GDP."

    I agree with the first part of the statement, but the 2nd part seems imprecise. Consider clean up of a small oil spill in SF Bay - clean up services will indeed increase this year, but that money must come from somewhere. Had the local shipping company not had to pay for clean up, they would have used the money elsewhere on something productive (or their shareholders would have, etc.) So it is included in the value of goods and services, but it does not add more to GDP than perhaps otherwise would be there.

    I really don't know how GDP is measured, and tracing money flows through the economy is difficult, but that statement always seemed incorrect.

  2. But in general I think focusing on GDP is foolish. Especially after listening to a recent econtalk podcast on the worthlessness of AFrican figures. I suspect that other countries have similar measurement problemts too

  3. @Damian -- good point about the opportunity costs of the cleanup, since it's unlikely that someone will just be sitting there doing nothing UNLESS there's a cleanup, BUT (1) what if they quit their job teaching kids to read @ $10/hour and take a cleanup job @ $20/hr (GDP higher!) and (2) there's a lot of emphasis on measuring impact or importance WITHIN sectors, so the cleanup industry LIKES to ignore those opportunity costs (losses to other sectors) when lobbying for money, attention, etc. It's not like everyone would go back to roots and berries if Silicon valley shut down. They'd move into their second best careers. (I'm agreeing with you at the same time as I offer further problems with GDP stats).

    Listen to this lecture (90 min MP3) if you want to know more about how macrostats are calculated.

  4. To your teaching kids example - suppose that is what happened. My point is that the $20 to pay this person must come from somewhere - $10 is subtracted from the education sector, but where is the other $10 coming from? Assuming it also has an opportunity cost, then GDP will go down elsewhere by a corresponding amount - perhaps $10. There is no way to tell or to track this flow precisely, but Bastiat's Broken Window Fallacy I think applies here - I suppose that is what I am focusing on.

  5. @Damian -- we're looking at it from two different directions: The opportunity cost of allocating resources to one activity or another (you) OR the measurement of GDP based on flows that may not correlate with "social value" (me). In some ways they line up (cash) but not in others (value).


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