"OK, just one last slogan: macroeconomics is about PEOPLE, not GDP!"
It started over on Bob Murphy's blog and he was so tickled by it he proclaimed it on his own.
Bah! - meaningless propagandizing for sentimentalism! The statement on its face is completely absurd of course. If you had to boil macroeconomics down you could even say soemthing like "the study of the determinants and the nature of national income", or if you prefer a more cosmopolitan rendering, "of aggregate income" it's about nothing if it's not about GDP. You may not like it, but that's the reality of it.
Of course, if the only way to stick it to Krugman is to insist we're all talking about parts of aggregates and their existence over several time periods, then you might be inclined to say it's about people.
And there's a reason for this, too. It's a science of aggregate income (and other relevant aggregates, of course) - that's what it's "about". But why do we care about it? Two reasons at least, I propose: (1.) scientific curiosity (in which case, "people" be damned), and (2.) the recognition that both a stable GDP and a growing GDP are extremely important for human flourishing because most humans (in the developed world) rely on income from employment for sustenance and employment depends crucially on the production and sale of new goods and services. We also experience life in snippets of time, so it seems to me the state of things in a given period matters. So you can care about macroeconomics because you care about people, but let's not fool ourselves: it's about GDP.
*****
Don't worry people - while I believe every word I just wrote, this is in jest w.r.t. Nick. I am not outraged or anything.
Posts
Daniel:
ReplyDelete(Your link doesn't seem to work, BTW).
Yep. It was meant to be a bit goofy. A side-reference to the "people not profits!" slogan.
But there's a serious undertone too.
It is paradoxical that GDP and consumption could be the same in all future time periods, but the lifetime consumption of future people could be lower at the same time.
Leaving the debt burden stuff aside, and leaving aside all the normal well-understood reasons why GDP is not a perfect measure of people's welfare. There's something else too:
"If you had to boil macroeconomics down you could even say soemthing like "the study of the determinants and the nature of national income", or if you prefer a more cosmopolitan rendering, "of aggregate income" it's about nothing if it's not about GDP. You may not like it, but that's the reality of it."
I used to believe that, at least roughly, until a month or so back. Now I think that the GDP focus causes us to miss something important. It distorts our perspectives, so we miss seeing a bigger pattern of what is happening over the business cycle. (Moreover, that focus on GDP can lead some of us into bizarre theories, like RBC, because we are ignoring half the data.)
Specifically, GDP is about production, expenditure and income from newly-produced goods only. But if trade in old goods is cyclical too, then that is important data we shouldn't ignore, and it matters for human welfare too.
My two posts:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/12/why-y.html
http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/12/the-trade-cycle-vs-is.html
I reckon I was onto something there.
Put it another way: there's more than one way to aggregate. We shouldn't let our theories of what is happening in the world be determined by the choices made by long-dead National Income Accountants.
ReplyDelete