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If You’re Going To Use Economic Statistics You’ve Got To Get Them Right

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Over at Al Jazeera a gentleman wants us to know that wages really haven’t risen in the US since – guess, wait for it – 1964. Err, yes. So, start asking what the standard of living was like in 1964. What did people eat? What were the choices of what to eat even? What was TV or radio like? Computers were, umm, rudimentary. Cars had ABS and airbags or what? The average living space per person in a household was higher or lower than it is today?

Heck, most of the country was only just getting useful air con or central heating at that date. Given that your wage is what you can buy with it it really seems a little odd that wages haven’t risen since then given that you can buy much more these days.

The correct answer here being that our laddie doesn’t know his way around the economic statistics. Here’s what he says:

Economists and politicians use gross domestic product (GDP) as an indicator of our success, and for good reason. According to World Bank statistics the US GDP, adjusted for current US dollars, grew from $686bn to $20.5 trillion between 1964 and 2018. Growing our economy by 30 times paints a nice picture.

He links to the world bank to tell us where he’s got his GDP numbers from. Which gives us this chart:

There’s a slight problem here. For he’s saying “adjusted for current dollars” and he’s given us the chart headed “GDP (current LCU) – United States” which doesn’t mean quite the same thing. Current LCU means unadjusted for inflation, not adjusted for it. It means the local currency unity that was current at the time of the measurement. That is, it’s a before inflation adjustment measure. We can see this here, this is nominal GDP in USD:

What he actually wanted to use from the World Bank set was this:

Or a slight alternative here. Constant dollars is the code word here. All dollars translated into the one standard, constant, value.

OK, trivia, right? Except not so much. For to get things this wrong does put a little pressure on our willingness to believe anything else coming from the same source on the subject really, doesn’t it?

And then again, OK, in this one example perhaps it is trivia. But keep it in mind. People will, entirely confidently, tell us all sorts of things about the economy without being able to get the very base numbers correct. Something we need to watch out for.

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    • Dear Southerner

      As our host has pointed out elsewhere, medical treatment and college are luxury goods, therefore attracting luxury prices. Professor Perry observes that medicine is heavily regulated, adding to costs. Medical and dental treatment is becoming global, with people travelling to foreign parts for cheaper services, generating the occasional Daily Mail headline about the enormous cost to the NHS of rectifying problems when things go wrong.

      On textbooks, I recall paying 4 guineas* for a copy of The Mechanics of Deformable Bodies, a tome which wasn’t a course book and I don’t recall ever reading. By comparison, hall of residence fees for a ten week term, including half board weekdays (waitress service dinner – jacket and tie required), full board weekends, was £50 – i.e. the book cost 0.00 am Monday to 9.12 pm Saturday.

      DP

      * £4 4/-; not being a race horse, it wasn’t actually priced in guineas

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