Through the person of its US \”finance and economics editor\”, Heidi Moore.
Would you believe it she\’s even worse than the Guardian\’s UK economics nutters?
For the first time, the US is changing the way it measures its economic growth, the measure we call our gross domestic product. Starting in July, the keepers of US economic data at the Bureau of Economic Analysis will stand over the usual cauldron of GDP – a stew that includes how much Americans consume, government spending, investment, exports and imports. They\’ll begin to add new ingredients that, in a puff of smoke, will create a more favorable, higher gross domestic product.
The new ingredients include Hollywood royalties from TV, movies and songs – some Tinseltown magic, really – as well as revenues from scientific research and development. Like a feelgood movie, this will make us feel positive, briefly – boosting our GDP by as much as 3% from its currently anemic level of 0.4%.
I think you can see where this is going, can\’t you? She\’s confused between the level of GDP (what we produce) and changes in GDP (how fast or slowly the amount we produce is changing). And you might think that that\’s just clumsy editing or something, but I\’m afraid it isn\’t:
For one, it will be harder for us to know when we\’re in a recession. Right now, a recession means several quarters of negative GDP.
No, no it doesn\’t.
Getting to negative from where we are now isn\’t hard; getting there when we\’re 3% higher will be. While it may seem useful to avoid recession right now, that is actually a bad thing: it means that in periods when we do get negative GDP, we\’ll be in truly terrible shape.
Dear Lord. A recession is several (actually two) quarters of negative *growth* in GDP. Thus whatever our actual level is, 100, or 103, makes no difference at all to our ability to either declare a recession nor our ability to be in one. And what in fuck is negative GDP?
In theory I suppose you could have it. No value was added in the economy at all. In fact, output was worth less at final market prices than the raw materials used to produce it at market prices would do it I suppose. But it\’s very difficult indeed to think of anywhere that has ever done this. Even in the glorious days of Soviet tractor statistics there were only a few factories that managed this prestigious feat.
Hollywood royalties, for instance, are not secure measures of investment.
Well of course they\’re not. They\’re income from past investments.
That\’s because, even in Hollywood, it\’s hard to measure what royalties are, or should be. Studios rely on notoriously tricksy accounting. Four major studios were hit with lawsuits this year over their accounting of royalties dating all the way back to the 1970s. \”Hollywood accounting\” is a shorthand for the obscure methods the industry has of turning profit into loss, or losses into hidden profits.
This chaotic mess of financial reporting will now be part of our national measure of economic health. What could possibly go wrong?
Err, no. Because we can measure what royalties actually are. Which is the number we plug into the GDP one.
She\’s simply not got the first clue about the subject under discussion, does she? Wonder what Larry Elliott thinks of this?
But let\’s not bne too, too, hard on The Guardian here. I reveal one of the things that is wrong with the world:
Heidi Moore is the Guardian\’s US finance and economics editor. Formerly, she was New York bureau chief and Wall Street correspondent for Marketplace, from American Public Media
APM is, I think at least, something like PBS, or their equivalent of the BBC sorta thing. And when you\’ve got \”Wall Street Correspndents\” who really have no clue about the subject under discussion then the public conversation about said matters is not going to be all that good, is it?
I wouldn\’t mind so much if they employed people with different views, different arguments about the way the world should work. But can\’t we at least start with people understanding the basics of the subject they are supposedly covering?
An economy made up entirely of this kind of article?
a stew that includes how much Americans consume, government spending, investment, exports and imports
wouldn’t that be GNP with them there external trade bits?
We’re back to this subjective / objective value question, aren’t we.
Subjectively, we think the article is not just a load of old cobblers but is actively misleading, therefore has a negative value.
Objectively, enough people buy the tripe to pay Heidi her wage (or however she is compensated), therefore even this is a positive contributer to GNP.
In fact, even our comments, as they possibly slightly increase chez Timmy’s ad rankings (and income) are a positive contributor to GNP. Even Arnald’s.
When you seem a name like Heidi Moore you know, you just really know, unless she’s doing pr0n fliks nothing much of interest will come out of it.
PBS is the TV public broadcaster. That means it’s funded by donations.
The radio equivalent is NPR (national public radio). Also funded by donations, and makes the excellent Planet Money.
APM is the smaller competitor to NPR, and is mostly useless local charitable crap. It has Marketplace, which is usually pretty decent, but rather too dumbed down to my taste.
@bis, wouldn’t the pr0n star be more plausibly called “Heidi Less”, or “Dana Moore”?
I believe “Negative GDP” is what Richard Murphy produces.
And of course the Greek deficit is now about 130% of GDP, so God knows what the debt is!
Seriously: has anybody tired explaining to friends why unemployment might be higher after the end of a recession than it was during or why you shouldn’t go SCUBA diving halfway between high and low tides? If you haven’t, DON’T; in my experience differential concepts are the hardest thing for the world to grasp.
Adding to Richard Gadsen …
American radio stations that are “public” are supported by government grants, donations, and advertising that they fib and say isn’t advertising (don’t ask).
They buy content from multiple sources: a big one is NPR, and a smaller but common one is APM. So, local stations might have shows from both, but the choice of shows might vary between localities.
Now about the economics …
What they have done is construct a new component to be added into GDP. This is something that was always part of American output, but was not included in announced GDP (presumably because it was dicey to measure).
In so doing, they have constructed that component for both the current period, and for all preceding periods. So, simultaneously, the entire GDP series will be updated back 65 years in the quarterly data, and about 80 in the annual data.
The whole point of this exercise is to make the measure more accurately reflect the reality, and to do so seamlessly. Both points appear to befuddle Ms. Moore. I wonder about her audience as well.
Oh, and by the way, it’s routine to adjust GDP like this every summer … although this is a particularly large adjustment.
@Dave Tufte
I didn’t know they did that, so thank you.
Tim’s fundamental question remains though: how does she end up as an economic’s correspondent?
You’ll be interested to know that I have spent much of the afternoon ignoring my own advice and explaining tides tracing sine waves, their differentials and adding stuff about why the wind blows stronger in Spring and Autumn than in Summer and Winter. I only tell you this because I’ve sort of made that up and wondered if it might actually be correct.
Perhaps they should add these intangibles to UK GDP too.
Abracabra 8% increase.
And her comment, with all the ad-homs they would freak about if anybody on the right (or even the merely correct) aimed them at one of they (sic), on your Forbes version of this piece shows that she simply fails to comprehend her original “negative GDP” error.
A US version of the LHTD? Somebody for us to have fun from for years and years to come?
Goodhart’s Law: as soon as a measure becomes a target of policy, it ceases to be a reliable measure.
Grr!
It-s taxpayer-funded.