Nina's Reading Blog

Comments on books I am reading/listening to

Archive for May, 2017

GDP: A Brief But Affectionate History

Posted by nliakos on May 14, 2017

by Diane Coyle (Princeton University Press 2014)

I have never studied economics, if you don’t count a MOOC I did a couple of years back with Dan Ariely (but behavioral economics seems more like psychology than economics). So I am one of those people clueless about the difference between GNP and GDP. I had never heard of things like FISIM (financial intermediation services indirectly measured), the ISEW (Index of Sustainable Economic Welfare), an IBSC (imputed bank service charge), the SEEA (System of Environmental Economic Accounting), or the SNA (System of National Accounts). In fact, I had never even heard of “national accounts”. I didn’t know what the OECD (Organization for Economic Cooperation and Development) was, for heavens’ sake.  So although this little book was written for non-economists, I still found it slow going, and at the end I can’t say that I understood very much or very well.

But my takeaway is this: GDP (Gross Domestic Product) is a way of calculating the amount of production of tangible items (like steel or cars or rice or TV sets) that was invented (or revised) during the Second World War. Economists do not all agree on how to calculate it. In any case, its accuracy depends on the completeness and accuracy of the data used to calculate it, and often, especially in the developing world, complete and accurate data are just not available, so the resulting GDP figures are suspect. (In a section entitled “Is Africa Poor?”, Coyle gives the example of Ghana, which was suddenly transformed from a low-income nation into a low-middle-income nation in November 2010, simply because Ghana’s statistical agency had updated its calculation of the price index, increasing GDP by 60 percent [but changing nothing about the economic reality of the country].)  So we should take GDP figures with a large grain of salt.

Another reason to consider GDP with suspicion is that it is concerned only with material output (i.e., “goods”), and not at all with services. In today’s developed economies, the service sector is huge. Yet there is simply no good way to measure the productivity of government or other office workers, artists, teachers, doctors, scientists, restaurant servers, X-ray techs or hotel clerks. Moreover, GDP does not take into account sustainability, innovation, variety, global production chains, or “intangibles” (such as the volunteer efforts which create and constantly improve Wikipedia or Linux), and it does not take variations in quality into account.

And perhaps we shouldn’t give so much importance to GDP anyway, as opposed to measures of well-being (“welfare”). Think of the catastrophe that was the Chinese Cultural Revolution, when poor Chinese peasants stopped farming in order to produce steel, and millions starved. And the steel wasn’t even usable. Isn’t our satisfaction with our lives more important than the number of widgets we produce?

But Coyle stops short of suggesting we get rid of GDP. She points out that there is no viable alternative to it for measuring economic growth. In addition, GDP growth appears to be linked to increased social welfare, even though they are separate concepts. She thinks we should supplement GDP with other indicators (she particularly feels that we need to develop a way to measure sustainability), find a way to measure unpaid household work and “the informal economy”, and modernize the way we collect the statistics used in calculating GDP, among other recommendations. As many nations tilt away from physical output to service economies, the very concept of “economy” is changing and needs a new definition. Until that happens, GDP will continue to be a significant part of how people evaluate the economies of the world.

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Into the Abyss: An Extraordinary True Story

Posted by nliakos on May 6, 2017

by Carol Shaben (Grand Central Publishing 2012)

In 1984, Carol Shaben’s father Larry, a Canadian legislator and provincial government minister, was one of four survivors of a deadly plane crash in northern Alberta. Carol Shaben, a journalist, painstakingly researched the crash, interviewing the four survivors as well as others who knew them or who were familiar with the event, to create a four-way narrative of the events leading up to the crash; the crash itself and the freezing night that followed for the four survivors, three of whom were severely injured; and the impact that the tragedy had on the lives of the four men.

In addition to Larry Shaben, the survivors included Erik Vogel, the young pilot whose exhaustion, stress, and errors led to the tragedy; Scott Deschamps, a RCMP officer; and Paul Archambault, the Mountie’s prisoner, who was being taken to stand trial for a minor crime. Shaben eventually left Alberta politics and spent years searching for a way to use the years he had been given to do good; eventually, he found this way in his faith community. Vogel wrestled with guilt and depression for many years after the crash. He came in for a fair amount of blame, and the continuing investigations prevented him from putting the tragedy behind him. Deschamps felt reborn but struggled to make the life changes he felt he needed, as he methodically checked things off the “bucket list” he created during the long night following the crash when he believed he was dying. Archambault, whose injuries were only superficial, became the hero who enabled the others’ survival, but it was not enough to prevent his death  at the age of only thirty-three, presumably due to homelessness and poverty.

Shaben focuses on the risks involved in the small-plane travel industry in Canada, where “bush pilots” provide transportation for large numbers of people living far from the major population centers. She examines how intense competition, lack of effective government oversight, flight paths over wild country inaccessible by road, and other factors combine with harsh Canadian winters to create the conditions that lead to many accidents, of which this particular crash is only one example.

The book is carefully researched and well-written. I learned about Canadian government and the small-plane flying industry as I followed the fate of these four people whose lives were intertwined by a tragic accident.

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