Tag: Tim Worstall

Must-read: Tim Worstall: “Brookings Is Wrong On The Productivity Slowdown”

Posted on by Brad DeLong

Must-Read: Tim Worstall: Brookings Is Wrong On The Productivity Slowdown: “My own favoured example being that in our current GDP numbers globally…

…we have Facebook marked down as providing some $18 billion of economic value, that should then translate into perhaps $36 billion of consumer surplus, which is the true measure of how we’ll we’re doing as humans. And yet that’s obviously ridiculous: something that 1 billion people do for an average 20 minutes a day simply cannot be valued at such a low number. If we measured that time at US minimum wage (maybe not right, but indicative) then we’d have $800 billion or so of time value. Or, alternatively, we should be valuing the time people spend on Facebook at 10 cents or whatever an hour….

Brookings has a new paper out:

We find little evidence that the slowdown arises from growing mismeasurement of the gains from innovation in IT-related goods and services…. Many of the tremendous consumer benefits… are, conceptually, non-market…. These benefits do not mean that market-sector production functions are shifting out more rapidly than measured, even if consumer welfare is rising.

And that’s a horrible assumption, a terrible line of reasoning. As Delong says:

Isn’t ‘measuring consumer welfare’ the point? We (a) arrange atoms (b) in forms we find pleasing and convenient, and then use them in combination with (c) information and (d) communication to accomplish our purposes. That our measures of economic growth are overwhelmingly ‘market’ measures that capture the value of (a), much of the value of (b), and little of the value of (c) and (d) is an indictment of those measures, and not an excuse for laziness by shrugging them off as ‘non-market’ and claiming that measuring the shifting-out of market-sector production functions is our proper business….

Consumer welfare… is the thing…. Market economic activity… are only a proxy… because we want to be able to calculate it in something close to real time… [and] to have objective rather than highly subjective numbers…. But we must never forget that it is only a proxy…. Consider WhatsApp. Currently it charges no fee… and… carries no advertising…. Anyone want to claim that WhatsApp adds nothing?… Thus we know absolutely that we’ve got a measurement problem here. Our only question is how bad is it?… And yes, obviously, this spills over into public policy…. We do indeed have 1 billion of those guys’n’gals getting their telecoms for free: what do you mean this isn’t making people richer?

Must-read: Tim Worstall: “Facebook Doesn’t Waste Trillions In Time: That’s The Value Facebook Adds For Us”

Posted on by Brad DeLong

Must-Read: Tim Worstall: Facebook Doesn’t Waste Trillions In Time: That’s The Value Facebook Adds For Us: “CNBC… [is] saying that we all spend lots of time on Facebook…

…That’s entirely true…. They’re then saying that that time has a value: this is also true…. But then they say that the time we spend on Facebook is a waste… because we are doing Facebook rather than working to make money. And that’s entirely the wrong way around. That we are on Facbeook rather than making money shows that we value the Facebook time more than the money. Thus this financial value of this time is the value that is being added to our lives. And yes, this is an important economic point which then feeds through into public policy….

[CNBC’s] is bad economics… a fetishisation, a reification, of GDP… not something that we want to do at all: we need to remember that GDP is only a proxy for how well we’re doing, not how well we’re doing itself…. Facebook is valued in GDP at it’s profits plus its wage bill… about $10 billion [a year]…. [But] we’ve got people giving up $900 billion in hypothetical labour value…. I’m not going to insist upon that $900 billion…. But I am going to insist that the addition is very much larger than the $10 billion odd that sits in GDP…

Must-read: Tim Worstall: “The Average American Today Is 90 Times Richer Than The Average Historical Human Being”

Posted on by Brad DeLong

Must-Read: Tim Worstall: The Average American Today Is 90 Times Richer Than The Average Historical Human Being: “I have regularly tried to get over the idea that there is just no such thing as real poverty in the United States today…

…Absent those entirely outside our society through addiction or mental health problems there is just no one at all who suffers from what has been the usual human description of poverty. Actually, there’s no one at all in the US who has anything even close to what the human experience has been of poverty. By any historical, and by standards of all too large a part of the world today, all Americans are simply hugely, gargantuanly, richer than any but the fewest, most privileged, of our forefathers….

What should really leap out at you is how poor the past actually was. England in 1600 AD was at $1,000 a year. So, a little over 1.5 times what it is like to be in the poorest country in the world right now, that CAR. China was at this level in 1978: just goes to show you what an idiocy Maoist economics was. But note that this runs the other way too: the American living standard of today is about 50 times what it was in 1600 England, or 1978 China…. Real poverty is that $600 a year of the CAR or most of humanity for most of history, or the $1.90 a day that the World Bank today identifies as absolute poverty. America simply doesn’t have any of this. It just doesn’t exist and it hasn’t for at least half a century and was rare even a century ago.