July 29, 2013

WALTER RUSSELL MEAD: We’re Richer Than We Think We Are:

We are still using blue model industrial age statistics to measure a post-blue economy. Increasingly, the world described by our statistical models (which are in turn used as a basis for planning by government agencies and business and used as a proxy for reality by commentators and pundits) does not match the actual world we live in. In general, the real world is significantly better than the statistical one—and offers more ground for optimism about American prospects in the 21st century. The economy is bigger and more dynamic than the conventional statistical picture, and America’s global strength is significantly understated by measures that concentrate on the old economy that America is leaving behind rather than the new one that we are busily creating. The changes being discussed here are just one step down an important road: we need to get much better at measuring and assessing the state of our increasingly information-based economy.

The central observation in the piece is certainly true: GDP significantly understates the value of the intellectual property formation that is a key to the knowledge economy now taking shape. This is not likely to be the last revision. Productivity in services is hard to measure but increasingly important, and getting this right will matter more over time.

On the other hand, I’m suspicious that changes in measurement will be driven by a political desire to make things look better, to the political benefit of the powers-that-be. But maybe I’m just cynical that way.