Methods of measuring GDP

A colleague the other day mentioned his annoyance with the Hans Rosling TED talks on global poverty. His annoyance generally stems from treating developing nations’ GDP estimates as anything more than numerical hocus-pocus.

A few things I know basically nothing about:

* I really have no idea how hocus-pocusy these GDP estimates are.
* I also have no idea how hocus-pocusy the U.S.’s own GDP estimates are.
* Another thing I have no idea about is whether every year’s GDP estimates from a given country are mangled in the same way, so that (estimated GDP in year 2) minus (estimated GDP in year 1) is actually a reasonably accurate measure of year-over-year change in GDP.
* Per-capita GDP estimates might introduce another source of uncertainty, namely uncertainty in the population estimates. I likewise have no idea how accurate most nations’ population estimates are. And I have no idea whether per-capita-GDP estimates come from sampling individual people on their incomes, or estimating the country’s aggregate GDP and dividing by an estimate of the population.

I guess what I’d like, then, is a good introduction to the problems of measurement in countries with not-very-well-established economic-measurement systems — and for that matter, an introduction to how the U.S. statistical-measurement agencies do their work. Paging Chris Blattman…

One thought on “Methods of measuring GDP”

Devin Finbarr

May 31, 2010 — 3:37 pm

You can check out my (unfinished) essay on the pseudoscience of GDP
here. John Williams at ShadowStats also has a couple great pieces ([http://www.shadowstats.com/article/special-comment here] and [http://www.shadowstats.com/article/grossdomesticproduct here]). If you want the gory details from the BEA, check out their guide to GDP.

Chris Blatman actually wrote a brief post about GDP in developing countries: “Second, never, ever take data from low income countries too seriously. Doesn’t it strike you as odd that the World Development Indicators have annual infant mortality data for most countries in Africa for most years? It should. Most of that data is interpolated, and the rest is (as often as not) close to made up. It’s not just the human development indicators. You wouldn’t want to be inside the sausage factory that is the GDP calculation in Chad.”

When look at Hans Rosling’s data you can have one of two reactions. Either the data matches your personal intuition, in which case you learn nothing. Or it doesn’t match your intuitions, in which case you have absolutely zero reason to believe the stats over your own previous knowledge. Either way, Rosling’s presentation is worthless, yet I’ve heard way too many people laud it.

Worse, Rosling mixes in a few absolute whoppers: “Africa has not done bad. In 50 years they have gone from pre-medieval situation to a very decent one hundred year ago Europe, with a functioning nation sate. I would say Africa has done best in the world in the last 50 years because of where they came from”

Even if you believe the GDP statistics Rosling is wrong, as Africa was actually ahead of Asia in the 1950’s, and since then has fallen way behind. Africa’s growth has stagnated or actually declined, depending on which data and end points you choose.

If you go beyond the statistics, Hans Rosling is even more unforgivably wrong. Here are three articles about the Congo, one from 1955, one from 1991, and one from 2008. From the 2008 Time article:

‘”When the Belgians and the Portuguese were here, there were farms and plantations cashews, peanuts, rubber, palm oil. There was industry and factories employing 3,000 people, 5,000 people. But since independence, no Congolese has succeeded. The plantations are abandoned.” Using a French expression literally translated as “on the ground,” he adds: “Everything is par terre.” It’s true that our journey through 643 kilometers of rainforest to where the Maringa River joins the Congo at Mbandaka, has been an exploration of decline. An abandoned tugboat here; there, a beached paddle steamer stripped of its metal sides to a rusted skeleton; several abandoned palm oil factories, their roofs caved in, their walls disappearing into the engulfing forest, their giant storage tanks empty and rusted out. The palms now grow wild and untended on the riverbanks and in the villages we pass, the people dress in rags, hawk smoked blackfish and bushmeat, and besiege us with requests for salt or soap. There are no schools here, no clinics, no electricity, no roads.’

Or we can look at Liberia. I remember viewing slides from when my eight grade teacher visited in the 70’s. She showed a peaceful, quiet, albeit poor countryside. Compare to the recently produced Vice guide to Liberia. I’m pretty a “very decent 100 one hundred year ago Europe” did not include canibalism.

Nor were 40% of the court cases regarding witchcraft.

Many people know about the problems of Zimbabwe, but few know how it got that way.

Meanwhile in South Africa the lights are (literally) going out, and those who can afford it are packing for Perth.

And if you have the stomach, you can check out Africa Addio (I have yet to summon the stomach myself).

I think Moldbug sums up the situation quite ably: “The various colonial regimes were by no means perfect. But to assert that their average quality of government service was anything but far better than either their predecessors, or their successors, is a political distortion of history which I have no trouble at all in comparing to Holocaust denial. Far more people were murdered in decolonization and postcolonial violence than in the Holocaust. Moreover, only a few fringe nutcases deny the Holocaust – whereas anticolonialism is a core tenet of everyone’s college education. Oops.”

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