I was listening to the Freakonomics podcast episode about Robert Gordon on the walk home. A lot of people (including my beloved Weeds podcast) have been talking about Gordon’s new book on how American productivity has changed over the last hundred-plus years, and I’m probably going to read it soon; seems like the sort of thing I’d (and you’d?) be interested in. Also, it’s one of those books that a lot of people talk about but probably most people don’t read cover-to-cover, and I enjoy reading such books cover-to-cover out of spite.
A lot of the discussion is necessarily going to revolve around what you count and how you count it. I think I need to understand the National Income and Product Accounts, or at least brainstorm the problems with the NIPA, before I dig too much into Gordon. For instance, how does taking care of your own kids rather than hiring out childcare factor into the productivity measurements? My understanding (see 6.21 et seq. in System of National Accounts 1993 for a very succinct explanation) is that most domestic production is not counted. So if I employ a nanny to take care of my kid, that’s going to count as income for the nanny and an expense for me; if I instead choose to stay home and take care of my own kid rather than work, I am subtracting from GDP. I wonder how much GDP we added from 1945 to 1990, say, just by women shifting from home to the office. That much GDP is arguably artificial, in the sense that we should have been counting their work at home as well.
(If I buy my home rather than rent it, the BEA counts what they call “owner’s equivalent rent of primary residence”. Why don’t they likewise count “mother’s equivalent sale of child-care services”?)
Likewise, consider Nordhaus’s history of lighting efficiency. Consider, specifically, the chart on page 11, registering a 30,000-fold increase in the efficiency of lighting from the beginning of recorded history to the advent of the compact fluorescent light bulb. Is it possible that we’re just under-counting productivity increases?
Or consider the humble shipping container (my review; Krugman’s hat tip). Where exactly does it show up in the productivity numbers? I assume/hope the BEA is counting an abstract cost of “shipping services”: the cost to ship the same quantity of the same goods from point A to point B; that cost has gone down, so the productivity of “shipping services” has gone up.
How about public health? As people stopped smoking and lung-cancer deaths decreased (see page 2), how did that show up in the GDP numbers? We lost some money from the unsold cigarettes, and we lost the money that we would have spent in hospitals. Yet clearly we’re better off than we were. Hopefully that shows up in GDP. Or, to take another public-health number: does water delivered to your tap from a tax-funded municipal water system count for less than water you buy in the store?
These public-health questions point to the broader question: what is the point of economic growth? Isn’t the point of economic growth that it makes us happier, healthier, and longer-living? Are we measuring that? To the extent that economic growth is connected to what matters, we should care about it; but otherwise, maybe we needn’t.
I think most of the usual argument for economic growth is that a rising tide lifts all boats, or a larger pie leaves more pie for everyone, or some such metaphor. But what if insufficiently small pies are not the problem? What if the problem is that we’re not getting pies to the right people? That is, what about distribution rather than growth? And what sort of improvements to the human standard of living could come about without anyone needing to spend another dime? What if we managed to get every last cigarette smoker to quit? What if we ended automobile deaths? We needn’t necessarily develop technological solutions to the problems of cigarette smoking and car crashes; we might be able to solve them without adding a dime to the GDP.
To be clear, I’m not suggesting that the GDP numbers are mismeasuring things. But I think these are the sorts of questions with which one should approach a book like Gordon’s: are they measuring the world correctly? And even if they are, should I care? Will increasing GDP per capita halt the rise in death rates among non-Hispanic whites? (The rise is seemingly driven by women in the South.) These are the sort of questions that I’ll have in the back of my head as I read Gordon.