See the mystery of US GDP, and understand ourselves better

Summary: It’s the simple things that provide a mirror in which we can see ourselves, and the roots of America’s problems. Such as this graph showing estimates of US GDP for Q1 2015 — getting more accurate with each revision.

Evolution of estimates of US GDP for Q1 2015

This graph shows estimates of GDP for Q1 2015 made by the Bureau of Economic Analysis. After the quarter ended, they said it was a bad quarter — with near-zero growth. In May they said it terrible, with a serious drop. It looked better with each of the following four revisions — ending as a strong quarter.

This is a commonplace. As in Q1 2015, sometimes we were depressed by the bad news — only a later learning that we had a great time. We have had horrible quarters, which enjoyed because the numbers were good — only later learning that we had suffered.

This is a trivial example of modern America. We learn how we feel from watching the media. We learn what to think. What our values are. When the media begins new campaign, we change ourselves to meet the new narrative.

Older men used to routinely marry teenage girls. Now we’re told that is pedophilia. Men used to casually approach girls; now that is “creepy.” What is strange is not that our values have changed, but that many have forgotten that they were once different.

The media tells us that the entire world has warmed, so people tells stories of the amazing warming in their town since 1950 — even those that have had little or none (many areas have had warming that is 1/5 the range in temps since then — see the record for your area here).

Kitten and partial reflection in mirror-Wikimedia

A second lesson from this graph

This graph shows another aspect of modern America. Many people look at it and mock or condemn the BEA. Which is daft. The US economy is vast, volatile, and constantly evolving. Tracking its short-term activity is difficult but feasible. All it takes is money. But there are no “street bandits”– lobbyists — buying Congressional support for BEA funding. For decades heard people complaining about the accuracy of US economic data. I’ve asked, but never found a single complainer who had asked his representative for increased BEA funding.

This is so America. We complain about free news (news from services to which they don’t subscribe). We complain about public infrastructures and services while demanding tax cuts. We whine that our political system isn’t what our awesomeness deserves, while sitting on our butts – contributing neither money nor work to find and support good candidates.

This is not the behavior of a great people. We were great once, however (not angels; that’s a rank for the dead) and can be again. Now we are great only in our pretensions.

Cat sees lion in the mirror

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  1. Look in the mirror at America and see the world brotherhood.
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  3. The unspoken issue of the election: America’s descent into darkness.
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The best book showing what we have become, and why.

Closing of the American Mind by Allen Bloom. From the publisher …

” In 1987, eminent political philosopher Allan Bloom published The Closing of the American Mind, an appraisal of contemporary America that “hits with the approximate force and effect of electroshock therapy” (The New York Times) and has not only been vindicated, but has also become more urgent today. In clear, spirited prose, Bloom argues that the social and political crises of contemporary America are part of a larger intellectual crisis: the result of a dangerous narrowing of curiosity and exploration by America’s elites — especially those in our universities.”

12 thoughts on “See the mystery of US GDP, and understand ourselves better

  1. Every government agency has been corrupted by political concerns. The FBI, for example, was never meant to involve itself in political campaigns or in the effort to topple an elected government.

    When these things happen and come to light, the faith of ordinary people in the deep bureaucracy — the permanent state — sinks even lower than before.

    We expect economic statistics and other politically sensitive statistical metrics to be influenced by political overseers. That is the nature of the deep state, and we should have no illusions how deeply its tentacles can reach.

    But we cannot quantify what is fact and what is tampering, and that uncertainty further disillusions even those who most want to believe in the objectivity of the number crunchers whose findings are amplified a hundredfold and carefully framed and altered by journalists and politicians.

    1. alfin,

      “Every government agency has been corrupted by political concerns.”

      Wow. Ideologue much? No, that’s not correct.

      “The FBI, for example, was never meant to involve itself in political campaigns”

      I suggest you read about the history of the FBI. It was created, with J E Hoover as its head, to conduct the crushing of the Left — starting with the Palmer Raids. Hoover made this one of the top priorities of the FBI until his death. During much of this time he denied that “organized crime” and the “Mafia” even existed as a serious force.

      Priorities.

    2. “When these things happen and come to light, the faith of ordinary people in the deep bureaucracy — the permanent state — sinks even lower than before.”

      Only when the government machinery crushes the people I dislike, and protects the people I like, is it legitimate!

    3. SF,

      Lots of examples of governments who have lost their legitimacy, which is (I think) what Alfin is discussing. For a current example see reviews of two new books about “Egypt: The New Dictatorship” — by Joshua Hammer at the NY Review of Books.

    1. PAT,

      “it sure looks to me as if the contiguous United States have become much warmer since the mid-twentieth century.”

      You must be kidding us. You say that as if it’s news. This just in: the sun rose this morning.

      A small point: “much” warmer is a meaningless phrase. Few people can detect a 1 degree change in temperature over several hours. Nor 4% over 60 years. These are small changes, which was my point (esp since many areas had minimal or even no change). Yet such small changes have substantial effects if continued over time.

  2. I’ve known about the volatility of BEA (and other govt stats) estimate revisions since schooling myself in government supplied data when I began using it in the 1990’s to build risk models. If you have any specific evidence that the revisions “get more accurate”, I’d be interested in seeing it. .

    1. Desi,

      The final numbers of most govt stats are based on the large scale tax databases. That’s the highest quality data available, both in accuracy and reach. For example, the final employment data is based on social security filings. Unfortunately, they become available only after a year has passed.

      The ultimate test of economic data is how well the various data series (public and private) match with each other — prices (the CPI, the MIT Billion Price Index), inventories, employment, tax receipts, etc. The final numbers present a coherent picture, not just as a snapshot at year end but as time series.

      The last is the most severe test. Data biased in one direction eventually will produce absurd outcomes. That is what revealed the Soviet Union’s fake demographic data.

  3. From the headline I thought the question your were asking is whether GDP is a meaningful number. We seemed to have moved from a focus on production to consumption as the measure of the success of the economy. Over long periods a society can only consume what it produces (or plunders, but that tends to be a fairly short term source of revenue for most empires).

    1. John,

      “focus on production to consumption as the measure of the success of the economy”

      False. Gross Domestic Production is a measure of production, not consumption. The alternative metric in the National Accounts System is Gross Domestic Income. Consumption is not a primary measure used in economics today.

  4. Another good article, thanks. For a long time we’ve been reading of the U.S. decline and the hope that things turn around. Isn’t there also a point of no return? Couldn’t it also become a slippery slope?

    1. Stuart,

      “For a long time we’ve been reading of the U.S. decline”

      Most of those stories of economic decline are quite bogus. The cautionary impulse is, however, good because “only the paranoid survive.” Treat most of those “decline stories” as yellow alerts.

      “Isn’t there also a point of no return?”

      Yes. But since we’re not in decline, that’s a worry for another age. We face challenges, as we always have and always will.

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