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More Economic "Growth"

Posted by Eric de Place

04/28/2006 02:30 PM

Is GDP the same thing as "the economy"?

Splashed all over page one today: the US economy shows strong growth. (And by "economy", of course, the media actually mean GDP plain and simple.) But do the GDP numbers lie?

Readers of this blog probably know we're a bit touchy on this subject. Today, I'll spare you my ranting and pull a quote from Ezra Klein at Tapped:

,,,macro data tells you very little about the economic experience of most folks, which accounts for the massive disconnect between how the Bush administration and the media seem to think the economy is doing (tubularly!) and the 63% of the public who think the situation fair or poor. For some more indicative numbers, head over to the Wall Street Journal, where you learn that wages and salaries grew only 0.7% over this period, while prices for U.S. consumers rose 2.7%. The labor market, which has tightened up, is seeing a weird combination of low unemployment without corresponding wage growth.

That just about gets it right.

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Comments

Posted by Get Ahead 04/28/2006 05:15 PM

"I'm just wondering if price is the correct way to create movement in society.

A New Capital Show caller mentioned that increasing prices would just create hardship on the poor.

The host, Leo Gold, suggested that rather than price controls, direct costs, such as the cost to the environment could be added into the price.

I've lived in countries where gas costs, over $9/gallon. It's very common in Europe. I didn't see a radical shift in car usage with
prices at that level. Though they still had a public transportation infrastructure left over from the pre-automobile era, freeways were overcrowded, and we used autos as much as
any country on earth, perhaps excepting the United States.

My theory is: There are certain commodities which don't respond when prices go up, the users just pay a larger portion of their overall income to use them, and unless that money is well spent, the economy as a whole suffers, and the corporations supplying the resource benefit."
- Trey

Posted by Jason 04/29/2006 11:28 AM

It's really hard to compare the U.S. and Europe. Europe is far more dense generally, so perhaps the shifts that would happen in the U.S. with higher gas prices have already happened there. SUV sales have already stalled and hybrids are doing great, so I don't think you can say gas prices have no effect at all.

That said, it's often very difficult to change gas-buying patterns because they are mostly determined by where you live or work. The most significant short-term change with increased gas prices may be fewer people with health insurance.