Think Freely Media presents Common Sense with Paul Jacob

Lately, governments have sought to seem more fiscally responsible by re-confabulating how they calculate a measure of economy-wide economic strength called Gross Domestic Product. (The principle involved is ancient. It’s been denominated “fudging.”)

One of the crassest number-jugglers is the Italian government.

Italy wants to comply with a European Union demand that it limit debt to 2.6% of GDP. If the country’s GDP is statistically fattened by using looser rules for calculating it, then debt as percentage of GDP becomes magically “lower” — as a statistical percentage. Italian politicians can lurch to waste more money while still fetching EU handouts.

A year ago, the American fedgov was guilty of similar fudging when it statistically padded our GDP by $500 billion.

Statistical aggregates like GDP entail much guesswork and many dubious assumptions to begin with. For one thing, why is government spending — including that huge portion that dampens or destroys economic production — included in a calculation supposedly measuring economic value?  (A better indicator of general economic strength, Gross Output, hasn’t quite caught on yet. And I don’t expect those highest up in government to push it.)

The purpose of the number-tweaking by Italy, the U.S. and other governments is hardly to improve or amend or salvage whatever is conceivably salvageable in the original number-crunching. The purpose is to disguise bad policies.

But jiggering with how the impact of awful policies is guesstimated in order to better to hide their consequences won’t erase the awfulness of those policies. And curtailing or ending awful policies can be done entirely without peering into statistic-stoked crystal balls.

This is Common Sense. I’m Paul Jacob.

By: Redactor

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