The Search for New Currencies
Although G.D.P. numbers still aren’t perfect ” they are subject to periodic revisions, for example ” the basic problem has been largely solved.
–Robert Shiller, “A Way to Share in a Nation’s Growth“; The New York Times (12/26/2009)
In a piece in today’s New York Times, Robert Shiller — that Robert Shiller, of “the Case-Shiller index,” “Irrational Exuberance,” etc. — calls for a new security, “the trill,” that’s pegged to U.S. Gross Domestic Product (“GDP”).
He argues that a such a derivative instrument would satisfy demand for stable, new currencies — and be a good deal for investors, to boot.
What jumps out at me is Shiller’s comment about GDP measurement being a problem that has “largely been solved.”
The same way that Ptolemy “solved” the problem of the earth seeming to rotate around the sun, perhaps? (He came up with increasingly tortured models that placed the earth at the center of the solar system).
Just consider how GDP now accounts for a horrific environmental tragedy like the Exxon Valdez spill in Alaska’s Prince William Sound.
The untold billions in environmental damage aren’t counted, because “natural capital” is assigned no value in today’s economic world.
Meanwhile, the $1 billion that Exxon spent on remediation efforts shows up as a spike in the “value” of services that go into calculating GDP.
Society’s putative wealth actually increased as a result of the spill.
Or consider how GDP currently accounts for tattoo’s — both creating and removing them.
At one end of a shopping center I know, a tattoo parlor puts them on for $100 apiece.
At the other end, a tattoo “removal specialist” gets rid of them for $100.
“Tattoo GDP” thus comes to $200.
But how is society $200 richer as a result?
Accountants have a saying that people “count what matters, and what matters is counted.”
Indeed, Mr. Shiller.