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America: Actually Quite Poor!

Started by Will Wilkinson · 9 months ago

I read Kevin Phillips cover article [$$$] in this month’s Harper’s, and thought he was completely crazy. First of all, I was amazed that they printed an article largely about one of my pet interests, the methodology of the Consumer Price Index, which I thoug ... Continue reading »

3 comments

  • Ken Hagler

    1 year ago

    Tyler Cowen's post doesn't make a whole lot of sense. For example, how does it follow that you will be a very rich man if you know that the inflation estimate is wrong? And then there's this sentence:

    "If there's anything wrong with gdp statistics, it's either environmental problems or that we don't have good measures of the productivity of government itself."

    Anyone who could seriously talk about "the productivity of the government" obviously doesn't know what he's talking about.

    Also, the inflation rate has nothing to do with how rich America is now, as he implies, but with how much of that current wealth the government is stealing by inflating the currency.
    reply
  • Grant Gould

    1 year ago

    Ken -- If you can estimate inflation better than the market, you can short stocks to buy bonds or vice versa. Bonds pay off constant, inflation-pummeled dollars, while stocks price in the inflated revenues of the underlying company.

    As for the "productivity of government", you can if you prefer substitute "the deadweight loss of government"; the problem of its being hard to measure remains the same. Governments do provide goods and services (albeit generally the wrong ones, and badly); if those goods and services get better or worse there is a real effect on peoples' lives that isn't going to be adequately measured in GDP figures.
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  • Ken Hagler

    1 year ago

    "If you can estimate inflation better than the market, you can short stocks to buy bonds or vice versa. Bonds pay off constant, inflation-pummeled dollars, while stocks price in the inflated revenues of the underlying company."

    That imposes additional requirements not specified by Tyler Cowen, though. Specifically: that the market's estimate of inflation be exactly the same as the government figures, that you already be rich enough to be messing around with stocks and bonds, and that your personality includes a willingness to gamble a lot of money.

    I don't dispute that if you know the government's inflation claim is wrong _and a whole bunch of other things are also true_ that you could be a very rich man. However, the number of people for whom all those other factors _are_ true doesn't seem to be very big.
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