Techdirt. Stories filed under "gdp" Easily digestible tech news... http://www.techdirt.com/ en-us Techdirt. Stories filed under "gdp"http://www.techdirt.com/images/td-88x31.gifhttp://www.techdirt.com/ Thu, 14 Feb 2013 00:16:32 PST Should We Be Measuring Happiness As An Economic Measure? Mike Masnick http://www.techdirt.com/articles/20130210/16300321941/should-we-be-measuring-happiness-as-economic-measure.shtml http://www.techdirt.com/articles/20130210/16300321941/should-we-be-measuring-happiness-as-economic-measure.shtml
In trying to deal with that, we've started to see new forms of economic measurements pop up. One popular one is "happiness." There's even been some talk about using "Gross National Happiness" as a key economic measure. There's a great book from a couple of years ago by Nobel-prize winning economist Joseph Stiglitz, with Amartya Sen and Jean-Paul Fitoussi, called Mismeasuring Our Lives: Why GDP Doesn't Add Up. It was actually the result of a request from then French President Nicolas Sarkozy to explore how useful (or not) GDP was, including looking into alternate measurements, such as this idea of Gross National Happiness. If you haven't read the book, I highly recommend it.

Recently, the folks at Planet Money also did a report on the growing interest in measuring happiness, particularly as an official stat for American economic health. There appears to be growing interest in establishing a happiness index for the US, not unlike the unemployment index. Of course, you can think of the immediate problem. Just how do you measure happiness:
But once you get into the details, there's a lot of debate over the happiness data. One big divide: Should you ask people how they're feeling right now, or how they feel about their life in general?

You get different answers depending on what you ask. Which one is more important is a squishy, philosophical question.
The difference between asking about "right now" or "their life in general" can be massive. It shows up clearly in the data about how happy parents are vs. non-parents. There are tons of studies that suggest parents are miserable compared to non-parents. But nearly all of those studies are based on questions about "how happy are you now" type questions. Not surprisingly, the parent changing a diaper is probably going to report slightly less current happiness compared to the non-parent who's out at the bar with some friends, for example. But... it's not that simple. When other studies are done that ask parents and non-parents about how happy their overall lives are or how fulfilled their lives are, parents frequently report much higher feelings of fulfillment/happiness on a grand scale, while non-parents often report more regret. In other words: time frame makes a huge difference.

Of course, as the Planet Money report points out, just because something is difficult to measure, or involves highly subjective concepts, doesn't mean it can't be done. For example, unemployment data. You might think that this involves a nice, simple objective question, but when you look at the details, it's actually pretty subjective as well.
In the U.S, in order to be counted as unemployed, you have to be out of a job and looking for work. But what counts as looking for work? Checking Craigslist? Sending out three resumes a week? Five?

"It's actually kind of a hard question," says Justin Wolfers, an economist at the University of Michigan. "It's very subjective."

Yet every month, a single unemployment number is released.
So, you could see why a "Happiness Index" might be a compelling bit of economic data -- especially if you believe (as I do) that GDP is misleading. After all, if people are happier, isn't that a pretty important thing? Well, yes and no. Even as I find the topic interesting, I also worry a lot about the embrace of "Happiness" as an economic measure beyond the reasons laid out in the Planet Money report. Yes, it's difficult to calculate, but perhaps you can get past that so long as the calculation is done the same way over time. The real problem, for me, is that when you choose to make something a key economic number like that, you are guaranteed to start optimizing for it. That's what happens when you create metrics. Whether they're important or not, whether they're accurate or not, once you have a number, you naturally try to optimize for it.

It shouldn't be difficult, then, to quickly come up with scenarios for why a National Happiness Index could create significant problems as people optimize for it. First off, you encourage the kinds of short-term rewards that lead people to say they're happier, even if that creates massive costs down the road. Want to see governments leverage the present and put the costs on the future? Start using a happiness index. Second, if the focus is on maximizing present-day happiness, then you just focus on drugging the population. Yes, that's an extreme example, but hopefully it gets the point across. In economics, you need to measure the costs and benefits to things. You can "maximize happiness" in all sorts of ways if you ignore the costs to it. Put happy drugs in the water, and let everyone be thrilled. The Happiness index fails to take into account all of the consequences of doing something like that.

So while it's encouraging to see more of an exploration into alternative metrics, and getting beyond some of the older metrics that clearly "mismeasure" important aspects of our lives, we need to be careful to not just leap to the "next great thing" without realizing that it, too, likely has downsides.

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]]> this-makes-me-sad http://www.techdirt.com/comment_rss.php?sid=20130210/16300321941 Wed, 4 Apr 2012 08:34:00 PDT Freakonomics Obsession With Patents Strikes Again: Says If More Women Got Patents The Economy Would Grow Mike Masnick http://www.techdirt.com/articles/20120328/02101618269/freakonomics-obsession-with-patents-strikes-again-says-if-more-women-got-patents-economy-would-grow.shtml http://www.techdirt.com/articles/20120328/02101618269/freakonomics-obsession-with-patents-strikes-again-says-if-more-women-got-patents-economy-would-grow.shtml have shown a willingness in the past to be skeptical about the traditional claims concerning copyright, they often seem to have a blindness to similar criticisms of patents. In fact, in the Freakonomics book sequel Superfreakonomics, there's what's basically a puff piece about massive patent troll Intellectual Ventures. Thus it's disappointing, but not surprising, to hear that one of the Freakonomics duo, Stephen Dubner, is talking up some claims about how "closing the patent gap" between the number of patents that men get and women get (by basically convincing more women to patent stuff) could increase our GDP by a staggering 2.7%.

That's a huge leap, and a rather astounding claim. And you would think that these guys, who are so focused on trying to sniff out interesting points from data, wouldn't leap so blindly past a whole variety of questionable assumptions, including the big one: the assumption that there's a causal relationship between more patents and economic growth. Similarly, Dubner, in his radio piece, goes so far as to claim that patents are a reasonable proxy for innovation -- directly asserting that the fact that fewer women get patents means that women have "the most room for improvement in the innovation field."

To put it simply, that's ridiculous. Just because people aren't getting patents, it doesn't mean that they're not being innovative. In fact, multiple studies have shown absolutely no link between patents and innovation. It's a shame that Dubner would take the easy way out and leap to the false conclusion that patents are a reasonable proxy for innovation -- and, even worse, that he would then encourage an increasing rate of patenting, when one of the biggest problems facing the innovation sector today is over-patenting.

To be fair, Dubner is basing his report on some new research into the "patent gap" between men and women, which makes these particular claims (including the GDP growth claim). There is some interesting data in the paper showing just how few patents are given to women, but there are a bunch of questionable assumptions and logic leaps as well. Others have been pointing out some of the problems with the report, including new data showing that, based on the trendline, women are already increasing the rate at which they get patents very quickly. The bigger problem, though, is just the facile (and simply unsupportable) claim that more patents automatically leads to greater GDP. As economist Alex Tabarrok notes sarcastically in response:
Right; and since only 10% of construction workers are women, closing the gender gap would result in many more houses
This is a first year stats student type error, assuming this kind of causal relationship where none exists. The authors of the paper should have known better, but Dubner and the Freakonomics crew, who give this kind of work a stamp of approval, should be even more careful. Disappointing.

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]]> logical-leap http://www.techdirt.com/comment_rss.php?sid=20120328/02101618269 Wed, 25 Jun 2008 09:26:00 PDT Is McCain Really Saying eBay Will Save The Economy? Mike Masnick http://www.techdirt.com/articles/20080625/0251071514.shtml http://www.techdirt.com/articles/20080625/0251071514.shtml somewhat mocking criticism of McCain's "jobs plan" as being "the eBay model" (sent in by reader Rose M. Welch). At issue, is the fact that McCain has repeatedly referred to the 1.3 million people around the globe who "make a living off EBay."

As the article notes, the figure is clearly exaggerated. However, many of the other criticisms of what McCain says seems misguided. It seems like a stretch for anyone to think that McCain is suggesting that people will find jobs selling on eBay. Rather, he's using the example of eBay to note that innovation leads to new ways for people to make money -- using the rise of the ecosystem around eBay as an example -- not as the definitive method for creating jobs. And, on that, he's correct. Continued innovation does tend to lead to job growth.

The second part of the criticism that seems incredibly unfounded, is the assertion by a few economists that eBay is just a business model for moving junk around, and that it doesn't add anything to the GDP. This is simply incorrect, and it's really strange that prominent economists would make such an assertion. eBay is about making an efficient market. Plenty of people use it to sell new products, rather than just "junk." And, many of the people who use eBay to "make a living" do so by adding value to products which they then resell. That does add to GDP. eBay is about a lot more than just moving around junk. In fact, a rather large percentage of our GDP is based on taking already built goods, adding value to them and reselling them. To pretend this doesn't happen on eBay is simply incorrect.

Now, before anyone thinks that this means I support McCain's economic positions, I don't. I think his continued disdain for basic economics, and his seeming assumption that economics can be handled by someone else is problematic. And, of course, his proposed gas tax holiday is just downright nutty.

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