Easter Monday links. (Mis?)measurement
The ECB buys lots of bonds from large oil companies, not from small and medium enterprises.
New UK guidelines on how to estimate natural capital. Surely worth the effort! But some things do not have a price for a good reason. And when you look really, really hard at statistics of the stock of capital it turns out that statisticians measure the value of rights to the monetary yield of ownership of certain items. And not any kind of intrinsic welfare or utility produced by machines or houses (or an Easter Monday trip to the woods). Do not commodify Nottingham Forest!
Economists like me measure productivity. Can we trust these statistics? Only if they are very carefully crafted. From a OECD manual standard methods used to calculate ‘real’ production can even result in estimates of negative production.
“Another issue is the occasional occurrence of negative value added figures when double deflation operates with Laspeyres quantity indices. Nothing ensures that the subtraction of constant-price intermediate inputs from constant-price gross output yields a positive number. The SNA 93 notes that negative real value added can occur when relative prices change: “a process of production which is efficient at one set of prices, may not be very efficient at another set of relative prices. If the other set of prices is very different, the inefficiency of the process may reveal itself in a very conspicuous form, namely negative value added”. … In these circumstances, a different accounting method should be used to estimate an aggregate like value added, such as the methods based on “superlative” index numbers
Work as well as income related to work have both become less secure and more volatile. Which is, also in an economic sense, a very bad thing as households struggle and feel insecure. Jonathan Morduch and Rachel Schneider tracked every dollar earned and spent by 235 USA families. Their conclusion: “The problems are too deep to solve with any one step, but there are clear ways to start helping struggling Americans rebuild a sense of control and security.”.
A sterling example of positive marginal returns: the extermination of bovine tuberculosis. Thanks to the logistic nature of animal diseases (first, one cow gets the sick. The second week: two. The third week: four. The fourth week: eight but after a time the exponential rate of growth falters as there are no more healthy cows left) the first million Euro spent on combatting a disease will have less effect than the second million and the third million will even be more effective. Olmstead and Rhode have a very good article about this; the USA were fast (1941) to eradicate bovine tuberculosis because they were already on the steep part of the logistic curve. This particular disease was eradicated by parties working together (farmers, states, farmers’ organizations, veterinarians etc.) though the state did occasionally use violence. Interestingly, another early eradicator (Friesland,1951) managed to do this without guidance of the government, as Abbo-Tilstra shows. It did help, however, that infected animals could be exported to the area around cities like Amsterdam, to serve as producers of milk… Most western countries adopted the USA model and succeeded in eradicating bovine tuberculosis, the UK however didn’t (and still suffers).
And I’m going for a walk.