Department of Awful Statistics

Chris Hayes points to Dean Baker catching the Washington Post in a rather sizeable error:

T]he Post tells us that "Mexico's gross domestic product, now more than $875 billion, has more than quadrupled since 1987." That's not exactly right. If we pay a trick to the IMF website, we find that Mexico's real GDP in 1987 was $1,130 billion. The IMF projects 2007 GDP as $1,895 billion, an increase of 67.7 percent. That is considerably short of quadrupling.

How on earth does the Post get that Mexico’s GDP quadrupled when it actually only grew by 67.6 percent? Well, they may have taken the growth in nominal GDP. If we don’t adjust for inflation then we can conclude that Mexico’s GDP quadrupled over the last twenty years. Of course, no reasonable person would ever assess growth without first adjusting for inflation since it has no meaning. If we don’t adjust for inflation, Zimbabwe’s economy, wracked by hyperinflation of several thousand percent annually, is the fastest growing economy on the planet. If the Post editorial writers use a consistent measure, we can expect to see warm praise for Zimbabwe’s extraordinary growth on the editorial pages in the near future.

My best guess is that the Washington Post used PPP figures in current international dollars, which give roughly a tripling of GDP since 1987. This is not totally out of line; using constant dollar figures from the Economist Intelligence Unit, I get roughly a doubling since 1987. But quadrupling is just in error according to any data set I can find. And I'm not sure what to do with a current dollar PPP figure.

Unfortunately, Mr Baker has made a few errors too. First of all, the constant-price GDP figures he gives are in pesos, not dollars. While it is true that in Mexico the dollar sign is used to denominate peso prices, the international standard for economics journalism--and certainly, the domestic American standard for same--is to write out "pesos" or abbreviate it (MXP) and then offer the exchange rate equivalent in a common currency, almost always dollars but in a growing number of cases, euros.

I'd also argue that to eliminate this sort of exchange rate confusion, Baker should have used PPP in constant dollars. That figure yields a much more favorable assessment of NAFTA--although still one that makes the Washington Post look wildly off.