Even more on GDP, economics, and "rational insanity"

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A number of China and technology issues in the queue (plus frogs), but for the moment, a few extra references on the "does GDP really matter anyway?" front. Previously here and here.

1) A group in Nova Scotia called GPIAtlantic has applied a "Genuine Progress Indicator" to social and economic developments in its region. The idea of GPI rather than GDP has a long history; for further information, see here, here, and here. (Yes, there are a variety of other "sustainability indexes" or measures of overall welfare; more info at sites above, plus here for another "can money buy happiness?" study.) Below, a sample GDP/GPI comparative graph from the Redefining Progress site.

GPIIndex.jpg


2) Another in the ever-expanding cadre of first-rate Atlantic online Correspondents is Ben Heineman Jr., who has this very valuable post on the perils of paying attention to statistical indicators of any sort. Part of living in the modern world is accepting that opposite-sounding principles can both be true. (Hey, living in China makes such acceptance easy! The country is rich -- and it is poor. It is open - and it is closed. It is one ancient culture -- and it is a thousand little baronies. But I digress.)

In the area we're talking about now, the contradictory principles are: a) "big data" can reveal truths that would escape normal human reasoning power. Easiest illustration: hundreds of millions of people, all creating links among web pages, can together produce a vast and nuanced guide to what is where on the web, which Google put to use through its "PageRank" system.  b) numerical data can lead to incredibly stupid mistakes, if users forget that numbers and models inevitably oversimplify real, messy reality. Easiest illustration: the apologia from Robert McNamara in Errol Morris's The Fog of War.

In his post Heineman talks about how the "idolatry of numbers" -- worship of the spurious precision of mathematical models -- can lead to terrible real-world misjudgments. This was a powerful lesson I took from my time in graduate school studying economics: the formulas were so neat and powerful, yet their connection to the real world was so hit-and-miss. In a way this is also a theme of Liaquat Ahamed's outstanding book Lords of Finance, about the way financial "experts" helped bring on the Great Depression. They had great faith in their models; unfortunately, the models and principles didn't match reality.

3)  While I'm at it, here is my article "How the World Works" from the early 1990s, which was an attempt to explain the mismatch between the nice, clean models of Anglo-American economic textbooks and the brand of economics believed in by many governments in East Asia. Mainly Japan in those days and China now. Japanese and Chinese economic strategies differ from each other in very important ways, but in both countries governments have often applied a "strategic development" model of economics, not just the "consumer welfare" approach that arises from textbooks in Ec 101. More explanation in that article -- and for a bonus, this one from 2005, "Countdown to a Meltdown," about the imbalanced economic growth that the financial models of the "derivatives / subprime" era were creating and why it would end in tears.


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James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

Fallows welcomes and frequently quotes from reader mail sent via the "Email" button below. Unless you specify otherwise, we consider any incoming mail available for possible quotation -- but not with the sender's real name unless you explicitly state that it may be used. If you are wondering why Fallows does not use a "Comments" field below his posts, please see previous explanations here and here.
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