One of the leaders of a huge global effort to build a better statistical yardstick has been Enrico Giovannini, until recently the chief statistician of the Organization for Economic Cooperation and Development. Though the OECD is the global coordinator of the project, its partners represent a who’s who of economic development: the World Bank, various UN programs, the African Development Bank, and the European Commission. They are looking to create more-reliable metrics for measuring change in our health, education, the environment—the many ways that human beings make themselves better off or worse off. This fall, in the wake of the OECD’s third World Forum on Statistics, Knowledge, and Policy, these groups are set to move ahead on a broader, better set of indexes.
Crisis seems to be the mother of statistics. The germ of the idea that eventually became GDP emerged after World War I, when American economists who had been frustrated by the lack of reliable statistics to guide war production founded the National Bureau of Economic Research (despite its name, the NBER is a private organization). Still, not until the Great Depression did we finally get our first national income accounts, which measured the annual income of people, companies, and the government.
It is rare for people to write about that era without taking a swipe at Herbert Hoover, but we might be kinder if we remembered just how little information he had. With no national income accounts, Hoover had to rely on fragmentary indicators such as freight-car loadings, steel production, and the gyrations of the New York Stock Exchange. There weren’t even comprehensive national unemployment statistics, because Congress didn’t authorize the Department of Labor to collect them until the middle of 1930. Forget Hoover’s economic theory, most of which was pretty bad; the man barely had any data.
Beyond newspaper anecdotes and a bunch of unrelated industrial indexes, he had little way of knowing just how awful things were or, more important, exactly where intervention might be needed. It’s as if someone hired you to cater a lavish formal dinner—then gave you no head count, a partial list of available ingredients, and the July 1953 issue of Gourmet magazine to work with.
That started to change in 1932. The legendary progressive Senator Robert La Follette introduced a resolution that directed the secretary of commerce to estimate national income for the prior three years. Unable to find anyone in the department who was up to the task, Commerce hired Simon Kuznets, who had already begun working on the problem at the NBER. He spent the next 14 years creating a system of national accounts that, with constant refinements and additions, we still use today.
It’s almost impossible to overstate what a titanic achievement this was. But here’s something that hints at the magnitude of the difficulties: despite his earlier work, Kuznets didn’t make the first tentative presentation of his figures to Congress until 1934. By 1941, he had expanded the series backward to 1919, and all the way to 1938. Measures of output—the true forerunners of GDP—didn’t follow until 1942, as war production ramped up. (Total mobilization depended on extensive statistics, which is why the Nobel Prize winner Paul Samuelson called World WarII “an economist’s war.”) The Great Depression and World WarII created the modern world in a lot of ways. They also created one of the primary lenses through which we view it.