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12/14/2009

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Ted H

I agree with most of your points besides your criticism of the HDI. The number in and of itself is meaningless, it really functions as a comparative and a yearly change metric so the arbitrary coefficients and the double counting would be irrelevant to the metrics usefulness.

Personally, I think the HDI metric is stupid because I see no reason to attempt to combine them. Just give me the adult literacy rate. Give me the life expectancy. I can figure out for myself how a country is doing. I don't even believe we need some grand figure to tell me the state of a country, nor do I believe it's even possible.

I think most metrics that try to combine things that are unrelated are worthless since it doesn't tell me anything at all. GDP tells me something, what does a number that incorporates GDP and literacy or another seemingly unrelated factor tell me? It tells me nothing.

Bernard D.

Prof. Becker,

Today we often hear about the U.S. that "we don't make things anymore." If possible, would you post on the subject of the U.S. as a services-based economy, and the decline in U.S. manufacturing (at least in terms of manufacturing jobs)? I'm curious to get your thoughts on our position in the global marketplace in the future. Can we maintain our standard of living without a strong manufacturing base, or am I wrong in thinking that we don't have a strong manufacturing base anymore?

Rok Spruk

Professor Becker,

I agree with you on the criticism of HDI as a measure of economic welfare. In fact, HDI is based on significant analytical flaws among which is its failure to capture the measurement of endogenous features that affect its main variables (life expectancy etc.). In addition, HDI is not based on sound econometric analysis but rather on particular aggregation of constructed variables.

Even though changes in life expectancy can indicate a positive improvement in terms of economic well-being, there is still a lack of appropriate empirical methods to evaluate the real economic impact of life expectancy on economic output over time. I'm particularly critical to HDI's weight on education.

There are many countries in the world where education participation on primary, secondary and tertiary level is rather high. However, when measuring the impact of education level on income per capita growth, the results can be against the anticipated theoretical expectations.

That's why I believe the education variable should be drastically reconstructed. Why? For example, the performance of U.S secondary school pupils relative to the OECD countries is rather dismal. However, each year the U.S universities produce a lot of genius-minded graduates in science, engineering, law, economics etc. The impact of these graduates on valuable output in private and public sector is highly endogenous and there is a notable statistical fallacy in judging its impact on labor market. I was rather surprised when I saw France placed high on HDI rank, especially in terms of education - when annually French students and enterpreneurs immigrate to countries such as Switzerland, Canada and the U.S due to high tax rates and onerous regulatory burden that impairs innovation.

In fact, innovation in econometric modelling and statistical evaluation of particular variables regarding the effect on output and employment, alongside the improvement in measuring the real income per capita - is the major challenge that can hopefully improve the measurement of standard of living. Thus, national income accounts should definitely not be discarded. But of course, there is an opportunity to foster the measurement of national income accounts in a more comprehensive way for further theoretical and empirical purposes.

Thomas Esmond Knox

I have not seen any acknowledgement of Richard Stone. Do you understand his achievement? He was an accountant.

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Such measures of total output or income adjusted for household time would be imperfect, but they would be superior to income measures like GDP that exclude the value of household work.

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I have not seen any acknowledgement of Richard Stone. Do you understand his achievement? He was an accountant.

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I think the HDI metric is stupid because I see no reason to attempt to combine them. Just give me the adult literacy rate. Give me the life expectancy. I can figure out for myself how a country is doing. I don't even believe we need some grand figure to tell me the state of a country, nor do I believe it's even possible.

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I'm curious to get your thoughts on our position in the global marketplace in the future. Can we maintain our standard of living without a strong manufacturing base, or am I wrong in thinking that we don't have a strong manufacturing base anymore?

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I have not seen any acknowledgement of Richard Stone either.

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Does household work not reflected in the GDP solely refer to stay-at-home parents?

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I am interested in it for a long time! Thus, national income accounts should definitely not be discarded. But of course, there is an opportunity to foster the measurement of national income accounts in a more comprehensive way for further theoretical and empirical purposes.

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It's a good idea not to discard the National Income Accounts. Should just amend it.

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I searched for this theme! The result is that the growth rate in full incomes are generally much more rapid in poorer countries than in richer ones, which implies that inequality in full incomes per capita declined greatly across nations during the past several decades, even though inequality among countries in GDP per capita did not change much.

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