Working Paper: NBER ID: w23306
Authors: Martin S. Feldstein
Abstract: The problems involved in estimating real output that I discuss in this paper cause the official government statistics to underestimate of the rates of growth of real GDP, real personal income, and productivity. That underestimation is important not just to economists trying to understand where the economy is going but also to the broader public and to the political system.\n\nThe understatement of real growth reflects the enormous difficulty of dealing with quality change and the even greater difficulty of measuring the value created by the introduction of new goods and services. Despite the vast amount of attention that has been devoted to this subject in the economic literature and by the government agencies, there remains insufficient understanding of just how imperfect the official estimates actually are. It is important for economists to recognize the limits of our knowledge and to adjust public statements and policies to what we can know.\n\nThis paper is not about the recent slowdown in measured productivity but that subject is discussed briefly.
Keywords: No keywords provided
JEL Codes: E01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inadequate measurement methods (C52) | misrepresentation of economic growth (F62) |
| misrepresentation of economic growth (F62) | public perception and policy decisions (D78) |
| low measured growth of incomes (E25) | public concerns about economic mobility (J62) |
| public concerns about economic mobility (J62) | pessimism towards free trade and market economies (F01) |
| misestimated economic growth (O49) | monetary policy decisions (E52) |
| misperception of economic conditions (E66) | low interest rates (E43) |
| low interest rates (E43) | financial instability (F65) |