Economist Frank Shostak delves into the perplexing issue of governments attempting to discern an “average” price level for the economy or calculating GDP “growth”. In a nutshell, the whole idea is nuts.
Suppose two transactions were conducted: In the first transaction, one TV set is exchanged for $1,000; in the second transaction, one shirt is exchanged for $40. The price or in the first transaction is $1000/1 TV set. The price in the second transaction is $40/1 shirt. In order to calculate the “average price,” we must add these two ratios together and divide them by two. But $1000/1 TV set cannot be added to $40/1 shirt, implying that it is not possible to establish the “average price.”
The employment of various sophisticated methods to calculate the “average price” cannot bypass the essential issue that it is not possible to establish an average price of various goods and services. Accordingly, various price indices that government statisticians compute are simply arbitrary numbers. If price deflators are meaningless, so is the real GDP statistic.
Oh look, someone building a model that disallows capitalism. What a lovely idea. We can throw out that whole healthy competition, consumer confidence and prosperity nonsense. And, thank goodness there would be no further need for quality, customer service or reputation. Those pesky nuances are overrated. What we need is some self-proclaimed “expert” setting prices on goods and services. They have an excellent track record, I’m sure. That’s what an expert is…yes?
Governments are doing this? Yes…yes…they ARE the experts. And, they only have the best of intentions.
The socialists/fascists love averages. It impresses the masses and does not require explanation, those that want one are ignored or cancelled.
See how great that works?
Some years ago read in an article that was talking about the average temperature, relative to the AGW. The article pointed out that the average temperature is like average money, so to say, what the hell is average money.
I always thought it was called the Gross Domestic Product because it includes all the money that the government spends… I guess that is the “Gross” part of it. 🙂
Since for the most part, the government doesn’t produce anything, it only taxes and spends, I always thought that government spending which does not result in something useful like roads, or damns, airports, or power plants should not be added to the GDP, but subtracted from it.
Sadly Reader government spending, welfare, subsidies and many other non productive activities and expenditures are included in the GDP. Remove them and we would have negative GDP.
Fire. Them. All.
Every economist and statistician whose pockets are filled by government.
“Average global temperature ” is calculated much the same way…
If its good enough for government work, why not?
You beat me to it. Someone pointed out that talking about “mean global temperature” is about as meaningful as talking about the average colour at Tommy Hilfiger.
Yep.
In fact, I dumb it down even more for them and ask: “what’s the temperature of Canada today”?
Yeah, crickets, but it shuts them up for a few minutes.
CIVILIZATION, WE BARELY KNEW YE.
Built By The Best And Brightest, To Be Brought Low By The Most Ignorant.
If there is a more nonsensical number on the planet, we have not heard it.
Generating an average of the temperature in Palm Springs, California and some (to the non-addicted to Rand McNally) unknown spot in Antarctica provides a non-existent temperature experienced by no one and affecting no one’s quality of life.
And on this hallucinatory ‘science-based’ datapoint which (need I remind them?) exists no where for anyone, it is vehemently professed that “we’re all going to die.”
The remarkable appeal of the imaginary to Climate Cuckolds like Princess Greta of Sweedeath is determined to deliver a grand, glorious and inevitable end to Western Civilization.
At the top of my bucket list is pissing on her grave.
Mean global temperature? It’s almost vindictive!
If a basketball team enters a room, the result is not that suddenly everybody else in the room is now taller.
One science fiction writer figured out the only way to tell if prices are fair of alien money, the price of a cheap but decent meal should be about two hours of work. Food, after all, is necessary to everyone.
It amused me when some people trying to destroy farming said that farming formed only a small part of the economy. You can live without cell phone apps, you cannot live without food.
You will understand that in the future when the war on farmers has been won. You will look at all your expensive geegaws and want to trade them for a simple meal, but that meal will not be available at any price.