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To: Oeconomicus who wrote (132047)	9/28/2001 3:55:54 PM
From: GST	Read Replies (2) \| Respond to of 164684

Bob: I have little to say about the calculation issues -- it is not my primary focus. My understanding is basic: Productivity improvement is the ONLY means os improving living standards over time. The US enjoyed an uptrend in productivity improvement in the 80s which was amplified in the 90s. Productivity gains have many, many components, but improvements in management and organization are, I believe, the leading contributors. Technology played an important supporting role, but people with no real understanding of organizations tend to over-attribute gains to technology in and of itself. The new economy is, at its foundation, about productivity improvement. Spending on technology is secondary. I know some people think that AG and others decided to cook the books -- I am not sure about that. What I am sure about is that people who went around saying "new economy" were typically completely lacking in even a passing knowledge of what goes into productivity improvement. I don't care if the books were cooked and helped us to bubble-up the economy -- by that I mean I do know that the 20 year track record on productivity in the US is indeed impressive.

To: Oeconomicus who wrote (132047)	9/28/2001 6:49:42 PM
From: Skeeter Bug	Respond to of 164684

rd, alan cooked the books in specific ways that had specific results. he stopped measuring the economic value of computers in terms of dollars. you see, when dollars were used, the numbers didn't fit his preconceived notion of what productivity and gdp s/h been. the productivity he expected to see just didn't show up, period. i argue it didn't show up b/c it wasn't there. the economy is incredibly complex and looking at one aspect to reach a conclusion is foolhearted at best. so, he began to measure cpu speed instead of dollars. this specific action specifically doubled gdp growth and productivity growth in the late 90s. there is no question here. it is a fact. there can be no other source so it sn't even open to debate. with 24 hour financial news coverage on several stations, you think somebody would discuss "hedonic pricing" and "chain weighted" dollars. at least disucss that our system for calculating gdp was drastially changed in 1996 and that the CHANGE ALONE cased gdp and productivity to double. iow, it didn't actually double! dr kurt richebacher, an australian economist, was the one who brought this to many people's attention. look at the chart about 2/3 down this page.... cornerstoneri.com the phony chained dollars added over $170 billion monopoly dollars to gdp in 1998 and 1999. nobody argues these dollars a REAL. this statistical change created a "new economy" image out of, quite frankly, nothing but the same ole', same ole'. labor productivity = gdp/worker hour. productivity growth is a change in this metric over time. over inflate gdp, all else being equal, and a productivity "miracle" is created out of thin air. and more... ...the computer share of real GDP growth has over these few years more than quadrupled, from 15% in 1996 to some 54% in 1998 and 78.5% in the first half of 1999. …During the first half of 1999, computer equipment, measured in current dollars, rose $7.6 billion to $105.8 billion, accounting for 2.3% of nominal GDP growth. This is peanuts. But the change in computer measurement (by the government) transformed these peanuts into a super-investment boom of $87.6 billion, providing 78% of real GDP growth in this half-year. Due to the governments’ view that an increase in computer power has some "extra" value, the $7.6 billion was transformed into $87.6 billion of GDP growth. Nice trick. – JJR

To: Oeconomicus who wrote (132047)	9/28/2001 6:51:48 PM
From: Skeeter Bug	Respond to of 164684

>>What if a car firm doubles the horsepower of a car and sells it… Does the increase in horsepower and fall in price add to economic activity and GDP growth? Everybody would regard this as ludicrous. But that is what is being done with computers. GDP is supposed to measure economic activity. …To be economically relevant, it requires a related income flow. But except for the $7.6 billion in current dollars, by >>which spending on computers actually increased, those $87.6 billion which the computer component added to US real GDP growth in the first half of 1999 are purely statistical fiction. It suggests "real" growth that has in no way taken place. All this is so absurd that we can’t help but to think of it as statistical fraud. - Kurt Richebacher, The Richebacher Letter, 12/99<< remember, the $87 BILLION in add'l phony dollars was for 6 months. 2h 2000 was even more if i recall correctly. >>That so many economic and financial experts let themselves be fooled by such plainly ludicrous statistics is hard to believe. Yet there are two obvious reasons: general ignorance of the actual facts and an overwhelming prejudice and wishful thinking. As to ignorance, it has to be realized that the reported computer data are, in general, virtually unknown. To find them, [analysts] need availability and study of the Commerce Department’s quarterly GDP reports in full detail of which… hardly any economist can be bothered. Most are satisfied to glance over the brief extracts offered by various financial services (Bloomberg, Reuters, Datastream) or at athe sparse numbers published by the media. …What are the famous words of Keynes? "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally." - Kurt Richebacher, The Richebacher Letter, 12/99<<