Thursday, August 18, 2011

The Stan Graphs

For my father

Graph #1: Real GDP relative to the GDP Deflator

With this graph, I'm taking inflation-adjusted GDP and dividing the inflation out of it, a second time. It doesn't seem right. But wait... I am only comparing Real GDP to the price level. That's all. That should be okay. And anyhow, dividing twice by the price level could be as valid as dividing twice by time. That's how they figure acceleration in first year physics, right? "Feet per second per second." So maybe it is valid.

I want the graph to be valid, because it is interesting.

The graph shows a steep increase until the mid-1960s, then a significant decline to the early 1980s, then mild increase. Interestingly, Clonal's graph shows increase until the mid-1960s, then flat until the early 1980s, and then increase again.

Same dates.

Real GDP increased quicker than prices went up, until the mid-1960s. Then, real GDP increased less rapidly than prices went up, until the early 1980s. After that, real GDP increased quicker again, but not as fast as before.

Graph #2: Index comparison

You see the same thing in Graph #2. Real GDP (blue) outpaces the Deflator until the mid-1960s. Then the Deflator (red) accelerates upward until the early 1980s. After that, Real GDP gains on the Deflator, but not at the same pace as in the early years.

The years from the mid-1960s to the early 1980s were years of substantial inflation. That is a big part of what we see on the graphs. But there is more to it than that. The shape of Graph #1 does not fit easily to the shape of inflation. Other factors are involved. Other forces are at work.

1 comment:

Jazzbumpa said...

I'm intrigued by this. It seems both right and wrong.

Arrrgghhhh - cognitive dissonance . . .