Tuesday, September 25, 2012

Fake Output

They add up all the stuff we produce in a year, at the prices we paid to buy it, and they call it "nominal" output.

Then they take all the price changes out of that number and of GDP numbers for other years, so it is like there was no inflation. And they call these numbers "real" output.

This thing they call "real" output is useful for looking at changes in the volume of production, as opposed to changes in prices.

It is also useful for faking evidence to support bad arguments.

From now on, let's not call it "real output". Let's call it fake output.


Gene Hayward said...

Art---you are re-writing the introductory economics textbook I teach from...I am too old to learn these new-fangled things you come up with. LOL!! :)

The Arthurian said...

Haha. Thanks Gene. Remember what Keynes said about new-fangled ideas: "The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds."

Lucky for me, I missed the whole Lucas revolution.