There are 3 kinds of lies:

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Presentation transcript:

There are 3 kinds of lies: Weaknesses of Economic Measurements There are 3 kinds of lies: lies, damned lies, and statistics Always think critically about statistics and recognize that there may be biases in the numbers.

Weaknesses of Economic Measurements Goal #1: Price Stability Goal #2: Economic Growth Goal #3: Full Employment Inflation Rate - Overstated GDP - Understated Unemployment Rate - Understated 1. Underground economy- black and gray mkt. 1. Shopping at Discount Stores- people pay less than govt. thinks 1. Discouraged workers not counted as unemployed 2. Undervalues “women’s work” i.e. childcare housekeeping, cooking 2. Lots of underemployed /overqualified workers 2. Substitution- buying more of something when it is on sale 3. undervalues volunteer work, other non-market activities 3. People on disability if not disabled lots would be unemployed 3. ∆ in tech- tech drives prices lower, faster than govt. can keep up 4. undercounts services- hard to measure the value 4. Prison inmates- if out lots would be unemployed 5. Ignores enviro costs of economic growth 5. Older population means more disabled/ discouraged 6. Does not tell about distribution of wealth (GDP per capita is an avg.) Time lags in measurement for all three