Oops on Commodity Prices

Epistemic sta­tus: Casual

Some pa­tient and thought­ful folks on LessWrong, and, ap­par­ently, some rather less pa­tient folks on r/​SneerClub, have pointed out that GDP-to-gold, or GDP-to-oil, are bad proxy mea­sures for eco­nomic growth.

Ok, this is a coun­ter­ar­gu­ment I want to make sure I un­der­stand.

Is the fol­low­ing a good rep­re­sen­ta­tion of what you be­lieve?

When you di­vide GDP by a com­mod­ity price, when the com­mod­ity has a nearly-fixed sup­ply (like gold or land) we’d ex­pect the price of the com­mod­ity to go up over time in a so­ciety that’s get­ting richer — in other words, if you have bet­ter tech and bet­ter and more abun­dant goods, but not more gold or land, you’d ex­pect that other goods would be­come cheaper rel­a­tive to gold or land. Thus, a GDP/​gold or GDP/​land value that doesn’t in­crease over time is to­tally con­sis­tent with a so­ciety with in­creas­ing “true” wealth, and thus doesn’t in­di­cate stag­na­tion.

Yes. The de­tailed dy­nam­ics de­pend a lot on the par­tic­u­lar com­mod­ity, and how elas­tic we ex­pect de­mand to be; for ex­am­ple, over the long run I ex­pect GDP/​oil to go way up as we move to bet­ter sub­sti­tutes, but over a short pe­riod where there aren’t good sub­sti­tutes it could stay flat.

Com­menters on this blog have also pointed out that the Dow is a poor mea­sure of the value of the stock mar­ket, since it’s small and un­nor­mal­ized.

Th­ese crit­i­cisms weaken my pre­vi­ous claim about eco­nomic growth be­ing stag­nant.

Now, a lit­tle per­sonal story time:

Nearly ten years ago (yikes!) in col­lege, I had an econ blog. My big brush with fame was hav­ing a joke of mine hat-tipped by Me­gan McAr­dle once. I did most of the re­quired courses for an econ ma­jor, be­fore even­tu­ally set­tling on math. My blog, I re­al­ized with dis­may when I pul­led it up many years later, con­sisted al­most en­tirely of me agree­ing with other econ blog­gers I en­coun­tered, and imi­tat­ing buz­zwords. I cer­tainly sounded a lot more main­stream in those days, but I un­der­stood — if pos­si­ble — less eco­nomics than I do now. I couldn’t use what I’d learned in school to rea­son about real-world ques­tions.

I think I learn a heck of a lot more by throw­ing an idea out there and be­ing cor­rected than I did back when I was not even ask­ing ques­tions. A shy per­son can­not learn, an im­pa­tient per­son can­not teach” and all that.

Ad­mit­tedly, my last post may have sounded more know-it-all-ish than it ac­tu­ally de­served, and that’s a prob­lem to the ex­tent that I ac­ci­den­tally mis­led peo­ple (de­spite my dis­claimers.) I ac­tu­ally tried, for sev­eral years, to be less out­spo­ken and con­vey less con­fi­dence in my writ­ten voice. My im­pres­sion is that the at­tempt didn’t work for me, and caused me some emo­tional and in­tel­lec­tual dam­age in the mean­while. I think ver­bally; if I try to ver­bal­ize less, I think less.

I think the M.O. that works bet­ter for me is strong opinions, weakly held. I do try to learn from knowl­edge­able peo­ple and quickly walk back my er­rors. But re­al­is­ti­cally, I’m go­ing to make er­rors, and dumber ones when I’m newer to learn­ing about a topic.

To those who cor­rect me and ex­plain why — thank you.