New York Times economic columnist Robert J. Samuelson wrote a column the other day essentially pointing out the extreme disconnect that has become obvious between the performance of the stock exchanges and real-life economic circumstances. Not that this was some big shock. For many years, that disconnect has been annoying people who really try to understand our overly complicated economy. The stock markets and their indexes are like trickle-down economics: they tell us what investors are betting and believing about the present and near future of American corporations and damn little else.
In recent months, the stock markets have been breaking their own records almost daily. Yet the economy still has too-high unemployment, too-low average wages, and far too great economic inequality to be seen as even favorable let alone ragingly successful.
What, then, are some candidates for more meaningful indexes or measures of the economic health of our nation? Is there a single index or composite index that might be of more value, that the media might begin to publicize rather than or in addition to the meaninglessness of stock market performance?
Part of the answer to that question lies in the precursor question of what we consider to constitute a “good” economy. And a very real and important problem associated with that question is the Western capitalist notion that only an economy that continues to grow is a good economy. But anyone who thinks about the problem very long can easily see that the idea of perpetual, infinite, unregulated growth is not a sustainable idea on any level. A perpetual-growth model eventually runs out of resources. So long as resources are not infinite and so long as we refuse to develop and use renewable resources so that we do have something resembling unlimited access, we will not be able to continue growing our economy and nor will any other nation.
Another problem that arises when we grapple with the idea of the measurability of an economy is that there are intangibles that seem to need to be included and yet practically cannot be. Things like happiness, safety, consumer confidence, and other such immeasurable notions cannot easily be taken into account numerically. And if they can’t be measured, they will not be perceived by economists and their supporting casts as important enough to be included.
But none of this means we cannot come up with a measure or set of measures that will meaningfully describe our economy that most reasonably educated and informed people could understand fairly readily.
The fact is, there is a plethora of such indexes an composites used by organizations and individuals across a broad spectrum of economic participants. The problem is that the news media are too lazy or incompetent or lemming-like to understand that the stock market indexes they report so routinely that people think they actually mean something, are essentially worthless junk news. Less than half of Americans own any stock and the vast majority own minuscule holdings, both absolutely and in terms of the share of their wealth represented.
Most indexes — e.g. the Conference Board’s mainly excellent composites — are heavily skewed toward the business and commerce side of the economy, leaving out the consumer side other than indirectly. For example, the mean wage of American workers is a hugely important indicator that’s omitted from the Conference Board’s calculations. (As far as I can tell from their site, at least.) But news of these other indexes is confined to business shows, which the vast majority of listeners and viewers tune out because they see them as too detailed and focused on investing.
Anyone got any ideas how we might approach solving this problem? Economic illiteracy, which is promoted by the use of junk news like stock market indexes in the media, is unhealthy for a nation whose economy is in nearly constant flux and disruption these days. We can’t make informed electoral and policy decisions in the absence of meaningful, quality data.
(Here, BTW, is a reasonably informative piece from the SF Fed on the question I’m raising. Though short on ideas and details, it’s at least a decent attempt to frame the question.)