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A Warped Economic Yardstick? (Int'l Edition)


International -- Readers Report

A WARPED ECONOMIC YARDSTICK? (int'l edition)

The report "Suddenly, the economy doesn't measure up" (Economics, July 31) is fascinating to read and forces the concerned reader to ask many questions about how gross domestic product might be measured with fewer mistakes. Economic historians may wonder why more than two decades passed--after it became clear the system had deficiencies--before the system was shelved.

As you observe, national accounts are important tools for economic policy decision-makers. Unless all material elements of real GDP are included in computations, the new methodology of the Bureau of Economic Analysis of the Commerce Dept. will not provide the necessary cure.

And a final note of caution: If, as proposed, the BEA is content to provide data in which pieces of GDP no longer add up to their total, the incidence of damaging mistakes in calculations will increase, while identifying them will take longer and correcting them will be more complicated.

Dan Bavly

Tel Aviv


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