Diane Coyle Misses Growth With ‘The Measure Of Progress’

“I have such easy access to my fans and customers.” Those are the words of Kylie Jenner, from a 2018 Forbes profile. Jenner was on the path to billionaire status, but in many ways the billionaire part was the least interesting aspect of her ascent.

Much more interesting was that Jenner had built her eponymous cosmetics company with seven full-time employees, and five part-time. Packaging, sales and fulfillment were all outsourced, at which point marketing was essentially free as alluded to in the quote that opens this review of University of Cambridge economist Diane Coyle’s new book, The Measure of Progress: Counting What Really Matters. Thanks to Jenner’s hundreds of millions of followers on Instagram, Snapchat, and other social media, Jenner had easy and essentially costless access to an acquisitive demographic.

Jenner’s story came to mind while reading Coyle’s lament that “it seems nigh on impossible to evaluate what is going on in the economy – is it getting better or worse, and for whom?” This is quite an admission from Coyle when it’s remembered that she authored the 2014 book, GDP: A Brief but Affectionate History (review here). While Coyle was downcast even in 2014 that GDP didn’t measure human wellbeing or welfare, it struck this reviewer that Coyle liked “economics” more than she was interested in actual economics, the study of human action.

How else to explain affection for a number (GDP) that presumes to measure country growth that is the certain effect of infinite decisions being made every millisecond of every day all over the world? Economies aren’t countries, they’re individuals cooperating with billions and trillions of hands and machines all over the world. While most of us wouldn’t presume to measure with any accuracy the economies of the streets we live on, economists arrogate to themselves an ability to measure cities, states, countries and the world.

Making it even worse is the double-counting fraudulence of GDP. As Coyle acknowledged at the time, prewar (before WWII) measures of economic growth explicitly showed “the economy shrinking if private output available for consumption declined, even if government spending required for the war effort was expanding output elsewhere in the economy.” Of course. Though it would be folly on the best day for number crunchers well on the sidelines of activity to measure economic activity, there was at least some honesty in the numbers: government spending clearly subtracted from growth. Explained more briefly, governments can only spend the fruits of economic growth as opposed to creating it. To suggest government spending boosts economic growth is double counting of the sort that would make even the most crooked accountants blush.

Yet that’s what GDP does, not to mention that it rises when imports exceed exports. Except that an “economy” is comprised of individuals and the trade of individuals balances by its very description. Oh well, it turns out that export of shares (which Americans do a lot of since the U.S. is populated with the world’s greatest corporations that the world’s savers yearn to own) doesn’t count in the measures of trade divined by economists, and that inform GDP. GDP will be revisited.

For now, Coyle’s belief as expressed in The Measure of Progress is that “a new political economy, if it is starting to emerge, will require a different framework of economic statistics.” Put another way, Coyle is building on her 2014 acknowledgement that GDP has lacking qualities, as do economic statistics broadly in her view, all of which is a heavy throat-clearing, roundabout way of getting back to the anecdote that begins this review.

Kylie Jenner and her Kylie Cosmetics line came to mind early on as Coyle asserted about “productivity growth” that “The story of the twenty-first century, unfortunately, is one of its absence.” So, while there’s no arguing with Coyle that in the words of Paul Krugman (in saner times) productivity is “almost everything,” there is mystification that Coyle would add to her “absence” line the confident assertion that “the productivity slowdown is a real phenomenon, not a statistical artefact.” The arrogance of economics and its myriad equations, charts and numbers is astounding.

We have Coyle acknowledging that something is amiss with all the statistics compiled by individuals far from the proverbial arena, yet Coyle is confident the productivity numbers are correct? Except that Jenner is one of countless examples in the marketplace revealing a growing ability of individuals to produce enormous amounts of wealth at a fraction of the cost required in the past. If the proliferation of “unicorns” staffed by fewer and fewer people is not productivity, what is?

Coyle adds that the alleged “productivity slowdown” will “not be magicked away by alternative price measurements.” Coyle may think not, but some of us will dismiss Coyle’s certitude not with magic, but with market signals. Seemingly lost on the economist is that equity markets are a look into the future, and specifically they’re a measure of all the money corporations are expected to earn in all their future. Getting into specifics, $100 invested in the S&P 500 when the 21^st century began is worth $595 today. It’s just a comment that investors with money at stake are seeing what Coyle and her fellow economists plainly do not.

Which is just odd. Looking back to the arrival of coal as a source of power, it was said that its rollout was the productivity equivalent of providing each worker with fourteen full-time assistants. This was coal! What have cars, airplanes, computers, smartphones, and the internet meant for production, and what will machines that do and crucially think for us mean?

It all speaks to a challenge that Coyle likely faces. If we ignore for now that economic statistics are arguably as obnoxious in their conceit as central planning, we can’t ignore that whatever the future of economic measurement, Coyle might be too limited to light the path to better understanding. And she indeed admits at book’s end that hers “will hardly be the last word.” Understatement, meet The Measure of Progress.

Which explains the problem, or one of the problems with the book. Coyle is eager to bring economics “Beyond GDP” given her belief that GDP is “no longer adequate for understanding the economy,” but it seems she doesn’t understand that something so complicated and globally interconnected at any point within the “closed economy” (yes, that would be the global economy) could never be measured. Coyle imagines it can be.

Seeking a new and improved GDP that isn’t GDP, Coyle cites economist Zvi Griliche’s allegedly pathbreaking observation from the 1990s that “four-fifths of the economy is hard to measure” without grasping that five-fifths of anything that involves human action is impossible to measure. That’s of course why central planning always and everywhere fails. It’s not that the central planners are dumb. No doubt they’re brilliant. They simply lack common sense, and they reveal what’s lacking in public fashion as they fail oh-so-publicly in trying to plan what is yet again a consequence of infinite human decisions made every millisecond every day.

It’s a comment that there’s nothing noble in what Coyle is trying to do, though some will say there is. Economists in particular. When each one looks in the mirror, each sees the individual poised to measure output or whatever better than has been previously done. The joke’s on them. It won’t work. Coyle merely makes what’s unworkable even worse.

Her goal in replacing GDP and other statistics that don’t tell the full story is not to reveal the genius of individual action arrived at freely, but to instead expand the role of government in the economy. In Coyle’s own words, the fallibility of GDP and other measures when it comes to evaluating “what is going on in the economy” is “hampering policymakers’ ability to tackle slow growth in productivity and living standards.” Yes, you read that right. More vivid economic statistics to aid government intervention in the economy.

As Coyle sees it, the problem isn’t government intervention, but intervention by politicians and bureaucrats armed with limited or incorrect information. Well, this is something new! Or something like that. Underlying Coyle’s view of the world is that free people are the problem, while government managing people made less free by government is the solution. It’s as though the 20^th century never happened.

So, while it’s more than difficult to support Coyle’s naïve belief that government isn’t the problem as much as insufficient economic statistics perhaps are, there’s no disagreement with her view that economic statistics obscure much more than they reveal. The only difference is that your reviewer sees this as logical while Coyle views it as fixable. But still.

Coyle at least recognizes the weakness of the measures. She sees how they hide progress. In her own words early on, “How on earth could you measure the impact of a treatment that can immediately reverse disabling symptoms and restore a patient’s ability to lead an independent life?” It’s a valid question.

The problem is that even when Coyle raises good questions, she soon steps on them. While acknowledging that the advance described in the previous paragraph couldn’t realistically find its way into something as bland as GDP, she asserts one page later that “Inequality of incomes, wealth” are indicative of something else GDP is unequal to reporting: “many aspects of modern life are all too obviously pointing to things getting worse.” Coyle’s assertion about what’s making life worse (inequality) contradicts the part about what makes life better. Sorry, but advances that reverse disabling symptoms, that turn once obscure cars, computers and wireless phones into common goods, and machines that will increasingly think and do for us so that we can specialize to our individual betterment will and already do enrich their creators.

In other words, what is allegedly indicative of things “getting worse” is the surest sign of life getting better. Inequality isn’t a bug, rather it’s a feature of a free society defined by the very wellbeing that Coyle laments is presently hidden by economic statistics. To use but one example, one that combines the real with the hypothetical, a few years ago the New York Times reported that over 500 million Indians lacked indoor plumbing. The latter is more than an inconvenience for obvious reasons, followed by the tragic reality that females must relieve themselves outside in groups as a way of hopefully avoiding rape. Allowing for the overwhelming truth that creators of abundance (Henry Ford became very rich as a consequence of creating affordable cars for “the great multitude”) invariably become very rich for having done so, would Coyle view India’s living situation as “getting worse” if a billionaire were minted for having brought indoor plumbing to the masses of a country that so cruelly don’t have it in the present?

Coyle writes that “young people – and their parents – no longer expect steady improvements over time in living standards.” About this one, if we ignore that this lament is made about every younger generation, can Coyle be serious? As evidenced by Coyle’s own mother’s stockpiling of household “commodities” in the brutal, centrally-planned by the British government aftermath of the 2^nd World War, along with how common the stockpiling was for families well beyond Coyle’s own, how can she write something so trite in such sober, all-knowing fashion? She’s clearly writing about the developed world, so where within that world can she find any evidence of downward mobility in terms of generational living standards? Tick tock, tick tock.

About corporations, Coyle writes that “they seem to have forgotten that their purpose is to serve customers.” Oh yes, that’s why the world’s greatest, most valuable corporations annually spend tens of billions of shareholder money in search of ways to meet and lead the needs of customers: so that they can underserve them! About Coyle’s lament, it gave the impression that at times she was looking for something, anything, to fill the page, only for allegedly heartless, disdainful of customers corporations to fit comfortably with all the other platitudes foisted on the reader by the economist. Notable about the lament about allegedly indifferent corporations is that Coyle didn’t back it with concrete evidence, just simplistic comments like “pharmaceutical companies profit from illness, financial service companies profit when customers lose out, insurance companies only want the customers unlikely to need to claim,” etc. Where to begin? It’s evident Coyle is innocent of the brutality of layoffs that visit themselves on strapped financial service companies when their customers are “losing out,” not to mention how much money a startup insurance company could earn serving all those likely to need a claim if there were a scintilla of truth to what Coyle imagines.

Since the world’s most valuable companies are located in Silicon Valley or Valley-adjacent locales like Seattle, Boston, and Austin, it was inevitable that Coyle would turn her disdainful eyes to the technology sector and what it’s supposedly doing wrong, or perhaps not doing. Coyle claims tech companies don’t produce innovations for housewives due to “the absence of regular economic statistics pointing to the potential scope of the market.” No. She. Didn’t! Except that Coyle did.

If there were any truth to Coyle’s lament, then it would also be true that in addition to Cambridge economist, Coyle would also be a billionaire futurist; endlessly in demand in the very hotbed of technological advance that she so clearly disdains. As evidenced by the failure rate of start-ups in the Valley that is north of 90 percent, they would give anything to know the scope not just of the home market, but any presently underserved or undiscovered market that Coyle has divined either through enlightened statistics or that she’s simply observed.

At the same time, it should be said that Coyle might profit from getting out more as it were. Thanks to Silicon Valley, long gone are the days when morning “call trees” were necessary for parents to communicate with each other about the day ahead, when grocery shopping required a physical presence in a grocery store (on p. 111 Coyle does in fairness mention internet grocery shopping), when families literally had to travel to the bigger city they didn’t live in (think Mall of America) in order to access the market goods not for sale nearby. And since Coyle most certainly doesn’t stereotype men and women, and men in particular as the breadwinners in most households (gasp!), she might gain from observing the male/female makeup of the typical school dropoff in an internet and smartphone enabled world that makes it possible for male and female breadwinners to parent in increasingly involved fashion without losing touch with the office.

Contra Coyle’s mean spirited, passive aggressive assertion that better understanding of households by economists “on household activities and their economic value might incentivize Silicon Valley to innovate more in the direction of washing machines and less in the direction of online delivery apps,” technology makes it easier and easier to be a parent nowadays all the while freeing up growing amounts of time to simply parent. It’s a reminder to Coyle that if there ever comes a day when Silicon Valley is reliant on economists for direction, that will be the day it ceases to exist as a center of innovation and wealth creation borne of relentlessly enhanced living standards. Stated more simply, Silicon Valley leads as opposed to being led by statistics that on their best day tell us what happened as opposed to what will happen.

All of which speaks yet again to the contradictory thoughts inside Coyle’s head that not infrequently make no sense in either instance. As previously discussed at some length, Coyle claims big corporations are ignoring (remember “corporations seem to have forgotten that their purpose is to serve customers”?) the very real needs of people including housewives, she claims at the same time that “a handful of companies have become so powerful that only the systematic use of state power can ensure they share the value they create.” Ok, but wasn’t the point that they don’t create value because they’ve forgotten their purpose? And if corporations are ignorant of their purpose, how is it that they have so many customers?

So many questions, and yet there are always more. How can companies become so valuable short of abundantly “sharing” their value with their customers? About the question, remember thick newspapers and magazines dense with ads? What happened? Well, what happened is that the internet proved a much more effective way of creating understanding about the wants, needs and potential needs of customers based on the reveal of their individual interests, likes and time spent looking at specific ads while online. In other words, companies like Google and Meta became very valuable precisely due to their ability to create bespoke advertising that actually reflects the desires of their users. Value shared across billions. Not to Coyle.

Instead of acknowledging the direct correlation between corporate valuation and needs met and led, Coyle invariably reverts to the state as the avuncular father figure. In her words, “a successful market economy has to be a partnership between government and business.” As always, endless platitudes. Worse, platitudes paired with no evidence. How could they be? Except that it’s not just platitudes that Coyle types out with frustrating frequency, or the insufficiency of statistics that if better, would enable better government. There’s also lots of misery.

You see, in Coyle’s view of the world it’s not just that we’re worse off because the government isn’t armed with the numbers that would make it more capable of guiding us. It’s that “we’re all much poorer” owing to the lack of wise guidance that has us “using nature for free” all this time, and “the bill has come due.” Yes, Coyle is a believer that the very humans whose combined genius made a brutal planet eminently livable have misused the resources discovered by intrepid minds on that planet (and that have gifted Coyle with a life defined by remarkable luxury), and that the future is bleak therefore. In Coyle’s words, “In the years and decades ahead, there will be reduced potential growth.”

Forget that forward-looking market signals resoundingly reject the musings of an economist who very much disdains market “fundamentalism” of any kind, forget that those same market forces have long been a sign of problems real and imagined being discovered and fixed by the profit-motivated, and just stop to think about what Coyle is saying: humans left to their own devices will foist misery on themselves and others, so we need better economic statistics once again so that governments can exert their power more effectively on the way to an allegedly better future.

Yes, underlying Coyle’s analysis isn’t a call for more freedom through better understanding, but more government because freedom is the problem that economists must fix. Which speaks to just how obnoxious the book truly is. Once again, it’s not about the genius of human action as much as it’s a celebration of central planners and a call to make them better central planners. Coyle doesn’t love prosperity or wellbeing as much as she’s in love with the idea of economists armed with charts and equations (as with everything in the book, Coyle reduces its underlying theme of comprehensive wealth and economic welfare to an equation!) combining with the state to bring us nirvana. Meaning the book is all about control, of allegedly wise economists like Kenneth Aarow (1921-1917) decreeing “increasing returns as a form of market failure, pointing therefore to an important role for the state in determining resource allocation.” Yes, Arrow was uncle to Larry Summers. How perfect!

Are there useful and interesting parts of the book? For sure. In her vain effort to happen on a path to remotely useful economic statistics, Coyle will at least get the reader thinking about “How should disappearing goods and new goods be factored into the price and quantity calculations” of GDP and CPI, but even there Coyle’s question reminds us that goods prices move up, down or disappear altogether for reasons that effect CPI and GDP, but that have nothing to do with inflation or economic growth.

About the iPhone, Coyle makes the crucial point (one regularly ignored by the Trump crowd) that it’s the creation of cooperative hands and machines in “at least forty-three countries in six continents.” From this, Coyle makes essential points similarly lost on the Trump crowd that bringing production back to the United States is not only impractical, but that it would take place to the substantial detriment of U.S. businesses that have outsourced low-margin work while arrogating to themselves the wildly profitable stuff. Yet even there, it’s perhaps lost on Coyle that in writing about the genius of production that is an effect of human action spanning the globe, she’s revealing the impossible to surmount limitation of economic statistics that imagine a closed country economies instead of a global one.

As for British tech companies, Coyle points to their only seriously true “exit” reality, which is “being acquired by one of the big U.S. companies.” It’s so true, and it explains why antitrust is such a barrier to progress. The problem yet again is that Coyle is a walking, talking contradiction. Following her comment about what enables British tech exits, she calls for the state to rein in corporations that have become too powerful. It goes on and on like this, with endless econobabble (“The index number formulae used in practice also assume homotheticity, which means the ratios of quantities demanded for different products depend only on their relative prices….”) in between. Uncle, this reviewer cried. More than once.

It all brings on the not difficult to arrive at conclusion that in celebrating economists and their alleged insights, Coyle has unwittingly revealed once again what a fraud economics is. Which itself is no insight. What created GDP can’t be that credible. Get it?

Which is why Coyle’s book can’t be called a disappointment. To say that it is presumes her affectionate look back at GDP added something to the discussion. Well, in a sense it did. Just as Coyle’s understanding of work divided has been improved by the Trump administration’s sad desire to totally misunderstand it, Coyle’s celebration of GDP over ten years ago and her call for its replacement now exist as all the evidence we need that neither is required for individual welfare or wellbeing. There’s nothing wrong with economic growth, but economists are another story entirely. Read Diane Coyle’s book to see why economists aren’t remotely the answer to the question of economic growth.