Thread by @JustinWolfers

My latest @nytimes column: Official economic statistics understate total output during a pandemic. Shifting from producing stuff to producing health is productive, but we don't charge for saving our neighbors lives and so GDP treats it like it has no value nytimes.com/2020/05/14/bus…

Here's the argument: Even if you can't get to work each day, it's likely that the lives that you're saving through social distancing are more valuable than whatever you were doing last quarter. If that's right, a true measure of your output must have risen (though GDP has fallen)

The argument isn't about our living standards, which have surely fallen. But rather, the value of our output—including our efforts to improve public health—has surely risen.

It highlights that our current problem isn't economic dysfunction. It's the coronavirus.

A thought experiment: What if we could prevent the spread of coronavirus with a pill?

I would happily spend $25 per day on such a pill. If 240 million Americans did the same, it would boost measured GDP by $540 billion. The result is that measured GDP would rise, not fall.

Here's the kicker: We have this pill. It's called social distancing. It has the exact same medical effect, in that it prevents you from getting coronavirus.

But while the pill would be scored as adding to GDP, our efforts at social distancing are scored as if they have no value

Or to think about it another way: Perhaps it's better to say that we're in a war against coronavirus.

Just like in a war, we pay the soldiers who make sacrifices to protect us, by offering pandemic unemployment assistance.

Just as WWII led to rising GDP, could this one?

Sort of.

Fun fact, much of the WWII "boom" was simply wages we paid the soldiers for providing "defense services."

This time, we're paying them through the UI system, so it's accounted as an unproductive transfer payment.

(Is it really that different though?)

Does any of this matter?

Yes.

First, it highlights that this is a very different recession.

Typically, a recession robs us of the ability to be productive.

But this time, perhaps the most productive thing we can do is stay home to protect our neighbors.

Second, it highlights the real problem right now.

Our problem isn't economic dysfunction reducing output. "True" output may be higher than it's ever been.

The problem is coronavirus. Our living standards are suffering because we've got to divert resources to fight this war.

Third, it changes the politics.

Accounting technicalities mean that we're measuring our output as tanking. Small tweaks would tell a different story.

Does anyone doubt that if we GDP were seen as rising that it would reframe the debate about whether to "reopen the economy."?

And fourth, it's a teaching moment. Economic statistics don't always mean what we think they mean. GDP measures what it does and ignores the rest, and it can tell a very incomplete story.

The pandemic is so different that many of our indicators could easily mislead. #teachecon