Economics as Junk Science: GDP and Historical Development
The title reflects the fact that sometimes Economists make tenuous claims that are scientifically weak.
This is an interesting video until you realize that it involves junk science.
Hans Rosling’s 200 Countries, 200 Years, 4 Minutes, – The Joy of Stats – BBC Four
Namely, comparing income across 200 years is meaningless. It makes much more sense to look at consumption choices. I’m willing to take a guess that the consumer price indexes used to weight the historical income don’t take into account whether the individual in 1810 can purchase penicillin, access to clean drinking water, or chemotherapy…. No wonder life expectancy is increasing.
Unfortunately, many economists fail to realize that GDP/money by itself is not a good indicator for well-being; indeed prices exist merely as relative quantities to one another within an economy of goods and services. But it matters what you can buy. As such prices are arguably useful in comparing year-to-year “wealth” where the type and prices of goods does not change drastically, but are useless for comparing consumption/utility across longer time periods where the nature of purchasable goods has changed.
So yes, it makes sense that things grow over time. It makes sense that technological progress increases economic productivity and life-expectancy. It does not mean that economic productivity and life-expectancy necessarily have a strong causal relationship, as the video seems to argue by juxtaposing them on the same chart. An econometrician would tell you that you need an instrumental variable. My guess is that time/technological advancement are the real causal link between the two.
Further to address the subtext of the video: there are problems with averaging country’s GDP to measure welfare, problems with the idea of convergence as there are increases in income inequality across countries, and problems with the arguments that on average for global citizens income inequality is decreasing.
Update: Also it appears that Hans Rosling is displaying logged (exponentially growing) income on the bottom axis rather then linear income. This modification would be necessary only if implicit in his presentation is the argument that life expectancy is a linear function of logged income.