How would you evaluate the quality of an economy?
Posted by admin in Finance Tuesday, 1 February 2011 00:02 4 Comments
How would you evaluate the quality of an economy? Economists seem obsessed with numbers and evaluating the quantity of an economy, like unemployment rate, annual growth, and so on. Is there a way to evaluate how good or bad the economy is?
GDP per capita, GDP growth, inflation, unemployment, Gini index or some other measure of inequality.
you need to look at all of them to say how well the economy performs.
Everything the guy above said^, but I would add something about diversification/sustainability of industries; the level of investment in infrastructure, etc, within the country; and investment in human capital as well.
e.g. if a country’s economy revolves around one industry, like oil, their GDP per cap is going to be high; but obviously it’s not sustainable if they are not using the money to invest in some kind of sustainable future.
Other contributors have given good indicators to the traditional Adam Smith style economists view of a quality economy but ths is relatively speaking a recent measure. You asked how would you evaluate economic quality and to do this you have to specify what you mean by quality and I believe there is a need to change the traditional measure to reflect that at current world population growth we are running out of key resources.
I pay my bills. If I have money left over the economy is okay. If I have a lot left over the economy is great. If i am crying as i write my last bill… then there may be some dark clouds on the economic horizon.
I could care less about Wall Street, or GDP. All I need to look at is my personal economy and that gives me an idea about the rest of it.
For example, (my economy) I had a nice boom after my tax refund came and I was able to pay bills and then some. Now that flash cash is gone and I am starting to face the reality again… I’m worried about my job, the money I have invested, and although there are some great deals out there now they are all just a little out of my price range.
In comparison, (The US Economy) Last month was nice, but now reality is rearing its ugly head. Jobs are being lost, financial markets are still a concern, and while there are some great opportunities for investment no one feels safe enough to invest in anything.