The Curse of Stagnant Change

29 April 2008

Here, from the BBC, is a bit of rot:

Policy makers will begin their two-day meeting later amid signs that economic growth has stagnated, or even shrunk.
Okay, stagnate means to become unchanging; which is to say that stagnant growth would be a constant growth. Some might perhaps hope for ever-accelerating growth, but most people would be happy with constant growth at, say, 3% to 4% per annum.

There is indeed some concern that the rate of growth has shrunk, but what really concerns people is the possibility that the rate of production (rather than of growth) may have shrunk.

Journalists are just constantly confusing underlying values, first differences, second differences, and so forth. In this case, GDP (or something like it) is our x, growth is Δxt, and the change of the rate of growth is Δ2xt2. A stagnant rate of growth would imply

Δ2xt2 = 0
whereäs the fear is that
Δxt ≤ 0
Last year, the Beeb similarly confused the inflation rate with the price level:
The latest inflation rate — or Consumer Prices Index for December as it is formally called — was known to the Bank of England before it made the decision last Thursday to raise interest rates to 5.25%.
(The initial version of the story was even worse, having the title Cost of living at 11-year high. Various parties tried to tried to get the Beeb to fix things, but they just couldn't wrap their heads around the matter.)

This confusion of underlying values and differences is illustrative of the more general problem that the mass of journalists and the mass of their editors just have no understanding of economics, and couldn't sensibly inform the typical reader even if they wanted to do so (and I seriously doubt that they want to do so).

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