>--- Seth Ackerman <sethackerman1 at verizon.net> wrote:
>
>
>
>>This is interesting, but it still falls prey to the
>>problem of growing
>>service production. Suppose there are two countries,
>>A and B, which
>>start out in 2000 producing an identical volume of
>>mfg output. Then, in
>>2000-2007, mfg output grows more rapidly in A than
>>B, but A's service
>>production grows more rapidly by an even larger
>>margin. By 2007, even
>>though A will produce more mfg goods than B, its mfg
>>*share* of output
>>will be lower - not because it produces less
>>manufactures, but because
>>it produces more services.
>>
>>
>
>[WS:] True, but that would be easy to detect by
>looking at the growth of the GDP. The countries
>inwhich service sector grows faster tham mfg, GDP
>would also grow faster, whereas in countries where mfg
>declines and services are growing the growth of the
>GDP would be small. AFAIK, service secotor in the US
>grows faster that the GDP.
>
>
No, I don't think this is right.
Checking to see whether the US service sector grew faster than its GDP doesn't tell you anything. Mfg's share of US GDP could be falling even as the US share of world mfg is rising. This can happen as long as the US share of world services output is also rising. In other words, if total US GDP is rising as a percentage of total world GDP then the US can simultaneously increase its share of world mfg *and* world services. If this is happening, a rising service share of US GDP just means that the US is increasing its share of world service output at a faster rate than it's increasing its share of world mfg output. But again, you run up against the same problem: It's just as hard to measure the US share of world services as of mfg (probably harder, actually), because of the presumed lack of consistent cross-national price data.
>Furthermore, the GDP growth figures can easily be
>fudged by the inflation figures - the lower the
>inflation the higer the real GDP growth. Again, the
>US is in the forefornt of fudging the inflation
>figures by using such techniques as substitution of
>goods in the basket(on the theory that people
>substitute one good for another if prices are going
>up) and hedonic valuation of electronics (on the
>theory that the quality of computers increased but
>their nominal price remains relatively unchanged.) So
>it is very likely that if the old methods of inflation
>estimaton were used, the real GDP of the US would be
>stagnant or even shrinking, which in turn would
>exacerbate the loss of mfg.
>
>
Somebody, I forget who, tried to put numbers on this theory in 1999 or
2000. If I recall correctly, they concluded that hedonic price indexing
does make US growth look relatively better, but correcting for this
doesn't come close to closing the growh gap with other leading economies
in the post-1995 period.
Seth