Friday, February 10, 2006

Disruptive Econometrics

The New Economy
This is the coverstory of BW last week. This is one of my favourite topic - the economy. This lays out in detail the transition going on in the US government in the perspective of tracking the growth (economy). The faculty of statistically tracking the economy is called Econometrics. The basis of this article is that the various metrics (GDP, inflation etc.) that are being used to see the pulse of the economy are age-old and needs to be changed to reflect the current Knowledge economy. I agree with it to some extent on the various ideas discussed. However, some of the ideas are flawed and the few others need to be seen deeply to understand the reality. I agree with the point of view that the money spent on kid's education by the parents is an investment and that Apple need to be looked upon as an innovative powerhouse (the spending on desing & brand building) rather than a hardware reseller. However, one cannot go to the extent of considering teacher's salaries as government investment. It goes on to compare US spending on teachers' salary to Japanese salary saying it is 6% in US vs. 4.2% in Japan. We have to see the exact dollar terms per student and the cost of living. Everyone would agree that the cost of a service offering is way too high in the US when compared to other countries. That is the basic reason that the quality of life in US is better than the comparable countries. The government's eagerness to provide a level playing field and that everyone would have be able to earn a decent living no matter what kind of job he/she is doing (The recent strike by MTA worker highlighted the fact that a NYC bus driver is earning 60,000 USD a year).

Philosphically, we can consider everything as an investment. However econometrically, we can't do that. But this is a good thing that a debate is going on in the government machinery to change the way the metrics are calculated. We need to change from the way we do things since the 1930s. This period could be termed "Disruptive Econometrics" like Disruptive technology.

When we don't see what we expect as defined, Change the definition!

Creativity Loves Constraints
http://www.businessweek.com/@@ePrOD2UQAfeDMAwA/premium/
content/06_07/b3971144.htm.
Copy and paste the above URL. If can't get it, write me, I'll get it for you.

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