Working Paper

Evidence of Accelerating Mismeasurement of Growth and Inflation in the U.S. in the 21st Century


Abstract: Corporate equity market values, profitability, and intangible investment have reached high proportions of income. Are these investments and their outcomes evidence of a wellfunctioning society? We do not see the rapid growth in aggregate measures of output that would justify these investments and rewards. And why did the yield curve invert as the U.S. federal funds rate reached 2⅜ percent in early 2019, if the inflation rate was near 2 percent? We present the broad case that mismeasurement of growth and prices accelerated in the U.S. during the 21st century and may be responsible for the appearance of secular stagnation in the U.S. We argue that it is possible that productivity growth has accelerated and that prices have been deflating during much of the 21st century. The evidence is very incomplete; large uncertainties surround these estimates. Indeed, the main message of this paper is that uncertainty in economic measurement has risen substantially.

Keywords: National Accounts; Internet; Information; Inflation; Welfare; Mismeasurement;

JEL Classification: O4; O3; E01;

https://doi.org/10.21799/frbp.wp.2020.41

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Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2020-10-22

Number: 20-41