CHART OF THE WEEK
Summary: This week two departments of the UN released a joint report which put forward a new way of measuring a nation’s wealth. The “Inclusive Wealth” measure tries to include a number of things that GDP misses out, and produces some interesting results.
What does the chart show? The chart shows the per capita wealth of each of the G7 countries, plus the OPEC average, according to the inclusive wealth measure. This is a combination of manufactured capital, human capital and natural capital. The blue bar is the value for each country in 1990, the red bar in 2000, and the green bar in 2010, all in 2005 US dollars (so inflation is accounted for).
Why is the chart interesting? The Inclusive Wealth report attempts to address a number of problems with current economic measures of wealth by including manufactured capital (typically captured by GDP), human capital (similar to the Human Development Index) and natural capital. This means that as well as economic output, the health and education of the population and the stock of natural resources of a country is taken into account. As you can see, the UK’s inclusive wealth grew from 1990 to 2010, but not as fast as in France or Germany, which started the twenty year period behind the UK but finished ahead. Canada scores very highly, as it has abundant natural resources spread out over a population half the size of the UK’s. The OPEC countries (a group of twelve oil producing nations) have mostly done well in terms of GDP growth, but this report suggests that their inclusive wealth has fallen by a third over the period as they have been depleting their supplies of natural resources in an unsustainable way.Generally speaking, this measure indicates that true growth has been slower than GDP figures suggest, and while it is still being developed, it represents the work of an increasing number of economists who are unhappy with traditional measures of well-being.
Greg Opie from the Economic Research Council will be on Share Radio on Thursday evening from 7.30pm talking about this week’s chart. To listen, please visit www.shareradio.co.uk.
The ERC Chart of the Week is updated every Wednesday.
The Fourth Annual Clash of the Titans
Oxford vs. Cambridge vs. LSE
Economic Predictions for 2015
Supported by PwC
Thursday 18th December
18:30 at the Royal Institution of Great Britain, London
With Kate Barker (former member of the Bank of England Monetary Policy Committee and Oxford graduate), Michael McMahon (Centre for Macroeconomics at LSE, and Associate Professor of Economics at Warwick University), and John Llewellyn (founder of Llewellyn Consulting, formerly at Lehman Brothers and the OECD, and spent ten years at Cambridge University).
Tickets are currently on sale for £20.
For tickets and more information please click here.
CLASH OF THE TITANS 2014
Do you think you know what is going to happen to the UK economy next year?
Our annual forecasting competition opened for entries this week, and by submitting your forecasts across a range of categories you have the chance to win a number of prizes (including a case of Royal Tokaji wine, and Amazon vouchers just in time for next Christmas). It is free to enter, and this year we have expert guidance from PwC’s Andrew Sentance to help you decide upon your predictions.
To enter the competition, please visit out website: http://www.ercouncil.org/cott2014-competition/
If you would like to listen to the opinion of our three Titans this year before entering, you can still reserve a place at this year’s Clash of the Titans event on the 18th December by clicking here.
THE ERC’S TOP THREE FROM TWITTER
Here are this week’s top three articles or blog posts we’ve seen on twitter:
Joint 1st: “10 reasons to cut public spending and keep cutting” (from @CapX)
On one side of the fiscal debate, Tim Montgomerie puts forward ten reasons why cutting public spending is an inherently good thing…
Joint 1st: “Dodging the debate” (from @mcmahonecon)
…and on the other, Michael McMahon (one of this year’s ‘Titans’) argues that government is neither inherently good nor bad – it depends on how it is run.
3rd: “On Not Counting Chickens” (from @NYTimesKrugman)
Paul Krugman argues that uncertainty in the US undermines the case for higher interest rates (and it applies almost equally to the UK).
Please follow the ERC on Twitter: @EconResCouncil