Comments on economics, mystery fiction, drama, and art.

Monday, March 29, 2010

Wishing for a better press corps

In today's Chicago Tribune, we read:

"Manufacturing's share of the economy has dropped to 11.5 percent in 2008 from 21 percent in manufacturing declined, so have supply chains, support firms, capital investment, and, perhaps most important, research and development. "

Here's a quick quiz: By how much has manufacturing output changed in the past 30 years?
a. It's down by nearly 50%.
b. It's remained about stable, but the overall economy has grown.
c. It's increased, but only by about 10%.
d. It's increased by a little over 20%.

And the correct answer is (drum roll): D.

Manufacturing output--defined not as gross manufacturing output, but as value added in manufacturing--in the US has increased by 21% over the past 30 years. But you would never know that from the story in the Chicago Tribune. It is true that manufacturing's share of total US output (Gross Domestic Product) has declined, but (a) why is the period since 1979 such a big deal and (b) why is manufacturing output share of total output somehow special? After all, the share of finance in the economy has increased from 15% to 20% over the same time period.

And what about "supply chains"? I'm not sure what the author meant by that, but the share of the economy devoted to transportation and warehousing has declined from 3.7% in 1977 to 2.9% in 2008. Capital investment? Real capital spending has only increased by 146% since 1979 (to be sure, much of that is not in manufacturing, but, still...).

R&D? According to the OECD, R&D spending in the US rose from 2.34% of GDP in 1981 to 2.62% in real dollar terms, that's an increase of 144%. Yep, R&D spending in the US has fallen off a cliff, all right...

So an article that is essentially gloom-and-doom about manufacturing in the US economy manages to get, so far as I can tell, one fact right, the share of manufacturing in GDP, but uses that in a way designed to confuse almost all of its readers.



Post a Comment

<< Home