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In Measuring the Economy, We Are Doing It Wrong
Manage episode 379761412 series 2826672
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Measuring things is essential to both economics and engineering, and while engineers strive for both accuracy and repeatability, economists play by a different set of rules. Consider civil engineering. When Hurricane Katrina devastated the Gulf Coast in August 2005, it surpassed Hurricane Andrew in 1992 as the costliest hurricane ever hit the United States.
When a civil engineer designs a structure, however, the design anticipates an expected lifetime that might be 30, 50 or 75 years. Some structures are designed with an indefinite lifetime, and the durability required to meet those targets comes at a cost, both in materials and labour to build the structures.
When a natural disaster, or war for that matter, destroys a large number of structures, the economic loss is not just measured in what it cost to rebuild those buildings, but in the economic value lost in the remainder of the original structure’s design life.
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