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Date: | Fri Mar 31 17:18:44 2006 |
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Observables can be directly counted or measured, once a definition
has been selected.
For example, inflation requires an agreement (not commonly
accepted, viz. the "Griliches et al. report" on the proper use of
index numbers in U.S. social policy) on the selection of basket of
goods and services and the way in which the corresponding prices are
measured in (at least) two different periods.
GDP measurement is the outcome of a process whereby some money
flows in the economy are estimated; nonmoney flows (such as
ecological damage and social degradation following from the
generation of GDP) are commonly disregarded -- but, otherwise, GDP
can be counted "objectively".
Unemployment, once the definition of an actual labour force and a
potential labour force has been made, is a matter of counting.
Needless to say that measurement and counting errors are always
present. Intelligent economists and policy makers take these into
account.
NAIRU is statistically derived from a complex estimation process of
the operations of an economy, in which process some assumptions about
human behaviour are made. Indeed, one should say that forms of human
behaviour is imputed (assumed to be present) in the way the model is
set up. Take away the imputations and NAIRU stands stark naked. The
reason why it is so popular in some circles is that its use
justifies attacks on the welfare state and labour rights -- nothing
objective about that, and not at all in the same league as the
measurement (even when subject to error) of inflation, GDP and
unemployment
Jesse Vorst
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