In the emerging world of global economics, our current measurements don’t add up – they are designed to measure an outdated system. For example, most trade treaties measure tons at dock, yet ignore the flow of intangibles and intellectual property. Another example is the measurement of the US trade deficit, which is at all time high levels. Yet the current measurements do not take account of American companies that are located overseas, sending both products and profits back to the US. The global world is different, and the economics are different, too.
Adam Smith, father of modern economics, helped us understand the basics of supply and demand, largely based on comparative advantage. But this was largely related to physical/tangible goods that were linked closely to physical geography. This is no longer the case.
Not being able to measure the things we instinctively believe, we instinctively continue to believe the things we can measure.
And that leads to bad decisions, based on bad information from bad measurements…
Measuring what we measure
