Seven Ways to Measure Economic Health

• John Vandivier

This article covers six ways to measure the health of an economy.

Some may be hard to measure, but is GDP particularly easy to measure either? Also, these measures may have cousin measures at the micro or industrial level.

  1. GDP - The total price of final goods and services
    1. Also, if GDP = I + C, and I includes future goods, does it really meet its own definition?
    2. It might be called Final Domestic Expenditure to match the syntax of later mentioned concepts.
  2. Intermediate Domestic Expenditure - The total price of intermediate goods and services
  3. Secondary Market Size - The total price of used goods and services.
    1. What is a used service? Maybe there is no such thing, or maybe pawn shops count.
  4. IDE/GDP - Ratio of intermediate market to final market, which may be like a BMI of the economy. It may be an indicator of development, or an otherwise useful measure, or a useless measure.
  5. Count of Transactions, or Transaction Volume - An interesting indicator for stability and liquidity purposes. Maybe cooler when mixed with other indicators.
  6. Consumer Surplus / Excess Production
    1. Excess production would be like the inventories held by producers in the current period.
    2. Consumer Surplus here can be thought of potentially as an excess. If producers had squeezed out every dime of surplus through perfect price discrimination, after all, total product may have been higher and the economy may have grown larger.
    3. Although the term \"excess\" may be misleading as they may intentionally or strategically be producing and holding future goods, but still the indicator is interesting and may relate to expectations, production, the interest rate, current and future unemployment estimates, and so on.
  7. Total Inventory Price - The total inventories, not just for the current period.