The Economy Gets a "B" for the Third Quarter

Three months ago I posted about how grading GDP growth with a letter might make the significance of the numbers easier to understand. Gongol.com picked up this suggestion and put together a nice looking graphic.

For example, knowing that the economy hasn't pulled an "F" since 9/11 or a "D" since 2002 might make it easier for Democrats to understand why Kerry didn't win easily.

By my scale, this morning's announcement that real GDP growth was 3.8% in the third quarter grades out as a "B".

Comments

[William Polley]

I'd give it a B+ on the strength of some of the details in the report. The one minor quibble I'd have with your grading scale is that an "A" on your scale might represent a reward for an economy that is growing faster than potential GDP growth. In a sense, I wouldn't want the economy to be striving for an A every quarter by that scale. (Unless potential GDP was growing that fast.) But that would be a problem for grading the economy on a curve no matter how you do it.

[Dave Tufte]

I'll defer to your better judgement that it deserves a plus.

Part of putting this into grade form was to get people to see the forest for the trees. I think adding in anything about potential GDP would goof that up.

Having said that, how many A's in college were from students who pushed themselves temporarily above potential? My sense is that it is about as sustainable for students as for the economy.

[William Polley]

Good points. The real difference is that we don't (and shouldn't) grade students on a curve based on their own past performance. Exceptional students consistently get A's and for them it is sustainable.

Grading economies is harder. You could grade relative to other economies, relative to past performance, or relative to some objective (that might include sustainability).

You've got me thinking. (But I agree that a simple version has advantages when you're trying to communicate it!)

[Dave Tufte]

What I particularly like about this system, and Gongol's graphics show this well, is that the really good times (like the late 90's or mid-80s) don't show up as endless strings of "A's", but rather as extended periods of good grades.

Take this from someone who got 1 F and 1 D in an undergraduate career - those can really bring down an overall GPA even if you get mostly A's.