What Matthew Baker did in the 1570s was to take the design process out of the shipyard, and onto paper. He drew his ships, to scale. And by using pen and paper, with geometry to make such drawings possible, he opened up grand new possibilities for design. […] He drew out new designs for frames, using geometry to work out how any variation would affect the overall shape of the hull, as well as its weight and carrying capacity – all at the cost of only time, ink, and paper, and avoiding the huge potential waste of conducting experiments at full scale in wood. His process allowed him to innovate more easily, and even to design new measuring instruments.
Interestingly, the new methods were not quickly adopted in the rest of Europe:
By the 1580s, new English ships were among the most technically advanced in Europe, and even in the mid-seventeenth century, ship plans were apparently still unknown in France. Having once lagged far behind, geometry began to give English shipbuilding the edge.
Unsurprisingly, people on Twitter took issue with the authors’ claim:
I find this polemic boring and unproductive.
Boring, because I explained the misconceptions surrounding “money from thin air” in Bankers are people, too. (If you have a copy of the book, see page 38).
It’s also unproductive, because a slogan is not an insight. VOX claims to provide ‘Research-based policy analysis and commentary from leading economists’. It’s a sad state of affairs if leading economists produce more heat than light by using slogans.
Scientists don’t argue about slogans. Insight follows from identifing the relevant mechanisms or from looking at empirical findings, not from these endless ‘debates’.
That’s why Bankers are people, too contains so many drawings of simple balance sheets and discussions of behavior and incentives. I wanted to be crystal clear, not become yet another vague economics guru.
How big is the economy? It’s a crucial question in economics. It’s also the title of a chapter in Bankers are people, too (pages 119-122).
Gross domestic product (GDP) is a measure for economic output based on market prices. This means that unpaid (e.g. domestic) work is not included in GDP, although we find it valuable.
As consumers, we also benefit from free digital services (email, messaging apps, maps, search engines…) that didn’t exist 40 years ago.
But how much do people value these digital services?
In How should we measure the digital economy, Erik Brynjolfsson and Avinash Collis try to measure just that. They introduce ‘GDP-B’, a metric which ‘augments’ GDP with the consumer wellbeing from free stuff. The whole article is worth a read.
For example, they argue that “Facebook alone has created more than $225 billion worth of uncounted value for consumers since 2004” and that “including the consumer surplus value of just one digital good—Facebook—in GDP would have added an average of 0.11 percentage points a year to U.S. GDP growth from 2004 through 2017.”