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20 of 21 people found the following review helpful
5.0 out of 5 stars An entertaining explanation of key numbers used by economists and governments
The unemployment figures do not actually tell us about the state of unemployment in a country, GDP figures do not actually give us an accurate measurement of the health of a country’s economy, and the trade deficit between the United States and China may actually be a trade surplus, according to Zachary Karabell in this book.

The book describes the...
Published 10 months ago by John Gibbs

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29 of 32 people found the following review helpful
2.0 out of 5 stars Disappointing and Preachy
Zachary Karabell's "The Leading Indicators" is a disappointment. The author provides a detailed history of the origin and use of today's leading economic indicators, such as GDP and the national unemployment rate, only to alert us that there are limits to single measures of national performance and that such statistics can be misused. Is there anybody alive that doesn't...
Published 8 months ago by John R. Holmes, Jr.


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29 of 32 people found the following review helpful
2.0 out of 5 stars Disappointing and Preachy, April 2, 2014
By 
John R. Holmes, Jr. (Anacortes, Washington) - See all my reviews
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This review is from: The Leading Indicators: A Short History of the Numbers That Rule Our World (Hardcover)
Zachary Karabell's "The Leading Indicators" is a disappointment. The author provides a detailed history of the origin and use of today's leading economic indicators, such as GDP and the national unemployment rate, only to alert us that there are limits to single measures of national performance and that such statistics can be misused. Is there anybody alive that doesn't already know this? I doubt we need to know who first started questioning what it means to be "unemployed," and where those early statistics came from, to understand the author's concerns about the use and misuse of summary statistics.

It seems Mr. Karabell's purpose is to warn us that aggregate statistics say little about individual cases. For example, in discussing the unemployment rate he tells us that within the labor pool there are identifiable subcategories with distinct age, gender, racial, educational and regional features. So between the arbitrary criteria for who gets counted and the distillation of the data into a single number, the end result can be misleading. But before you get your hopes up for alternative indicators, check the following two paragraphs from the author's final chapter:

Example 1: "What, then, is to be done? It would be satisfying to unveil a new framework and to outline a new set of statistics that would better serve our present needs. That would have the virtue of simplicity, and it would be easy to digest. Instead of GDP, let's have a version of gross national contentment. Instead of the unemployment rate, let's have the employment-education ratio. Problems with our current numbers? Well, then, let's invent new ones." (p246)

Example 2: "No one number will suffice. That is the key limitation of GDP: not it's methodology, not what it includes or excludes, but the very fact that it attempts to distill into one figure complicated, ever-changing economic systems. The same can be said of each of the indicators invented in the 20th century and so prevalent today. They were and still are more than adequate to answer a specific set of needs. They are far better than nothing, and they still serve a purpose for policy makers, for business, and for individuals as markers that offer some additional guidance about what to do and when to do it." (p247)

The first conclusion is incoherent. If we can't generalize from gross national product, what makes us think we can generalize from gross national happiness? Won't this new measure, lacking the same stratification by age, race, education, gender and region have the same infirmities? Even worse, the author seems to have embraced this happiness concept due to its reported success in the tiny country of Bhutan. But if he were to read up on ethnic cleansing, he would discover that managing for national happiness can have a steep price. In Bhutan's case that price included expelling a large fraction of their population in the 1990s to preserve Buddhist culture and identity.

The second conclusion is naive. Contrary to the author's implication, there's no lack of metrics. Just spend a few minutes on the websites of the Census Bureau or the Bureau of Labor Statistics. If anyone wants to understand prices, education, income or employment at a more granular level, it's all there. As for why we "distill into one figure complicated, ever-changing economic systems," the author is confusing cause and effect. It's not that they distill out information we need, it's that we need it to be distilled so that we can see the big picture and track changes over time. And while it's true that these distilled numbers can be intentionally or unintentionally misused, the author himself recognizes the need for them.

As these two examples illustrate, if there is a single takeaway from this book it's that some people have an irresistible desire to preach. The author has no limits. He even warns that the traditional relationship between GDP and the demand for earthmovers may have changed and that current GDP trends shouldn't matter all that much to Caterpillar. Instead, he advises, "It should matter whether the specific need for its earthmovers and mining equipment and excavators is expanding or contracting." Does anybody imagine Caterpillar doesn't know this?

In summary, I had great hopes for this book and was very disappointed. Having done a passable job of defining the problem, the author then offers nothing but platitudes. I haven't yet found a book that covers the ground I had hoped this one would cover, but for a book on the limitations of human thinking, try Daniel Kahneman's "Thinking, Fast and Slow." For the limitations of forecasting, try Nate Silver's "The Signal and the Noise." And if you're up for swimming in deep macroeconomic waters, especially as it relates to China, try "Avoiding the Fall" by Michael Pettis.
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20 of 21 people found the following review helpful
5.0 out of 5 stars An entertaining explanation of key numbers used by economists and governments, February 12, 2014
By 
John Gibbs (Melbourne, Australia) - See all my reviews
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This review is from: The Leading Indicators: A Short History of the Numbers That Rule Our World (Hardcover)
The unemployment figures do not actually tell us about the state of unemployment in a country, GDP figures do not actually give us an accurate measurement of the health of a country’s economy, and the trade deficit between the United States and China may actually be a trade surplus, according to Zachary Karabell in this book.

The book describes the history of a number of economic measurements which we now take for granted. Measurement of unemployment and national income evolved in the wake of the Great Depression, and gross domestic product took over from gross national product as the favoured measure of a country’s economy by the end of the 20th century. What we do not often realise is that these measures were subject to significant limitations at the times when they were invented, and the limitations have become more substantial over the years as the state of technology and the nature of the economy have changed.

Although the book provides a good description of the history of various leading indicators, the extent of the inaccuracies described is not entirely clear. For example, the author explains that every iPhone sold in the US adds $229 to the US-China trade deficit, and every iPad adds $275, although components are sourced from countries other than China and the actual cost of assembly in China is only around $10. However, presumably the components imported into China get counted in China’s trade accounts, so the imports and exports should cancel each other out, but the author does not discuss whether this actually happens.

The book is entertaining and informative, providing a very useful explanation of the key figures used by economists and governments.
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16 of 17 people found the following review helpful
4.0 out of 5 stars Good, basic coverage, February 16, 2014
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The book lives up to its title: "The Leading Indicators: A Short History of the Numbers That Rule Our World". It covers the development and shortcomings of "headline" statistics such as gross domestic product, unemployment, and international trade. Readers will learn some eye-opening things, unless they already know the basics of what measures underlie these statistics and why many such statistics suffer from potentially misleading imperfections. For example, headline unemployment (U-3) doesn't include people who have given up looking for work; so if all workers lose their jobs and decide not to look for new jobs, the headline unemployment rate would fall to zero. The book does get a bit repetitive as it goes along, repeating its basic assertions over and over.

Bottom line: If everyone read this book, we'd have a much more informed citizenry.
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4 of 4 people found the following review helpful
5.0 out of 5 stars Karabell book stimulates thinking., March 16, 2014
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Karabell challenges out habits of unquestioned acceptance of the validity of economic measurements.
In future I will not look at GDP, unemployment rate, and inflation figures as I did in the past.
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3 of 3 people found the following review helpful
4.0 out of 5 stars a very interesting book which will help you to understand "the numbers" we read about the economy and stocks, May 12, 2014
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I've always been interested in investing. I've been pretty successful. I believe that you have to make your own decisions based on your own information. To do that you need as much understanding of the economy is possible. This book makes it easy to understand what GDP is and what the strengths and weaknesses of the numbers are. It was well-written. It did not have too much technical wordage. It was easy to understand.
I believe that it has given me a better insight into the economy. I would unhesitatingly recommended. It's relatively short and easy read.
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2 of 2 people found the following review helpful
5.0 out of 5 stars One of those great books that takes the world as you know it and turns it upside down, May 11, 2014
This review is from: The Leading Indicators: A Short History of the Numbers That Rule Our World (Hardcover)
If you said to me that I'd want to read a book about GDP, I would have asked answered, "I have C-SPAN if I need to sleep." But Karabell is known for his fascinating books about the 1948 campaign, the building of the Suez Canal and, even, Chester A. Arthur. The Arthur book is a case in point: this guy takes subjects that you thought you knew (and thought you knew enough about) and makes them not only very interesting but provides an often seductive narrative that is at once historically accurate and yet full of real surprises. The Leading Indicators basically explains why most economic discussion is spin: those who try to sell us definitive statements about how well administration X or Y are doing economically are usually blowing smoke. Indeed, the book could have been entitled "Misleading Indicators," since Karabell shows how all are, at best, arbitrary approximations of reality. This is a quick, smart and essential read for anyone with a 401 K or who has aspirations of having a 401 K. The people who tax our 401 Ks ought to read it, too.
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2 of 2 people found the following review helpful
4.0 out of 5 stars A thought provoking book about the numbers that rule our world, April 1, 2014
By 
MoMo (Washington, DC) - See all my reviews
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Overall: I recommend this book to people who have an intermediate knowledge of economics or work in finance.

This is one of the more thought-provoking books I've read in a while. Karabell does a good job explaining where and why important economic indicators (e.g. GDP and inflation) arose. How the idea of "the economy" is relatively new. He then goes on to explain whether they measure what we think they (ought) to measure. Each of these important indicators has its limits in describing our well-being, but at the same time that's not why they were created.

I could have done without chapters 10 and the conclusion. But since it's not a terribly long book anyway, it wasn't too much of a waste of time.

Overall, a recommend for econ nerds.
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2 of 2 people found the following review helpful
4.0 out of 5 stars Easy to read summary of the development of economic indicators., March 24, 2014
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An excellent summary of the collection of economic data and the subsequent application of statistics to the data. The author repeats his theme but it is worth repeating; the "leading indicators" that become the headline news do not and were never intended to fully describe a country, its citizens or its true (whatever that may be) economic well being.
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1 of 1 people found the following review helpful
4.0 out of 5 stars A good introduction to econometrics for poets, August 20, 2014
When I was in college, the more liberal artsy among us tended to fulfill the science requirement for graduation through either "Physics for Poets" or "Rocks for Jocks". This book would be a good textbook for "Econometrics for Poets.". It is short, utterly non-technical and not particularly demanding on the brain. I finished it in two settings, which is unusual for a book about economic statistics. The author has clearly chosen to write at a level that the general reader with no prior background can access, and there is definitely a niche for that kind of exposition. He obviously knows much about the subject but at the same time is capable of dumbing it down enough to fulfill his objective. As such, it is a very good nontechnical introduction to the topic for someone who is seeking one.

Chapter 1 is an introduction to the compilation of census statistics through a brief summary of the Domesday Book produced to document England at the time of the Norman Conquest.

Chapter 2 is a short history of the development of the unemployment rate and the Bureau of Labor Statistics in the progressive era.

Chapters 3 and 4 comprise a short history of the creation of national income, gross national product and gross domestic product metrics told mainly by focusing on Simon Kuznets.

Chapter 5 is a short history of consumer sentiment statistics.

Chapter 6 is a short history of the creation of inflation measurements.

In each chapter the author briefly mentions some of the issues associated with the metric -- hedonic adjustments in relation to inflation; part-time and under-employment for unemployment; and activities ignored in computing GDP, for some examples. These discussions are mainly illustrative, perhaps a bit polemic, but not demanding and probably insightful if you are new to the topics.

In chapters 7 and 8, the author illustrates various recent shortcomings in the capacity of these statistics to serve as a basis for governments to design forward-looking policy. These were, imo, the best chapters in the book. There is a nice discussion of how these statistics have failed to properly capture globally allocated economic activity, through a summary of the 2011 work of three economists (who for some reason never get named in the text, but are in fact named Kenneth Kraemer, Greg Linden and Jason Dedrick), who teased out the geographical loci of the several stages at which value is added in the supply chain that brings us the iPhone.

Chapter 9 is, in contrast, the worst chapter in the book, but tailor-made for a course called "Econometrics for Poets", in that it is titled "Gross National Happiness", the Bhutanese alternative to GNP and GDP. This subject has been mentioned far too often for the negligible contribution it makes to understanding the real world. The chapter also discusses the more intellectually rigorous work of Amartya Sen and others in trying to fashion an alternative metric.

Chapter 10 is a brief look at emerging use of "big data" to develop new metrics to track and conceivably predict "the economy".

I hope this review has helped you determine if the book is right for you.
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1 of 1 people found the following review helpful
3.0 out of 5 stars A bit dry, July 2, 2014
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The book starts out well giving you the history of major economic statistics and how it came about. The author does a fine job in the department but a majority of the book is focused on why those numbers should not carry the significance they now do.

He does a great job of stating his case and I agree with him 100% but he gets a bit wordy. In fact, I will describe it as word barf. He could of made his point in half the amount of words that he actually used.

All in all, it was an interesting read. I would suggest this book to anyone who has an understanding of major macroeconomic indicators, but just plan on being frustrated with author continually repeating things already covered. But, inside all that word barf I promise there is gems of knowledge and new perspectives on the statistical collection in Economics.
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The Leading Indicators: A Short History of the Numbers That Rule Our World
The Leading Indicators: A Short History of the Numbers That Rule Our World by Zachary Karabell (Hardcover - February 11, 2014)
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