This is a very interesting thread, and shows how treacherous "real" spending numbers can be. Always worth recalling: nominal values are real. Inflation-adjusted values may be useful or necessary for some purposes, but they occupy a lower ontological tier. - ThreadSky

jwmason.bsky.social • 3 days ago

This is a very interesting thread, and shows how treacherous "real" spending numbers can be. Always worth recalling: nominal values are real. Inflation-adjusted values may be useful or necessary for some purposes, but they occupy a lower ontological tier.

Reposted from Ernie Tedeschi

@ericvannostrand.bsky.social & I are in @briefingbook.bsky.social on infrastructure.
Last week, @jasonfurman.bsky.social argued that real US infrastructure investment has fallen since the pandemic.
Eric & I find however that using BEA’s deflator, real highway spending is up 11% since 2019.
1/11

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rosnick.bsky.social•3 days ago

Calling nominal “real” confuses two different ideas. I think your point would be more clear if you said something like “nominal values are observable” even though I’m pretty sure even that isn’t strictly true across the board

jwmason.bsky.social•3 days ago

I mean that nominal values are what is real, ontologically speaking. They have a tangible, direct existence in the world. X many dollars were wired from federal to state bank accounts as a result of legislation - that actually happened. Whereas "real" values are something we estimate after the fact.

rosnick.bsky.social•3 days ago

I know what you mean and though it is largely correct I don’t believe it is even strictly true in the national accounts. More importantly my opinion is that you should for nothing more than clarity avoid the word “real” in the sense you mean

jwmason.bsky.social•3 days ago

I think the ambiguity comes from the conventional use of the word "real", which mixes up three different ideas - what is (relatively) directly observable in the world, quantities that have been adjusted for inflation, and non-monetary factors in economic outcomes.

jwmason.bsky.social•3 days ago

I think this is a case where "words should be a little wild, for they are assaults of thoughts on the unthinking" -- in this case, the unthinking assumption that dividing by a price index turns a price or monetary quantity into something like a physical measurement.

rosnick.bsky.social•3 days ago

Okay I agree that describing aggregates as “real” is a little too cute for what you and I know is actually meant (eg a price index measuring relative market-implied production Value of currency over time where Value is certainly up for debate) but an accurate description is ever way too clunky

rosnick.bsky.social•3 days ago

I do think even in the modern economic sense it is meant to reflect something “real” in the colloquial sense. I also think that the extent to which it succeeds depends on your depth of faith in market valuation and price theory, etc. in short, meant to be real in colloquial sense but probably isn’t

jwmason.bsky.social•3 days ago

Right. This is the confusion that I am trying to call attention to.

rosnick.bsky.social•3 days ago

Right. When we talk of real GDP that’s not directly observed. It’s not a production index but an attempted inference of the relative real Value of GDP over time

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