From macroeconomic performance to stability, economic indicators can be used to measure a plethora of things going on with an economy. Amongst indicators for economic growth, GDP is one of the most widely accepted and used indicators. However, it isn't free from faults and thus there is still scope for better indicators. This has led economic enthusiasts across the world to devise their own quirky ways of predicting and measuring economic growth. These may not be very famous among economists who prefer mathematical accuracy but have become widely popular amongst budding economists or economics students for their interesting and unique way of visualising economic growth. Here's all you need to know about this different side of economic prediction.
1. THE HAPPY MEAL INDICATOR
Happy meals as we know it, are those meals sold at McDonald's that are accompanied by small gifts, usually toys for children. The happy meal indicator takes into account the quality and quantity of these free compensations, given by not just McDonald's but every other firm that uses a similar strategy for attracting customers, to predict economic growth. It is based on the observation that in case of economic recession, firms begin to downsize or reduce the quality of these free offerings in order to protect their profit margins and preserve cash for future purposes. A similar positive correlation is evident in the case of economic growth as well. Thus, by analysing the data on free gifts, economists can more or less predict the direction of economic change.
2. THE JAPANESE HAIRCUT INDICATOR
The Japanese haircut indicator is another very quirky tool that takes into account the number of women who are getting their hair trimmed to a shorter length to tell how the economy is doing. It is based on a very subjective assumption that women in Japan begin to get their hair shorter whenever there is less income available in order to escape maintaining long hair, as was the case in 1997 when Japan's economy was declining. It also associates positive change in the economy with more women getting their hair groomed more often.
3. THE GARBAGE INDICATOR
The garbage indicator, ironically, is the best and most accurate indicator for economic growth among the ones that we have discussed thus far. Just like others, it is too based on an assumption that people tend to spend more when their wealth increases, even if they don't necessarily require what they are purchasing. This results in an increase in garbage disposition that can be traced back to increased income levels and thus a growing economy. This metric, in the opinion of analysts, accurately predicted the U.S. economic output by 82% between 2001 to 2012.
If such measures have been prevalent in the rest of the world for a long time, is there scope for any similar unconventional tools in India? For instance, can one use a change in metro footfall as an indicator of economic change based on the assumption that middle-class people tend to use the metro or any other form of public transportation more when their incomes take a hit and they can't afford the maintenance or travel costs of personal vehicles. What can be the possible loopholes in the case of this indicator?
Gaurika Bhanot
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