The Oil Drum

24 comments on Driving Recessions

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helium3 on October 23, 2005 - 5:03pm

What if the two correlate so strongly simply because the calculation of GDP is based significantly on the number of vehicle miles driven?

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WebHubbleTelescope on October 23, 2005 - 6:13pm

That is exactly what I said in the previous thread on this topic. Stuart dismissed this notion saying that dollars used in gasoline consumption is negligible compared to the rest of consumption.
http://www.theoildrum.com/story/2005/10/21/18399/446

I would suggest that since the GDP calculation get decomposed into constituent parts, then take it apart and look at correlations between each of the components.

So the parts of GDP are:
private consumption + government + investment + net exports

Take private consumption first and plot against that. I bet you see a strong correlation with that one, and weak against the others.

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helium3 on October 24, 2005 - 1:56am

Well, I think what I'm really saying here is that perhaps the people that calculate GDP (is it something that any old person can calculate from easily available data?) might be significantly based on the statistic that he's trying to relate it to.

Does anyone know specifically how GDP is calculated? What formula is used?

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Stuart Staniford on October 24, 2005 - 4:04am

You can get an overview of how they do it here

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Gloomy on October 24, 2005 - 1:28pm

I would bet the same against government consumption too.

I also want to add that the correlation seems to be strongest in the direction drop in miles -> drop in GDP during the oil crisises. Obviuosly the oil shocks caused drop in the GDP because of the shortages not because of the high price. The high price was just the mechanism to "price out" some miles which in turn caused drop in economic activity.