How reliable is a millennium of macroeconomic data?
Markets

How reliable is a millennium of macroeconomic data?

FT Alphaville is a fan of economic history: not only because it often makes for fascinating reading, but because it also plays an essential role in highlighting how changes in the political, social and technological environment have impacted growth — as well as economic thought and policymaking.

So we’ve noticed with some interest that numerous official and private sector economists are increasingly turning to data sets based on very long economic time series. However, few can match the Bank of England’s, which pulls together almost a millennium’s-worth of economic data going all the way back to 1086.

How useful is this information? Well we’d start by making the point that something doesn’t have to be relatable to the present day in order to be worth knowing. Sometimes it’s as simple as things being interesting in and of themselves.

In terms of usefulness in learning from errors past, there are clearly some periods more relevant than others. The Victorian economy, for instance, had a lot more of the features of the current economy — such as business cycles and industrialisation — than the economies that preceded it. But there are perfectly valid lessons drawn from much earlier periods that tell us about phenomenon that affect us today. The debasement of currency, for instance, was a feature of the Roman economy, which some even pin the blame on for the Empire’s fall. Actually, maybe that’s a bad example given the lack of inflation right now, but you catch our drift.

FT Alphaville, however, has more profound concerns over the data’s accuracy. Even if you put to one side the question marks over whether measurement of the variables is accurate, you run into the issue that some of the concepts only came into being relatively recently.

In her history of GDP, Diane Coyle writes that the concept was introduced in the 1940s (though there were forerunners dating back to the 18th century). So how can we possibly have readings dating back centuries earlier? The Bank of England partly gets around the problem by using measures of sectoral production for the period from 1270 to 1870:

The Bank does, however, purport to have a measure of English GDP dating back to 1086. We are somewhat dismissive of this given that, from what we can discern from the data itself, “growth” wasn’t really a thing that economies did to any great degree in the centuries before the industrial era:

Which is probably why no one really bothered to measure it.

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