The Economics Book

36

THE ECONOMY

CAN BE COUNTED

MEASURING WEALTH

T

oday we take it for granted

that the economy can

be measured, and its

expansions and contractions

accurately quantified. But this was

not always the case. The idea of

measuring the economy dates back

to the 1670s and the pioneering

work of English scientist William

Petty. His insight was to apply the

new empirical methods of science

to financial and political affairs—to

use real world data rather than

relying on logical reasoning. He

decided to express himself only

“in terms of number, weight, or

IN CONTEXT

FOCUS

Economic methods

KEY THINKER

William Petty (1623–87)

BEFORE

1620 English scientist Francis

Bacon argues for a new

approach to science based

on the collection of facts.

AFTER

1696 English statistician

Gregory King writes his

great statistical survey of

England’s population.

1930s Australian economist

Colin Clark invents the idea of

gross national product (GNP).

1934 Russian-US economist

Simon Kuznets develops

modern national income

accounting methods.

1950s British economist

Richard Stone introduces

balanced, double-entry

national accounting.

Wealth includes people

as well as property.

Both population and

a typical person’s

average expenditure

can be estimated.

Multiplying average

expenditure by the

population gives

the national income.

Deducting an estimated

amount for rents and profits

leaves a sum for the total

worth of labor.

The economy can be counted.