The schoolboy error that will not die

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In a special report on managing information, the Economist writes that Wal-Mart’s “revenue last year, around $400 billion, is more than the GDP of many entire countries.”

This is an apples-to-oranges comparison that means nothing. GDP measures value-added. Revenue measures gross value. Please never print such a comparison again.

Martin Wolf tackled this in a FT column in 2002. Jagdish Bhagwati took it on in In Defense of Globalization in 2004. And Paul De Grauwe and Filip Camerman even devoted 15 pages to measuring the size of companies correctly. Yet this “elementary howler” keeps rearing its head, time after time.

Addendum (22 March): My very brief letter to the Economist on this point appeared online.

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3 Responses to “The schoolboy error that will not die”

  1. Trade vs aid: Gross value vs value added « Trade Diversion Says:

    […] Previous editions of gross value vs value added. […]

  2. DRDR Says:

    I disliked Mark Bittman’s new NYT column already (can he go back to his core competency of recipes?), but then he goes and writes in his opening paragraph, “The leading fast-food multinational, with sales over $16.5 billion a year (just under the GDP of Afghanistan), represents a great deal of what is wrong with American food today.”

  3. What we don’t learn from looking at exports/GDP « Trade Diversion Says:

    […] that sum to 100%. That’s not true when you talk about gross exports. We’re back to the distinction between gross values and value-added measures that I have repeatedly emphasized. What would it mean […]

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