Economists Are Beginning to See the Light

By Tim Worstall

A small diversion into one of the tinier byways of the hugely complex international economy demonstrates the miracle of markets.

GDP growth is often measured poorly for countries and rarely measured at all for cities. We propose a readily available proxy: satellite data on lights at night. Our statistical framework uses light growth to supplement existing income growth measures. — J. Vernon Henderson, Adam Storeygard, David N. Weil, National Bureau of Economic Research Working Paper No. 15199

There is a serious suggestion out there, one which this Worstall fully supports, to move from the archaic and confusing idea of Gross Domestic Product (GDP) as a method of measuring wealth to what I call “the Worstall Standard.” Surprisingly, the suggestion is not one of this or any other Worstall, but rather comes from sober and competent economists (however rare that combination is thought to be these days).

There are many limitations of GDP as a measure: cleaning up pollution adds to it; a man marrying his housekeeper reduces it; it does not account for the oppression of women in the unfair division of household duties; does not take count the things that really matter such as love, satisfaction with life, equitable distribution of incomes, nor that in Al Franken we have finally knowingly elected a comedian to the Senate.

The hold it has over economists is that it is easy, relative to any other possible measures, to calculate. This, however, does not always hold true, so the aforementioned economists’ proposal is as follows:

GDP growth is often measured poorly for countries and rarely measured at all for cities. We propose a readily available proxy: satellite data on lights at night.

This is both simple—just call up NASA and ask for the latest shots—and, according to the paper, also accurate. As the famous photos showing the difference between North and South Korea at night show, there is indeed a correlation between standards of living and whether a society can actually light up the night. A correlation which seems robust enough to use as a proxy for what we really want to measure: how well are the people there living?

There are many limitations of Gross Domestic Product as a measure. The hold it has over economists is that it is easy, relative to any other possible measures, to calculate.

But what has this to do with any “Worstall Standard”? What is being proposed is, in fact, that the more people trade with Tim Worstall (yes, your humble author) then the richer they will be: and we can measure how much they trade with Tim Worstall by how much light we can see from their localities at night.

At this stage in the exegesis, of course, mutterings will begin, rising possibly to shouting: Worstall's finally flipped his lid might be the mildest of it. Of course the more people are trading with the rich world, the richer they will be. The more any locality is taking part in the international division of labor and specialization, we have known since Adam Smith that this will boost incomes. So, yes, the more people are trading with Tim Worstall the richer they will be, but this applies to any of us billion or so rich people in the world, to anyone trading with the next three billion not-so-rich people. Where does he get off with this Worstall Standard stuff?

To explain that requires a small diversion into one of the tinier byways of the hugely complex international economy that we have. The allegation is not that one very unimportant middle-aged Englishman is to be taken as a proxy for a connection to international trade. Rather, that one very unimportant middle-aged Englishman is, through the hugely complex international economy, specifically trading with all those billions of people producing those lights that we are measuring as a proxy for wealth.

As our obligatory boring explanatory part, the majority of the light that you can see from space comes from street lighting. Street lighting in turn is powered by halogen lamps. Halogen lamps use a small slug of mercury that the current heats up, emitting a vapor that gives us the light. You can change the spectrum of light that comes from such lamps by adding minute (think a quarter of a milligram per bulb, or four million bulbs from a couple of pounds of material) amounts of other metals: europium and yttrium give blue or red for example, scandium gives you something more like sunlight. Yes, streetlights all use this scandium (don't worry, almost no one else has heard of it either).

The more people trade with Tim Worstall, even if at some remove, then the more light we will see from them and thus the richer we can assume they are.

Having done the boring technology part, now I can explain: I and two friends have a small business (think very small—it makes a little more than beer money and a little less than vacation money per year, for us each) that supplies this scandium to the global lighting industry. For some 15 years we have been supplying 80 percent of what the industry uses: there were a couple of years when we also got the other 20 percent but we found that running a global monopoly is nowhere near as fun and profitable as some seem to think.

Those who buy from us care not that our raw material is the waste from a uranium processor nor that we originally ship from the shores of the Caspian Sea. Nor that we refine in Moscow: all that concerns them is that regular and timely deliveries at the correct purity occur. The light bulb manufacturers have never heard of us and could not care less: they just want that mixture. Nor, indeed, do the people stringing up street lights as they get richer give two hoots about this entire tri-continental process—they simply want the most light at the least price.

The end result of this process is that some 50 percent of the light that you can see from space is (at least in part) enabled by material that has been through my hands, or at least my books.

What is being proposed in the aforementioned paper is that, as a measure of how rich places are, we should measure their light output. That light output can be identifiably linked to what I do: thus I submit the incredibly modest claim that the entire process should be known as the Worstall Standard. The more people trade with Tim Worstall, even if at some remove, then the more light we will see from them and thus the richer we can assume they are.

In the interests of balance I must also point out that the same technology is used to make all of the lighting for TV sets. If I am thus to make claim to what light can be seen from space, I must therefore also acknowledge my responsibility for “The Price is Right,” something for which I can only profoundly apologize.

Tim Worstall is an entrepreneur and a freelance journalist and is regularly published in UK and U.S. national news outlets. Contact Tim at timworstall@gmail.com.