"A little knowledge is a dangerous thing". No kidding. For one thing, this famous line from Alexander Pope's 1711 poem, An Essay on Criticism, is itself a misquote. The actual line goes: "A little learning is a dangerous thing". But there we go again, falling down rabbit holes and hyper-fixating on minutiae when we aren't even through the opening paragraph.
The knowledge to which I'm about to refer comes from my A-level economics teacher, back in the prelapsarian world of the mid-2000s, sometime after China's admission into the World Trade Organisation but before the Global Financial Crisis. He explained why, as a measure of value, gross domestic product (GDP) had clear limitations. For instance, GDP suggests that theft is good.
The formula for GDP is fairly simple: C + I + G + (X – M). That is, consumer spending + investment + government spending + (exports – imports). And so, for example, if someone steals your detachable car radio (which, I concede, ages this story somewhat but is the example my teacher used), you have to go to a shop and buy another one. This boosts the economy.
Of course, he also acknowledged that this misses the point in another way. Had your radio not been nicked, you likely would have spent a similar amount of money on something else – something you actually wanted. In which case, theft doesn't encourage economic activity, it merely displaces it.
So I'm always a little wary of stories which confidently state that Taylor Swift boosts GDP wherever she goes, even when they are written by friend of the newsletter and the Standard's business editor, Jonathan Prynn. Jonathan reports today on the City analysts who say that Swift's Eras Tour may have given June's growth figures a boost.
Because, hang on. Isn't this the same phenomenon as those car radios? Surely it stands to reason that, had this tour not taken place, yes the world would be a sadder place, but Swifties would simply have spent their money (Barclays estimates £848 per person) on something else? So I gave Jonathan a call. And like any good educator, he patiently listened to my query, appeared to agree with my thesis, before providing counterpoints with such gentility I only realised he had eviscerated me after I had put the phone down.
First, the Eras Tour brought tourists to the UK who might otherwise not have visited. And second, there was some specific spending on hotels in cities which hosted the concerts, including Edinburgh, Cardiff, Liverpool and London. Indeed, it was frothy hotel room rates that contributed to inflation falling less fast than analysts expected last month.
The real reason why the Eras Tour is unlikely to have meaningfully boosted growth is simple. Swift may be big, but the UK economy is much bigger. Indeed, as this report indicates, we are probably only looking at tiny, localised effects for these concerts. However, for much smaller countries hosting Swift, the impacts are likely to be proportionately larger.
Having said all that, and with apologies to economists and Swifties alike, perhaps we could experiment with something akin to GDP (Taylor's Version). In which case, I propose C + I + G + TS + (X – M). Or not. It's Friday, it's sunny and I'm heading to the park.
