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Technology

City Lights Reveals Economic Activity---But Don't Give Up Ledgers Just Yet

80beatsBy Veronique GreenwoodMay 17, 2011 4:41 PM
earth

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Not so helpful after all.

What’s the News: City lights are more than a pretty sight from the air—they’re also a good way to tell how a country’s economy is doing, some economists say. Over the past decade, deducing a country’s gross domestic product from how much it glows in nighttime satellite images, a factor called luminosity, has become quite the econ fad. But as clever as it sounds, luminosity isn’t as helpful as you’d think, a new study says. Only in countries that are such a disaster that gathering reliable statistics is impossible is the glow a better approximation of GDP than you’d get with traditional measures.

How the Heck:

  • GDP, which is generally used as a measure of a nation’s standard of living, is calculated by factoring in spending by consumers and governments, investments in industry, and the values of imports and exports made by a country. If you’ve had a good year, your GDP should be high—and so, say advocates of luminosity, should be your country’s glow.

  • But any calculation of GDP is going to involve some error—records of government spending might have been lost in a war, a large black market could throw off estimates of consumer spending, and so on. These researchers wanted to know whether the errors involved in calculating GDP from luminosity were, statistically speaking, bigger than the errors you get the usual way.

  • As it turned out, for most countries the records of spending, investments, and so on are so reliable that luminosity, which has its own sources of error, like variation among satellite cameras, doesn’t bring much to the table. Only for nations in turmoil is luminosity more helpful than traditional data gathering. The researchers give several examples of such places, and you can see why government census workers and other economic bean counters have a difficult time getting a handle on the specifics: they include North Korea, Democratic Republic of Congo, Libya, and Iraq.

Reference: Xi Chen and William D. Nordhaus. Using luminosity data as a proxy for economic statistics. Proceedings of the National Academy of Sciences. Published online before print May 16, 2011, doi: 10.1073/pnas.1017031108

Image credit: NASA

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