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WHEN CHINAGDPGDPGDPICPICPICPkbICPGDPGDPICPICPYour browser does not support the element. entered the Korean war in 1950, America was keen to take the measure of its new adversary. The government asked William Hollister to estimate the size of its , relative to America’s own. Economists are often accused of giving two answers to any question. Hollister gave three.After much painstaking work estimating the output of different sectors (including the revenue generated by labour camps) Hollister faced an awkward question: how to compare these totals, given in Chinese yuan, with America’s , denominated in dollars? One answer was to use the official exchange rate. But Hollister thought the results were misleading. Instead he tried two alternatives: first valuing Chinese output using American prices and then American output using Chinese prices. Using the latter approach, China’s was a puny 5% or so of America’s. Using American prices, it was a formidable 20% or more. The truth presumably lay somewhere in between.The problem faced by Hollister lodged itself in the mind of Alan Heston, a young doctoral student. Mr Heston—who died on October 25th—would spend most of his career at the University of Pennsylvania, where he studied esoteric questions such as why Indian farmers kept fragmented landholdings or why camels in Pakistan survived competition from Suzuki vans. But his biggest contribution to economics was his lifelong work on what became the International Comparison Programme (), or what his children called “The Project”.The , co-founded by his colleagues Irving Kravis and Robert Summers, was an attempt to measure the “real” size of economies holding prices constant across countries. It seems obvious that if two economies produce the same sort of stuff, any comparison of their output should use the same prices to add it up. But that approach, pursued by Hollister and a few others, was rare when the project began in 1968 and remains controversial today.Instead, the output of countries is often converted into dollars using market exchange rates. Unfortunately these rates are not well anchored by the prices of goods and services in each country. And so they can produce wildly different dollar prices for the same good. own Big Mac index, for example, shows that the price of the iconic burger varies from over $8 in Switzerland to under $2.30 in Taiwan, when converted into dollars at market exchange rates.To correct for this problem, the collected the prices of hundreds of comparable items around the world. From the start, statisticians quibbled over what counted as “comparable”, Mr Heston recalled in a memoir written in 2017. One Irish delegate remembers European statisticians spending over half a day discussing the varying quality of strawberry jam across the continent.The European Economic Community back then provided two chauffeur-driven Mercedes to help them collect prices in the suburbs of capital cities. Other price-gathering efforts were less stately. Kravis, who had served in China during the second world war, revisited the country in 1979. Much to the bemusement of onlookers, he tried window-shopping for items on the project’s list. To check if a towel met the list’s pernickety specifications, he had to know its weight per square metre. The shopkeeper agreed to weigh and measure the towel, only to discover in dismay that the visitor had no intention of buying it.Once collected, the prices had to be combined into weighted averages for products and countries. The calculations were not easy. For the first report, data would be entered on 80-column punch cards and fed into a mainframe computer. In early 1972 Sultan Ahmad, another contributor to the project, would stay up to an ungodly hour to run calculations on the university’s computers, because an extra 256 of memory would become available at night. With Kravis and Summers, Mr Heston created the Penn World Table, an offshoot of the which extrapolated its results across countries and time. The data for the 1988 version was distributed in three floppy disks, stuffed into the back sleeves of an academic journal by the editors’ two daughters.The results, laboriously calculated, were not always welcomed. In the 1985 estimates, India’s per person was embarrassingly low—lower indeed than Bangladesh’s—because it had collected prices from expensive shops and brands. China, by contrast, has long thought that its appears uncomfortably high, threatening its cherished status as a developing country. It once asked to see other countries’ prices before submitting its own, according to Mr Heston, in a clumsy attempt to manipulate the results.But although national governments were sometimes uneasy about the , economists have embraced its figures and offshoots, especially the Penn World Table. Those floppy disks and their downloadable successors made it easy—perhaps too easy—for economists to test their pet theories of growth across a broad canvas of countries and decades. Even Mr Heston suspected there were perhaps “too many” such exercises, linking their data on growth to a bewildering variety of potential causes, from saving rates to Buddhism. “We were not complaining of course.”The tables that he helped create became something for others to build on. A complex architectural feat, they were more foundation than frieze. They succeed when they are taken for granted. Having started with ten countries, “The Project” now spans 176, drawing on hundreds of people in statistical offices across the globe. It creates “a product that none of us could have done on our own”, said Angus Deaton, a Nobel-prizewinning economist, at an event celebrating the 50th anniversary of the . “I should modify that. None of us except Alan Heston.”
