It’s something you toss away, not something you study. Right? Not necessarily. According to economist, Michael McDonough, as interviewed by Kai Ryssdal on Marketplace, there’s a surprisingly close correlation between railroad carloads of trash and the national gross domestic product.
Not yet convinced? Read on.
McDonough tells Ryssdal that the GDP-to-trash indicator is holistic – one of its most powerful qualities. “It’s not isolated to a single part of the economy,” he says. “It’s people throwing things out, it’s buildings being demolished – it’s everything.”
Currently, he adds, the trash levels indicate a weakness in new construction. “I mean, if you’re going to build a new building, there might be a building that’s already there,” he says. “If you buy a couch, you might be throwing out an old couch. If you go out to McDonald’s and you buy something, you’re going to throw something out. So the fact that it is as weak as it is right now means something’s wrong in the economy, potentially, in the underlying economy.”
The trash McDonough studies constitutes a mix: iron and steel waste as well as demolition and municipal waste. He culls his data from the American Association of Railroads, which measures carfuls of waste on a weekly basis.
McDonough considers the trash a lagging indicator because, as he notes, researchers have to wait for people to throw things away. More likely, he says, it’s a coincident indicator.
His interest in trash began in college while studying both anthropology and archaeology. He learned that one way to track ancient migrations was to study the amount of trash they left while moving from area to area. “So everything kind of came together,” he said. “I found the data, I ran the numbers and it made a lot of sense in my mind.”
So, where does your economic truth lie? Is it time to build, buy, or refi?
Stewart Real Estate Company