Regular readers of this blog will know that one of my pet hates is journalists invalidly comparing stocks and flows (for example, see this post), like wealth (a stock) and income (a flow), or total assets (a stock) and total revenue (a flow). However, journalists can be forgiven, because they often don't know any better. Researchers, on the other hand, should know better.
This week's example of not understanding the difference between a stock and a flow comes from this article in The Conversation by Louise Grimmer (University of Tasmania), Gary Mortimer (Queensland University of Technology), and Martin Grimmer (University of Tasmania):
Amazon is now one of the most valuable companies in the world, valued at more than US$1.7 trillion. That’s more than the GDP of all but 10 of the world’s countries. It’s also the largest employer among tech companies by a large margin.
Amazon is one of the most valuable companies in the world, but despite what Grimmer et al. imply, Amazon is not worth more than all but 10 of the world's countries. The size of an economy (as measured by GDP) is a flow of resources for a single year. Amazon's market capitalisation is a stock (a measure of its total value), not a flow for a single year.
A valid comparison would be between GDP and Amazon's profits (or, even better, its 'value added'). Amazon's value added is still a large number, and Amazon would still rank highly relative to some countries. But comparing GDP with market capitalisation is lazy, and simply reduces the credibility of the researchers making the comparison.
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