The Paranoic Impulse in Current Discourse

Or, “return of the black helicopters”

Plenty of examples of hyperbole in current policy discussions, but here I want to return [0] to the topic of whether several key data series examined by economic analysts can be trusted, or whether in fact they are deliberately manipulated by government bureaucrats. Case in point is Econbrowser reader DickF’s comments:

The government thinks it can run the economy on data that is years old and inaccurate at best. Also any time numbers are manipulated by government there is a political element involved. The whole reason the numbers are manipulated is to the will be “more normal” but who decides what is normal? In the government political bureaucrats who know their jobs depend on pleasing the politically connected. This is just another reason why centrally planned economies always fail. The hubris in government economic circles is enormous.

I am not saying that the agencies are manipulating data to make “each respective Administration look good.” Sometimes they manipulate date to make an Administration look worse than it actually is. It depends on their political inclination.

Here are some data revisions for GDP…

Figure 1: Growth rate of real GDP, SAAR, from 2008Q1 advance release (green), 2009Q1 final release (red), and 2009Q2 advance release+benchmark revision (blue). NBER defined peak at gray dashed line. Source: BEA, NIPA releases.

I’m cynical enough to believe that numbers quoted by governments and private companies are selected so as to put themselves in as good a light as possible (after all, the Bush White House was happy enough to sit on a global climate change report for a couple of years, and to defund statistical programs that measure the behavior of low income households). But this view is distinct from the perception that the statistical agencies that collect US national income and products account data (the BEA), the CPI and PPI and employment statistics (the BLS), industrial production and capacity utilization (the Federal Reserve), and import and export data (BEA/Census) purposefully and consciously distort and manipulate the data for their own nefarious purposes.

In my view, the reason why so many hold onto these views is because it’s so much easier to remain ignorant, and leap to the conspiracy view, than to do the hard work to understand why the statistics are imprecise measures of economic concepts, and why they are revised over time. After all, the former requires nothing more than taking somebody’s word, the latter entails reading the supporting documentation, comprehending what the terms used mean, and applying some basic math and statistics skills…And if that’s too hard, there are many people trying to help (Jim Hamilton cited some work by Oldprof on the BLS birth/death model).

As I noted in my previous post The Government’s Macroeconomic Series: X-Files, Dilbert, or Resource Constraints?, there are (at least) three different categories of explanations for the shortcomings of government statistics. One is the conspiracy view (X-Files), one is the incompetence view (Dilbert), and one is a realization that government statistics are generated by organizations with limited resources, facing legal constraints on data collection, and confronted with an ever-changing structure of the economy.

So, if one wants improved government economic statistics, then tell your elected representative to keep up support for proper funding of the statistical agencies (time series here) FoxBusiness has some reportage.

See also Mark Thoma. Dean Croushore has a good review of why macro statistics exhibit the characteristics they do over different vintages.

The Paranoic Impulse in Current Discourse

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About Menzie Chinn 83 Articles

Affiliation: University of Wisconsin

Menzie Chinn is Professor of Public Affairs and Economics at the University of Wisconsin, Madison.

Visit: Econbrowser

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