Today's Economic Statistics: Poorly Suited When Put Forward as Measures of Well-Being

Article excerpt

There have been times, such as the summer of 1997, when economic statistics for the United States have told an almost-euphoric story of national well-being: inflation far down, unemployment at the lowest levels in years, increasing productivity, a booming stock market, and the federal budget deficit falling so rapidly that policymakers have begun to talk about what to do when the budget starts showing a surplus.

All the while, there have been continuing news reports of corporate mergers, downsizings and restructurings, with abundant layoffs. In their personal lives many Americans have several acquaintances who are being retired early, or moving through a series of temporary jobs, or working at employment far below their qualifications, or waiting with bated breath to be ousted in a "reduction in force," or retaining a job only by moving hundreds of miles to a new location, tearing up roots with family and friends that the person had hoped would last a lifetime. For many people, their own income has hardly moved up in years, certainly not to match inflation, and they know that making any progress at all has depended upon a second income brought in by a working spouse. Often at the same time, however, if they are fortunate, they receive quarterly reports from their retirement stockfund informing them of gains at a dizzying pace, portending (if all remains well) an affluent old age.

How are these seemingly incongruous elements to be reconciled?

More by theory, certainly, than by statistics. It would seem that almost anything can be "reconciled," or not, depending upon ones wishes. Economic statistics today, in the hands of differing interpreters, can and do give widely varying pictures.

It is plausible to speak of "a crisis of statistics." Every subject is lost in a welter of claims and counterclaims, with all points of view citing statistics that confirm their position, so that it is almost impossible to penetrate through to reality on the basis of statistics alone. In this vein, Business Week in March 1996 spoke of a resulting "cognitive dissonance"' and Kenneth Auchincloss in Newsweek, talking about the figures for per capita income, says "the statistical argument is an impenetrable thicket."2 In an enlightening article entitled "The Real Truth About the Economy: Are Government Statistics So Much Pulp Fiction?," Business Week in November 1994 said that "the economic statistics that the government issues every week should come with a warning sticker," adding that "the government is pumping out a stream of statistics that are nothing but myths and misinformation."3

And yet it is striking that Alan Greenspan, who as chairman of the Federal Reserve Board holds center stage in the making of economic policy, is willing freely to use standard statistics on such things as unemployment and the Gross Domestic Product as though they are fully meaningful, which they probably are for his purposes, since he's certainly no fool.4 He sees the statistics, in their usual form, as conveying significant information. Just the same, he acknowledges the problem when he says that "the list of shortcomings in U.S. economic data is depressingly long."5

Whatever continuing value the statistics may have for some uses, for the purpose of understanding where the United States' and the world's economies are going in response to global high-tech, the criticisms in Business Week have considerable force. A current statistical category such as "Gross National Product" was adopted after World War II as a tool that was useful to economists at that time. With changing conditions, it and other measures are becoming increasingly ill-suited. The Economist suggests that a major reason "for the inadequacy of official statistics may be that the economy is simply becoming unmeasurable. Conventional methods of measuring the economy are no longer up to the task, and economists cannot agree on how to improve them."6 The result is that we are forced to rely more on theoretical insight than we would like to in knowing the current state of things. …