Indicators In Play

Are you being gullible? Do you treat official stats as economic indicators? Those very same stats fraught with issues of both relevance and accuracy?

In chemistry, you got parts per billion. In physics, you got Angstroms, for gosh sakes. Probably unfair comparisons, those being hard sciences. So look at another social study—anthropology; they got carbon dating and language recordings.

What do economists rely on? Official figures for inflation, unemployment, and growth.

Human Errors—Intended Or Not?

Where do federal tabulators get their numbers to crunch? From local yokels, who don’t win any prizes for thoroughness in collecting data, often with an attitude of “that’s good enough”. Seriously. Have you ever been a low-level flunky in a county bureaucracy? Some are about as careful as an unwashed short-order cook in a greasy diner working the morning shift with an aching hangover.

Then every few years, given political expediency, the central statisticians redefine their “indicators”. Jack Rasmus at It’s Our Economy writes“The US changes in GDP represent just one of many such redefinitions designed to boost lagging GDP numbers in a number of countries.”

Worse, the bean counters don’t use as indicators the things that really matter. People complain that economists don’t measure happiness, as the New York Times reports. But happiness is not an economic activity. Truly inexcusable is the official failure to measure basic economic reality, like our spending for things never produced, namely land. Nor do they publicize the concentration of ownership of land and wealth. They downplay the loss (or gain) in leisure. Everything fundamentally relevant, they overlook.

How can any science be based on a combination of faulty data and non-relayed data? It can’t. Bad data equals bad science: garbage in, garbage out. No wonder economists can’t predict.

How is it the official number crunchers can do such a bad job? Probably—if it’s not too cynical—a bad job is what’s expected of them by private entities much higher on the food chain.

The Big 3 Official Stats Re & Redefined

Back up to officialdom redefining their chosen phenomena—which amounts to massaging the data.

Unemployment: The US Bureau of Labor Statistics redefined how it counts the jobless at least twice, in 1976 and in 1995. Its official figure does not count the people who have quit seeking employment and who are under-employed.The BLS does count those people, and includes them in an incidental tally, but does not release this larger number as their official figure.

Inflation: Over the past 30 years, the US government has changed the way it calculates inflation more than 20 times. Each change made inflation seem slower, less significant, than it really is. The rest of the inflation story is told in another article near this one.

Growth: The US redefined GDP in 1958 to treat government as enterprise, giving a more prominent role to spending by the Federal, state, and local governments. However, did governments spend tax revenue or borrowed money? Is sinking into debt economic growth? Is transferring money from citizens to politicians economic growth? The citizens were going to spend or invest those same dollars, often more productively; e.g., private schools give more bang for the buck than public schools. Even the graft in military spending gets included; yet is any greater spending for weaponry, which hopefully will never be used, truly economic growth, the same as greater spending for food, clothing, and shelter that consumers will use?

Switch from money flowing from capitol treasuries to money flowing into downtown skyscrapers. Nigh four decades ago, the government shifted their estimates of so-called fixed capital—buildings and land. Of the two, only buildings are manmade capital; land is cosmos-made and so not actually “capital” at all. In 1976, the statisticians quit using the prices that the buyer paid and began using the price the assessor gave property for the year of the “indicator”. Sure, this move does capture the impact resulting from people with money-to-burn speculating in real estate. But using the higher price also makes land seem too valuable, too rewarding, an ideal object of speculation, something crucial, something to be sheltered. Indeed, it is politics—favorable rules and spending by governments—as much as anything else that enables inflationary “housing” (location, actually) bubbles.

Next, in 1999, government expanded its definition of bank “services”, swelling the figure for finance. Finally in 2003, government paid the same favor to insurance “services”. And thus the official obeisance to FIRE (Finance, Insurance, & Real Estate)—now the biggest category in the GDP—was complete.

The Big 3 Should be The Big 5

The three main official statistics track, after a fashion, the activity of the three classical “factors in production”:

  • GDP for land; when people spend and earn more, they use that new largesse to bid up location values;
  • unemployment for labor, obviously; and
  • the Consumer Price Index (CPI), their measure of inflation, for capital.

What they sweep under their rug is that a rising cost of living—or shrinking purchasing power of the dollar—correlates with debt. The federal, state, and local governments are deeply in debt, but not as much as private business and consumers. And to whom are they all in debt? To lenders, of course, who are the Great Whites among the capitalists.

Taking a broader view, social order can be seen as a fourth factor in production. Well, not in production so much as around production. Nothing happens outside a context, everything that happens, happens within an environment. Laws, customs, and paradigms are the context in which production occurs. For example, if it’s customary for society to use slaves, economic output is low. OTOH, if society uses consensual exchange, output is high. So output can measure freedom. And spending on police and military can measure slavery. And both require money, so taxation—proposed as a fourth main indicator—can measure the cost of law and order. Subsidies, divided into “guns vs. butter”, can measure the benefit of this new fourth factor.

Reporting only their chosen “indicators”, government distracts the public from wondering about what really matters, like, is the economy serving us, or we it? How could we tell? Our public servants would tell us the figures for leisure, a fifth and final main indicator.

Better Sources, Better Indicators

If you want the real GDP, the true employment rate, and the actual inflation pace, to whom can you turn? Who’s crying the emperor wears no clothes? Try Shadow Stats. Hear them on GDP, on unemployment, and on CPI. And if you find another lone voice in the wilderness, do let us know.

What about what should be the king of indicators—leisure? (What else is an economy supposed to be for?) There is an official stat, probably accurate. It says we spend 45 minutes a day socializing with friends, and four times that watching TV. That saddens me, in two ways. TV is merely escapism. And those few hours, compared to the many hours at work, in an economy yielding so much abundance (especially using so much automation), is simply irrational.

This official datum for leisure means the economy is working, even if it is over-working us. We need a new social order—new laws and customs—that works to distribute our social surplus as well as our economy works to produce it. A shrinking workweek—available now—would indicate that.

Reporting only their chosen “indicators”, government distracts the public from wondering about what really matters, like, is the economy serving us, or we it? How could we tell? Our public servants would tell us the figures for leisure, a fifth and final main indicator.

Truly inexcusable is the official failure to measure basic economic reality, like our spending for things never produced, namely land. Nor do they publicize the concentration of ownership of land and wealth. They downplay the loss (or gain) in leisure. Everything fundamentally relevant, they overlook.

© Text Copyright Jeffery J. Smith rights reserved.
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