A call for better macroeconomic statistics

As the economic crisis continues, one blogger suggests American macroeconomic statistics are “pretty weak” today:

In particular, the data coming out of the Bureau of Economic Analysis at the beginning of 2009 was way off. Here’s Cardiff Garcia, introducing an interview with Fed economist Jeremy Nalewaik:

The initial GDP estimate for the fourth quarter of 2008 showed that the economy contracted by 3.8 per cent. It was released on January 30, 2009 — about three weeks before Obama’s first stimulus bill passed. That number was continually adjust down in later revisions, and in July of this year the BEA revised it all the way down to a contraction of 8.9 per cent.

The BEA is happy to try to explain what happened here — but whatever the explanation, the original 3.8% figure was a massive and extremely expensive fail. It was bad enough to be able to get a $700 billion stimulus plan through Congress, but if Congress and the Obama Administration had known the gruesome truth — that the economy was contracting at a rate of well over $1 trillion per year — then more could and would have been done, both at the time and over subsequent months and years. Larry Summers warned at the time that the risks of doing too little were much greater than the risks of doing too much; only now do we know just how right he was on that front. (And even he didn’t push for a stimulus of more than $700 billion.)…

When I told Cardiff that the status of macroeconomic data-gathering has been declining for decades, I was making two separate statements — first that the quality of statistics has been declining, and secondly that the status of economists collating such statistics has been declining as well. Once upon a time, extremely well-regarded statisticians put lots of effort into building a system which could measure the economy in real time. Today, I can tell you exactly how many hot young economists dream of working for the BEA on tweaks to the GDP-measurement apparatus: zero.

Sounds like there is work to do. This commentator seems to suggest the government needs to offer the kind of money that would attract economists to this task. Are there economists out there right now who could handle this job and all it takes it some more money?

If we were looking at the causes of economic crises or perhaps what sustains them, could statistics really play a large role? Even with the best statistics, policymakers can still make bad decisions. But I suppose if the foundation of policy, the statistics that we trust to tell us what is really going on or what might, is faulty, then perhaps there is really little hope.

At the same time, I would suggest this isn’t only a macroeconomic problem: the world is complex, we want to tackle difficult problems, we are very reliant on statistical models, and there is more and more data to work with and collect. We need a lot of good people to tackle all of this.

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