Price Indexes (13) Shooting the Messenger

Some economists are pretty hard on statisticians. They see them as a government tool for manipulating the masses. This statement is a little unfair. Most of the statisticians that I know are very independent thinkers determined to measure the economy accurately. Most have an obsession with detail and a fixation with doing things accurately (other personality types find the work boring). They put enormous effort into producing correct estimates.

Statisticians actually have a prophetic role. They are often the only ones who can expose the full impact of government’s monetary policies. The central bankers are the ones who inflate and devalue the currency. I suggest that we concentrate on getting rid of them, rather than attacking those who measure the damage they do. Until we have sound money and inflation disappears, we will need statisticians to measure the impact of monetary manipulation.

I agree that a government monopoly is wrong and dangerous. The best way to get reliable statistics would be to have various providers competing in an open market for statistics. This is what economists should be arguing for, rather than undermining the practice of statistics.

Developing measures that are as accurate as possible is not easy, and there will always be debate about methods. Statistical journals are full of debates about the merits and problems of different methods, including hedonic adjustment. Rather than complaining about the work of statisticians, economist should be glad that they are exposing the damage done by monetary inflation.

Another good example of the prophetic role of the statistics profession is the manual for Government Financial Statistics. This is a system developed by statisticians for measure government income and expenditure. This system exposes the multitude of sins that are hidden by the cash based accounts kept by most modern governments. If all governments adopted these standards, there economic management would be much more transparent.

To those looking for a conspiracy, I am sorry guys, but I don’t think it is there. You should about be careful about the way you use statistics, and make sure that you understand what they measure, but encouraging conspiracy theories adds more heat than light. Statistics and statisticians actually expose the consequences of politician’s actions.