Two separate articles today comment on the same underlying theme: that much of government economics statistics are wrong.
The first, from Gerard Jackson , points out the problem of trying to make meaningful analysis from aggregate data, which can be misleading. He says:
“The problem is the Keynesian tyranny of aggregates. The vast majority of economists have come to believe that studying certain aggregates, i.e., employment and GDP aggregates, they can discern what is happening to the economy. These magnitudes or macro-variables as they are sometimes called are grossly misleading. Because they are treated as real entities that interact with each other and lend themselves to statistical measurement and testing their micro-foundations are invariably ignored.”
The second article, by John Crudele of the New York Post makes a few points, the most important being the danger of false assumptions. Specifically, he says it is a leap to presume that a rise in GDP will translate to lower unemployment as it has in the past:
“Your biggest mistake is calculating job growth based on the supposed expansion of the nation’s gross domestic product. Economists are assuming that GDP growth figures being released by Washington are correct. In the first place, even if you believe the 8.2 percent annual GDP growth reported in the third quarter, you already know that the fourth-quarter growth figures will probably be half that amount. But even that 4 percent annual growth is being pumped up in Washington by some false assumptions about inflation. If you keep inflation statistics down artificially – and Washington has done that nicely for a decade – then you keep GDP up.”
Posted by Mike Runge