Friday, May 23, 2008

Cooked Geese

Today is Friday, 23 May 2008.

As anyone who has studied economics or USA/USE government statistics can tell you, the three official measures upon which most Americans base their view of the nation’s economic health are, unbeknownst to them, largely fiction.

For example, beginning in the Kennedy administration, the jobless rate (U-3, one of six unemployment measures) has been increasingly distorted by the simple expedient of subtracting certain categories (e.g., “discouraged workers” and “marginally attached workers”) from the total number of unemployed. If you’ve ceased to look for a job because there are none in your area for which you are qualified, you are classified as “discouraged” and disappear from the ranks of the unemployed.

At any given moment, the true number of unemployed is between two and three times that of the official (U-3) number.

Similar manipulations have degraded the Consumer Price Index and the Gross Domestic Product. In the former case, the magic is achieved by eliminating from the “core” inflation rate the values for food and energy, historically the most volatile. Thus, while everyone is in fact paying more for gasoline and milk, the official inflation rate declines to recognize the fact.

While the jobless rate and the CPI are distorted downwards, the GDP is distorted upwards by simple bookkeeping fiddles. Last year, 15% of GDP was created by arbitrarily assigning quantities to values such as the birth/death rate of businesses and a truly scrumptious dodge called “imputations”. (The money one saves by owning a house, instead of renting, is “imputed” to homeowners as if were cash income they actually received.)

(This was all brought to mind by a marvelous article in the May issue of one of my favourite magazines, Harper’s: “Numbers Racket: Why the economy is worse than we know”, by Kevin Phillips.)

As the man said: Lies, damned lies, and statistics. Read ‘em and weep.


Anonymous la_libertine said...

Smoke & mirrors, baby!
WTF indeed.

9:38 PM  

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