Measurement in Economics
Possible Reforms
Several reforms are likely necessary to encourage the roles we see for economists to play in contributing to a system of measurement for economic research. Not surprisingly, this encouragement is grounded in creating an incentive-compatible framework that encourages continued participation in a collective evaluative process.
To increase the benefits to contributing, journals might require that empirically based articles contribute to a common structure as a condition of publication. The programs of national meetings of economists could include sessions explicitly targeted to data improvement. Social science funding organizations could require contributions to data be listed in a manner similar to publications. The profession could agree on standardized citations of data, like publications. Approaches such as these would increase the returns to individual investments in building data systems.
The cost of documenting and disseminating data needs to be reduced. Progress in this direction would be eased by improved training in graduate programs in “data science,” as well as in econometrics.
Investments could be made in data centers that can be accessed from individual researchers’ desktops. Such centers could be used to create collaborations that combine knowledge about data (through metadata documentation), augment the data infrastructure (through adding data), deepen knowledge (through wikis, blogs, and discussion groups), and build a community of practice (through information sharing).
It also has been argued that a shortage of money constrains economic measurement. Certainly, there are ongoing systems of measurement that could be improved if additional funds were available, and there are new systems that could be started. But, in general, without a more basic change in attitude toward measurement, much money could be spent for far too little benefit. Where measurement is not noticeably valued as an activity, only highly altruistic people and those without competing opportunities will be likely to participate.
Altruism is probably not a reliable, sustainable force for any particular system of measurement. Failure to attract sufficiently talented people will have heavy long-run costs not just for economic research, but also for economic policy that depends on data. Failure of the profession to engage with measurement is likely to lead to further deterioration of existing measurement systems and inefficient development of any new systems.
A proactive response requires collective action: leadership from important organizations of economists and the active and enthusiastic engagement of the broader economics profession. In our judgment, failure to respond will seriously reduce the capacity and credibility of the economics profession.
Editor’s Note: The opinions expressed in this column are those of the authors and do not necessarily reflect the views of the Board of Governors of the Federal Reserve System or the National Science Foundation.
Science Policy Actions
The ASA signs a letter opposing a Senate amendment to add a question to the Decennial Census questionnaire in the 11th hour because of deleterious effects to the census.
The ASA president sends a letter of support to the president of Sociedad Argentina de Estadística for his efforts to defend national statistical agency independence.
The ASA signs letters to President Barack Obama in support of a robust fiscal year 2011 NIH budget request and with a pledge to support the administration’s STEM education efforts.
The ASA signs a letter to Congress in support of the fiscal year 2010 U.S. Census Bureau budget.
A sixth Statistical Significance, titled “Statistics Aids in Drug & Device Development,” is finalized.
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The problems of data and measurement lead to mis-calibrated analysis results. “Employment” data does not reflect what ordinary people think of as the characteristics of a “real job,” and has never been officially measured in a way that would make sense to families when they discuss “real jobs” in private conversation. “Unemployment” data excludes information maintained by the Bureau of Labor Statistics on discouraged and underemployed workers that was originally in the unemployment measure. The “CPI” incorporates adjustments to the specification of the original CPI measurement such that it now reflects only one-half of the loss in purchasing power of a dollar since 1965. The official “poverty level” does not pass an elementary straight face test in relation to the actual level of need in families today, including families at double and triple the official poverty level. All of these changes create a Potemkin village of official statistics. They are the best we have because they are the maintained time series statistics. But, for analysts, they do not reflect reality “on the ground,” nor do they reflect the perceptions of ordinary people. Many of the corruptions introduced into the federal system of statistics are supported by grounding supplied by economists. For example, the CPI subsitutes “equivalent rental value” of housing so as to remove the investment component of home buying. Yet the home buyer faces the full cost. The cumulative results of these changes is that the current economic damage, as bad as it is stated to be, is seriously underestimated in oficial analysis and the national policy response is seriously mis-calibrated and weak.