11/27/2019

There are Numbers, and There Is Reality

"In 1963 Oskar Morgenstern published “On the Accuracy of Economic Observations,” (a 2nd edition vastly expanded from the 1950 edition) in which he took to task the growing complacency with which economic data, in particular that which is tracked, compiled, analyzed and released by governments, was increasingly regarded. Noting that the growth of computing and spread of econometrics were rapidly lending a physical science sheen to what is fundamentally a social science, he outlined both the common problems with economic statistics (purposeful misrepresentations, errors, lack of definition, problems of classification, an inability to design experiments, bespoke interpretations, inappropriate aggregations, and so on) as they manifest in several particular areas: foreign trade, prices, unemployment, national income, and growth rates. 

The very least that could and should be done, Morgenstern concluded, is (somewhat ironically) to emulate the physical sciences, albeit in one of its decidedly less glamorous habits: prominently displaying error estimates alongside all economic data releases."