Originally published May 2, 1983
I HAVE BEEN reading with great interest but no sense of urgency (I’ve had it for four months) the Economic Report of the President. It consists of three parts: a moderately tendentious little essay of five-and-a-half pages signed by President Ronald Reagan; an already superseded essay of 135 pages signed by the members of the Council of Economic Advisers; and 125 pages of statistics. The statistics cover more things than you would think possible, starting with “Gross National Product, 1929-82,” and ending with “Unemployment Rate, and Hourly Compensation, Major Industrial Countries, 1960-82. “They’re more fun than the World Almanac and Guinness Book of Records rolled into one.
Entertainment aside, though, I wonder what good they are. If you’ll forgive me for asking a personal question: What use have you made of any economic statistics in the past year? Oh, I know you’ve cited some in debates with your husband or wife or friend. You picked these up from the press or the tube, probably not remembering them precisely; the press had picked them up from the government, probably choosing those that seemed most astonishing and overlooking footnoted qualifications. Or perhaps you listened with half an ear to some claim President Reagan made, or to the rejoinder from Speaker Tip O’Neill. I don’t mean to disparage your intelligent concern with public questions. I am merely asking about the practical use you have made of economic statistics in your daily life.
Speaking for myself, I will say that there are two figures I have paid some attention to. Having enough foresight to peer a short distance ahead to my retirement, I’ve glanced from time to time at the interest rate and the unemployment rate. Up until last May or June the interest rate was preposterously high (it’s merely ridiculous now), making bonds the investment of choice unless a surge in the economy could be expected, and the scandalously high unemployment rate suggested this was unlikely. Anyway, I made my decision and I’ll have to live with it.
Although those two rates have loomed large in my thoughts, they are insignificant among the available masses of other information. Indeed, all I had to know in dealing with a problem like mine could be learned from following the daily news, which gave me the quotations on Treasuries and municipals and also reported on unemployment.
I recognize, however, that there was more going on here than that. The people who were, in one way or another, involved in setting the interest rate may very well have studied and based their actions on all kinds of numbers. And the Bureau of Labor Statistics did not count the noses of the unemployed, of course, it extrapolated from a carefully constructed sample.
Yet it must be acknowledged that the results were poor excuses for all the work that went into compiling the underlying data. The interest rate was, as I have said, preposterous. The unemployment rate was, as I will now say, gravely flawed, in that it excluded the unquestionably unemployed – that is those who’ve been out of work so long they’ve quit looking. (The figures for the New Deal years, by the way, count everyone in the CCC,WPA and the rest of the alphabet soup as unemployed. So much for the government as the “employer of last resort.”)
Reflecting on the foregoing, I am emboldened to wonder if it would be proper to paraphrase what Oliver Wendell Holmes (Sr.) said about the medicine of his day: “I firmly believe that if the whole materia medica as now used could be sunk to the bottom of the sea, it would be all the better for mankind and all the worse for the fishes.” Could it be that the fishes would also choke if the National Bureau of Economic Research, the Bureau of Labor Statistics, the Census Bureau, and their ilk, together with their computers, were similarly lying asleep in the deep?
As a first guess, I’d venture that nothing much would change, except in index-related activities, possibly in big business (what John Kenneth Galbraith calls the planning system), and naturally in some schools of economics. And those are precisely the sectors that are in greatest disarray today.
The indices I could happily forgo, for reasons set forth here last year (“Let’s Put Indexing on the Index,” NL, April 5, 1982). But if we didn’t have these series of numbers, would the President, the Congress and the Federal Reserve Board still be able to do their job of maintaining a prosperous economy with stable prices? Would the managers of the steel and textile and motorcycle industries be able to continue leading us to new heights? All I can say in answer to those questions is, it hurts to laugh. Since laughing at our leaders is a cheap shot (and since they’re our leaders because we follow them), I hasten to add my opinion that whatever they’ve done wrong could not have been corrected if they’d had more statistics.
I’m conscious of sounding like a troglodyte, and maybe I am one; nevertheless, I fail to see how either our successes or our failures have been due to the figures we’ve collected or not collected. Our failures – the Volcker Depression chief among them-have been spectacular, and it is an indisputable fact that our statistics haven’t protected us. Casey Stengel once complained at colorful length of a player who failed to catch a pop fly in spite of an expensive new glove. “At least, I didn’t see him catch it,” Casey added. The same can be said of our expensive statistics: At least, we haven’t seen them protect us from depression. So what good are they? The statisticians answer that rhetorical question with their own: Isn’t it better to know something, no matter how little, than to know nothing at all?
WELL, that depends. “It ain’t the things we don’t know that hurt us,” said Artemus Ward, another of our wise men, “it’s the things we know that ain’t so.” One of the things we know that ain’t so is the Gross National Product. The GNP is treated with such reverence that we talk about it in capital letters. It is nonetheless riddled with error, and is not only irrelevant to responsible public policy but is often positively subversive of responsible public policy.
This subversion is partly because of what the GNP includes and partly because of what it excludes. Let’s consider some examples:
Item: The GNP, though it is an aggregation of prices, is indifferent to values. Thus the $14 billion budgeted for the space shuttle looks the same to the GNP as would $14 billion spent for public housing. There is no doubt that we need the 150,000-250,000 housing units we could build with that amount of money, and there is little evidence that our lives will be greatly improved by putting additional communications satellites in orbit. Moreover, the public housing would provide many more jobs than does the space program. But the GNP doesn’t care, and neither do those who base their policies on the GNP.
Item: Not so long ago Brazil was the wonder of the Western world because of its skyrocketing GNP. Bankers who couldn’t see their way clear to lending money to New York City elbowed each other in their eagerness to press our savings on the miracle workers under the sign of the Southern Cross. Now the same bankers are nervously (yet still self-righteously) preparing the way for the Federal government to bail them out with some more of our money (tax money, this time). Nor is that the worst of paying attention to the GNP. Far worse is the fact that while the Brazilian GNP was soaring, the squatters in the hillside barrios behind Rio and the sugar workers in the northeastern provinces, who were already abjectly poor, became oppressively poorer. Trickle down worked there no better than it ever does. The GNP didn’t care, and neither did those who based their behavior on the GNP.
Item: Johns Manville made a triple contribution to the GNP by manufacturing things out of asbestos. First, the asbestos products swelled the GNP when they were made and sold. Second, the resulting leukemias made work for doctors, nurses, hospitals, pharmaceutical manufacturers, insurance adjusters, and lawyers, with all those activities swelling the GNP. Third, the removal of asbestos installations made work for the removers, and that swelled the GNP. It was all the same to the GNP, and to those (like some recent officials of the Environmental Protection Agency) who base their policies on the GNP.
Item: The quip attributed to Mark Twain about two women “who earned a precarious living by taking in each other’s washing” points to the comprehensive inability of the GNP to measure the contributions of housewives and househusbands, volunteer workers of all kinds and both sexes, and unpaid scribblers like me. This means that somewhere between a quarter and a half of the work done in the country is not counted. The GNP can’t think how to count it, so it forgets about it.
In short, the GNP has only a tenuous and accidental relation to the way people live, and not infrequently the relation is inverse. Winston Churchill‘s metaphor, later taken over by John F. Kennedy, had it that a rising tide raises all ships. This may be true of tides and ships; the GNP is not the tide, and we are not ships.
Won’t I agree, you may ask, that the GNP is useful in studying the performance of our economy, as they say, over time? The answer is, no, I won’t because there is no point in comparing meaningless figures. (As Tolstoy might have put it, all meaningless figures are meaningless in their own way and therefore are incommensurable.)
Then what would I do to fix the GNP? Nothing, because I don’t think it can be fixed. If I don’t think it can be fixed, what would I put in its place? Nothing, because the problems to which the GNP was supposed to give automatic solutions don’t have such solutions.
When we say that it is better to increase Aid to Families with Dependent Children than to recommission some battleships that were next to useless even in World War II, our saying depends not at all on the GNP. Again, when we say that chemical companies shouldn’t pollute the inland waterways, that saying depends not at all on’ the GNP. Yet again, when we say we need the Equal Rights Amendment, that saying depends not at all on the GNP. Finally, any manufacturer of detergents or building materials or anything whatever for a broad market is a fool if he bases his plans on the GNP: What should matter to him is whether there are enough employed people to buy his products.
The fact is that the GNP is either irrelevant or adverse to every important question. Every important question is specific, and has a specific answer that requires specific thought and judgment.
The New Leader