In regard to your editorial of Jan. 21 concerning U.S. economic statistics and policy: While your main point is well taken - i.e. that economic statistics compiled and reported by the federal government are imperfect and may have serious flaws - I cannot agree entirely with the conclusions you draw.
First, a minor point. You state that incomplete information leads to economists spouting "meaningless gobbledygook." Let me assure you that the economics profession is well aware of the deficiencies of the data it deals with on a day-by-day basis. The empirical branch of the profession has developed and continues to develop ways of gleaning useful information from incomplete or even biased sources of information.Obviously incompleteness in data is something we wish we didn't have to deal with. But that does not mean studies based on such data are "gobbledygook," anymore than incomplete or inaccurate information on the quake in Kobe, Japan, makes stories in the Deseret News based on that information "gobbledygook."
The problem you point out with the data which is of most concern is that good data are compiled and reported slowly, while economic forecasts are demanded quickly. Since data reports are often revised substantially after their first release; this means that the most recent data reported by government agencies are the least accurate. As you point out, this leads to poor forecasting ability. Studies based on data which have had time to be compiled correctly are less prone to this criticism.
The fact is most economic forecasts are bad in the sense that they do not consistently predict what will happen to the economy with tight accuracy. The problem, however, is not attributable to the lack of good data. Rather, the problem lies with the uncertain nature of the world. Economic forecasts cannot predict random events which can and do alter the economic climate dramatically. These unpredictable events are often more economically important than those predictable even from the best economic data.
Would better CPI data have helped predict the Iraqi invasion of Kuwait? Would the most precise economic information available on GDP have helped predict the election results of last fall?
You conclude your editorial by stating that since the federal government relies heavily on economic data in formulating economic policy, we need data that is "as precise and up-to-date as modern technology can make it." While your prescription is expensive, it is perhaps the conclusion we must draw if we assume that the federal government must continue its attempts to "fine-tune" the economy.
A far better solution, however, would be to let the economy manage itself, with a minimum of governmental interference. In that case, data inaccuracies will not have the avenue of government policy to transform them into real problems.
Kerk L. Phillips
Provo