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Some Thoughts on Improving Economic Statistics
The rapid pace of change in the American economy is straining the ability of the statistical system to
measure economic performance accurately. Millions of daily private economic decisions rely on
government economic statistics. Economic statistics also drive public policy. The Federal Reserve
relies on economic statistics to formulate monetary policy. The formulation of the budget outlook and
tax and budget policy responses to it are affected by economic statistics. Many programs and tax code
features are tied explicitly to economic statistics, for example, the cost-of-living allowance (COLA)
tied to the consumer price index (CPI) for Social Security, tax brackets, and so on.
Among the areas where economic statistics can and should be improved are the following:
(1) the growth of hard-to-measure services; (2) the timely introduction and valuation of new
products; (3) quality change in goods and services (e.g., health care); (4) technology, human capital,
research and development, innovation and ideas whose measurements are incomplete, at times
primitive, at best piecemeal; (5) workers and households' use of time and health status; (6)
international trade and finance; (7) the formation, growth, and failure of new firms; (8) financial
innovation and changing payment methods; (9) changes in the organization of production and
distribution.
The essay makes eleven recommendations for improving the quality of the economic statistics, ranging from methods to deal with new products and quality change to dealing with the trade-off between timeliness and accuracy to consistency across statistics, agencies, and the private sector to organizational issues including the appropriate division between private and public collection and dissemination of data. Such changes would improve the measurement of economic statistics from national income to inflation to measures of household well-being. The returns from such improvements are likely to be substantial, ranging from better early signals for monetary policy to more accurate COLAs to more accurate economic information on which citizens depend not only for their own private decisions but for understanding and evaluating the nation's economic progress. EXECUTIVE SUMMARY | ESSAY | |
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