How misleading are Economic Stats?

Discussion in 'Economy' started by william the wie, Feb 7, 2011.

?

How bad are the economic stats we use?

  1. They're good

    1 vote(s)
    12.5%
  2. misleading more often than not

    2 vote(s)
    25.0%
  3. a bit of a coin flip

    1 vote(s)
    12.5%
  4. of some but limited use

    2 vote(s)
    25.0%
  5. Who knows

    1 vote(s)
    12.5%
  6. worse than useless

    1 vote(s)
    12.5%
  1. william the wie
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    william the wie Gold Member

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    This is not the usual attack on UE or hedonics but a serious question. The stats put out by public and private bodies have a lot of problems such as not knowing for sure the error rate because of budget constraints. This tends to be a lesser problem with private sources because the customers will not continue to pay for non-actionable intelligence. And there is the secondary constraint of getting the computers needed to figure out what the collected data means when 535 members of congress have input on the purchase.

    There are basically three problems with the use of private source data:

    It has to be available on the market. Value Line and other sources for actionable data on stocks are not cheap and stocks are the fourth or fifth biggest capital market.

    It has to be accurate. Case-Shiller was adapted after the meltdown and it has major problems such as not dealing with amenities, location and sq. footage. However it was such a huge improvement on the previous rental equivalent model (there may be other terms used in your sources) that it has become almost universally accepted. Real estate is the largest capital market.

    It has to be actionable. It is relatively cheap and easy to get most types of insurance, particularly if you don't need it. Insurance/pensions may be one of the biggest capital markets out there. However it is only in the last 4-5 years that anything like comparable policies have been available for anything in insurance.

    Government stats tend to be treated as a big step down from private sources. The Fed, treasury and congress all use different models to figure out what policies to implement. So here is my question, which I have also asked on other boards, how misleading are these economic stats?
     
  2. Toro
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    Toro Diamond Member

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    I think there are a few problems, but for the most part, the stats are pretty good.
     
  3. william the wie
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    william the wie Gold Member

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    Good enough to cause severe injury.

    The meltdown, cause bad housing stats masquerading as decent housing stats.

    The Tech-wreck, cause not subtracting out one time Y2K revenues/expenditures when doing IT projections.

    or as NN Taleb pointed out it usually profitable to bet on models failing.
     
  4. pinqy
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    pinqy Gold Member

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    Where did you hear that? While the error for Employment and Unemployment isn't explicitly published, the parameters are available to do the calculations. I have an Excel spreadsheet set up to calculate the standard errors and different levels of confidence for Employment and Unemployment. I'm pretty sure the errors and error calculations are available for all gov't stats.


    ALL statistics can be misleading for people who have not studied statistics. Many terms, such as Employed, Unemployed are used in a technical sense, while people understand them in a colloquial sense. There are not many in the general public who have studied stats and economics and understand what's being measured, why, and the difficulties and problems with collection and analysis. Hell, some people talk as though BLS has a giant list of everyone in the country and classifies each individual every month. And it seems counterintuitive to many when both employment and unemployment go up or both go down..."How can the UE rate go up when we've gained jobs????"

    And prices....the concept of average weighted price changes seems lost on many. A person will see that their grocery bill has gone up, guess at the percentage (I doubt many if any actually do the hard math), don't take into account any changes in purchasing, just noticing that their bill has gone up "a lot" and then see that the CPI only went up 1%. Somehow they think inflation should exactly reflect their indivdual experience.

    So in short (too late), the stats ARE misleading to the general public, but not to most of the professionals who actually deal with them regularly.
     
  5. editec
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    editec Mr. Forgot-it-All

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    Even if the STATS are NOT flawed, the problem is that STATS seldom tell you the whole story.

    A single swallow does not a summer make.
     
  6. william the wie
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    william the wie Gold Member

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    Also label changing, a continuous DC process, violates all standards of recordkeeping in general and accounting in specifics.

    Then there is compounding error as with Pinqy's battles over UE. The different surveys public and private imply an unacceptable error rate by not tracking closely enough to get anyone to believe that they reflect economic reality with the public surveys in particular highly suspect because they don't even agree with each other. I suspect that this is a budgetary problem but it provides continuous data for the CT crowd.
     
  7. 8537
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    8537 Senior Member

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    Which public surveys don't agree with each other?
     
  8. rikules
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    rikules fighting thugs and cons

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    stats can be manipulated to present a lie as the truth

    or just to present the image you want no matter how incorrect that image is

    for example;

    lets say 1% of the population has 99% of the wealth

    the ruling class might not want you to know that

    so

    instead of telling you "1% has 99%"

    they give you numbers that you are more comfortably with...

    like...."the top 10% of the population has 50% of the wealth"

    BOTH of these statements might be true but the first one might piss you off where-as the second one doesn't seem so bad....
     
  9. pinqy
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    pinqy Gold Member

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    But they shouldn't agree precisely...different surveys measure different things in different ways. General trends do tend to track, and the Gallup UE rate and the BLS not seasonally adjusted rate look to me like they're within each other's margins of error, even though the methodolgies are radically different.

    The ADP survey is only of their own customers, so while large, is not really representative of all businesses, so BLS and ADP are off and on as far as correlation.

    Which particular surveys were you thinking of?
     
  10. uscitizen
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    uscitizen Senior Member

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    Yep anyone who has worked in mid level management or above in a large corporation knows how statistics are "massaged" to show what you want them to.
    another thing about stats is that they are ALWAYS past tense.
     
    Last edited: Feb 8, 2011

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