Wednesday, November 11, 2009

Better Data

We need better data.

The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.

“We don’t have the data collection structure to capture what is happening in a real time way, or what is being traded and how it is affecting workers,” said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., who has done pioneering research in the field. “We have no idea how to measure the occupations being offshored or what is being inshored.”

1 comment:

John F. Opie said...

This is something new?

The fact that input-output tables don't go down to the 8-digit level should come as no surprise: that is how the system works. No one can pay for it.

It's not a defect: it's a fact of life. If economists want to understand how import substitution works, then they need to model it: this is not trivial, nor will they find anyone willing to pay for it.

National data sucks. Get used to it. It's the only thing we have...