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On the prowl for insight into economists

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But numbers are to an economist what make-up is to an aging starlet…put on enough of it and maybe the folks won’t see the truth.

Behind every number is a wrinkle… Small numbers hide small ones. Big numbers hide bigger ones. A big number, such as the unemployment rate, has a whole army of other numbers behind it. There are the statistical adjustments…seasonal adjustments…and enough arbitrary definitions to make a corpse look good.

The Bureau of Labor Statistics says that 8.2% of the workforce is unemployed. Simple enough. But what does it mean? What’s the ‘workforce?’ And what does it mean to be €˜unemployed?’ Think of all those people who work for cash…like the Latinos you pick up at gas stations for day work. Are they unemployed? How about the guy who couldn’t find a job, so he went back to school? Is he unemployed? What about the housewife who would like to find a job…sort of…but isn’t actively looking for one? Are these people part of the workforce?

It’s obvious that you can change the assumptions a bit and change the reported unemployment rate a lot. When statistician John Williams looks at the data, for example, he comes up with a real unemployment rate of 23% — almost as high as the jobless rate in Spain.

And yet, the BLS tells us that US unemployment is 8.2%. Not €˜around 8%.’ Not ‘less than one in ten.’ But 8.2%…exactly. And yet, there are so many slippery assumptions lurking in the shadows of this number that it is completely unreliable and practically meaningless. Or worse. It pretends to tell you something…but once you have taken it in you know less than you did before, because what you think you know is largely a fraud.

You could take almost any number used by economists and do the same analysis. Each digit masks a wart…a crease…a frown.

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