Choosing Sources for Data and Analysis

At “A Dash” we emphasize the need for objectivity in finding and analyzing data.  It is good for public understanding and it is good for your investments.

We disagree sharply with those who allow their own biases to guide their work.  One way to spot such pundits is to see how they treat sources.  Many have embraced the work of a conspiracy theory website that purports to show the “real” economic data, getting rid of the alleged biases and manipulation of government.

We have avoided linking to this site in the past, but our work on misleading data and the cost to the individual investor will lead us there at some point.

Meanwhile, mainstream economists simply ignore this source.  Mainstream media writers, with one prominent exception, have also ignored him.  There is a good reason.  Professional economists choose to deal with those who behave in a collegial fashion– those who share data and who are open to discussion.  Professional journalists demand a good source for their material, and often some independent support.

Despite this general lack of official recognition, the “research findings” from this source are starting to appear in the comments of many others, often without attribution.

A Frontal Assault

In an excellent article, Menzie Chinn at Econbrowser, one of our featured sources, takes a look at some of the data criticisms of the conspiracy theorists.  Covering difficult topics like inflation and GDP measurement, he shows that apparent data inaccuracies result from many things, most frequently the lack of up-to-date inputs.  His conclusions on inflation measurement are similar to our own, (and he also gets a similar reader reaction).

There is no way to do justice to his article in a brief summary, so we encourage everyone to read it.  You will get a link to the Twilight Zone if you want to go there, and some very specific refutation of key points.  The analysis of GDP inputs is especially enlightening and relevant.

Our Take

On the one hand, we have official government data.  This is detailed information on every aspect of methodology, on the components of various data series, and including the ability to examine alternate measures.  Thousands of economists and pundits pore over the data, sharing and exchanging opinions.

On the other hand we have a single source.  Menzie could not do a complete comparison because he did not have access to the data.  In the absence of checking and peer review, mistakes are frequently made.

Here is the irony.  Many of the prominent pundits who are the loudest complainers about the official government data, often using quite colorful language, drink deeply from the waters of the conspiracy theorist.

It is something to think about.

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  • RB July 11, 2008  

    Mauldin had something to say on this as well:
    “A quick sidebar. I am often asked what I think about the inflation numbers produced by John Williams of Shadow Government Statistics. His number, using the methodology to figure inflation that existed in the late 70s and early 80s suggest that inflation in the US is over 11%. That certainly corresponds to what many of us feel like as we see food and energy prices rise. If you are bearish, a high inflation number makes your case easier.
    But let me make a few of you mad. I think what Williams’ number actually do is show that the government did not know how to calculate inflation back then. If inflation were actually 11.8%, then that would mean that GDP was a negative 6% today, and that the US would have been in a recession for several years. That is obviously not the case. You can simply look at corporate profits and tax receipts to see the economy has been growing the past five years.”

  • Jeff Miller July 11, 2008  

    RB. I have been traveling and had not yet caught up with Mauldin’s latest. As he often does, he is willing to use some common sense to challenge the face validity of these numbers.
    Most people hearing or using them have no sense of context.
    As usual, thanks for your contribution!

  • Lord July 11, 2008  

    There are always a lot of kooks around, best to view them for entertainment only.

  • Commuting Distance July 12, 2008  

    Conspiracy theories need and feed ignorance:
    Admittedly offtopic (economics here, Venezuela there) but it gives a parallel construction that may serve in future web encounters.
    There is a follow on piece that highlights a typical indicator: