Interpreting Government Data: Is a Conspiracy Afoot?
Nearly everyone agrees that there are many economic issues and that government policies are an important part of analysis and forecasting.
So much for the non-controversial statement.
Investors Need to Know
As investors, the key questions we all face involve interpreting data. We want to know whether there are signs of a change in the economy. We want to know what data can be trusted.
When it comes to interpreting government data, we find three different groups:
- Those who see a conspiracy around every corner. They believe, to take a prominent example, that the Bureau of Labor Statistics (BLS) is a pawn of any President. They watch too many "B" movies and have never taken a class in political science. They have a ready audience of those who already share their opinions. It is like the Rush Limbaugh of financial blogging. We have no idea how much market power these folks have, but we have no hope of convincing them, whatever our evidence.
- Those who are intent on serving investors and have the purest motives, but who suspect BLS data. This is an honorable group of commentators. We disagree with them. We should all understand that disagreement is OK. It gets issues out in the open for forthright discussion.
- Those who are political science and/or public policy experts. As far as we know, we are alone in this category. The Street seems to feel that there is nothing special to learn from those who actually know about government. We note the many blogging economists and the dearth of blogging public policy or poli sci types.
The Public Policy Perspective
In understanding government data, there are a few key points to keep in mind. Let us begin with a story from our days in Wisconsin. We were once invited to a meeting in the office of a key legislator, the Chair of the key committee with oversight of the state's Department of Revenue. On the wall of his office was a row of pictures — many pictures. One of us inquired about them.
"These are all of the Revenue Secretaries who served while I have been the Chairman."
If you understand this statement, you have taken a long step to understanding how government actually works. For example, President Obama cannot dictate to the executive agencies on data, nor to legislators on policy.
The single most important concept to grasp about those generating government data is that it is NOT like a private company. The government workers have tenured civil service jobs. The administrations come and go, but they have career positions. If you talk to them, as we have, you would understand that their career objectives are geared to a high standard of professionalism. They do not flip around with each new administration. They certainly do not sit around tweaking data to fit the needs of "bosses."
Anyone who suggests this is showing a lack of experience with actual government agencies. As part of our service to government, we worked with these people. They all knew that they would be around long after the political leaders were gone. They were doing a job as well as they could.
Now more than ever it is a time to understand economic data. There are many who disparage official reports. It empowers them to use non-quantitative evidence. Following this lead is a mistake for investors who are wondering when the economy will turn. If one is free to reject actual data, the field is open to opinion and preconceived notions. It empowers those who do not do quantitative research, relying instead on impressions.
It is one of our missions at "A Dash" to engage those whose disagree, but have who have pure motives. We seek to convince them, and through them, their readers. We often send emails to economic observers whose well-intentioned efforts miss the mark.
We will have some future specific posts where we cite those who disagree. This should be interpreted as a mark of respect. If we did not think that these influential pundits sought the truth, we would not bother with them.
We look forward to some constructive discussions. Those who want some good background should revisit this article, where we discussed the conspiracy issue.