Data and Dogma in Public Policy

"Data and Dogma in Public Policy," Journal of the American Statistical Association, 1999.

Abstract: Statistics play an important role in the affairs of state. The development over the last 70 years of national economic and product accounts, the creation in 1946 of a Council of Economic Advisers, and advancements in the collection and analysis of economic data have strengthened the ability of policy makers to understand the forces that affect the U.S. economy, anticipate economic changes, and take steps to minimize the adverse effects of market fluctuations. Although it is often correctly said that the business cycle has not been repealed, it is also true that in the last half-century measurement tools have helped produce a remarkable record of virtually uninterrupted economic growth in the United States. Yet problems remain, particularly because data in the social sciences are inherently more prone to error than data in the natural sciences. Perhaps most important, errors in measuring consumer prices can have enormous consequences for the economy and body politic, because the Consumer Price Index (CPI) is used to index Social Security benefits as well as a wide range of federal retirement payments and the tax code. Small differences in measurement have large consequences for federal finances. For example, the Advisory Commission to Study the Consumer Price Index established by the Senate Finance Committee in 1995 estimated that the CPI overstates changes in the cost of living by approximately 1.1 percentage points per year. Correcting this error would “save” the Federal government roughly $1 trillion over 12 years. This measurement error, along with other factors, has contributed to a huge transfer of resources from younger to older age cohorts. However, it is difficult to fully assess the consequences of this resource transfer, because data are not collected or well organized for this purpose. This article suggests that the creation of a Council of Social Advisers, akin to the President’s Council of Economic Advisers, could improve the ability of the Federal government to better address the nation’s social problems. The article also points out that despite repeated attempts over a period of many years to coordinate the collection, analysis, and use of statistical information by the U.S. government, the Federal statistical infrastructure remains poorly organized. The article also suggests that progress in addressing this continuing problem could be made through enactment of legislation to establish a 15-member commission to study the Federal Statistical System and make recommendations for its improvement. The author, along with other members of Congress, first introduced such legislation in Congress in 1996.

Taylor & Francis