Tags: Economy

Economic Data Becoming Unreliable

Thursday, 17 Jul 2014 12:38 PM

By Scott Rasmussen

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
The economic data that drives so much political debate is becoming increasingly less reliable in the digital era.

That's because new technology makes it hard to compare the 21st-century economy to anything that came before it.

How, for example, do you compare the living standards of a middle-income American in the 1970s with a middle-income American today? The 1970s version had no cellphone, no Internet, no digital camera and was limited to watching one of three television networks.

That sounds primitive by today's standards.

However, official Census Bureau data suggest that the median income in the United States today is barely higher than it was in the late 1970s. Income stagnation may make a great talking point in a campaign commercial, but it is out of sync with reality.

I remember the '70s. The notion that we're no better off today is silly.

When data and reality collide like this, it's safe to assume the data are wrong.
The problem is not with the government statisticians, who do a fine job generating lots and lots of precisely accurate data. The problem is that the data they are asked to generate are more appropriate for the 1970s than today.

"During periods of major technological change," Yale Professor William Nordhaus noted, capturing "the impact of new technologies on living standards is beyond the practical capability of official statistical agencies." What's more, the failures of official statistics are not random; they always tend to underestimate the real improvement in living standards.

In the 1990s, Nordhaus presented fascinating research built around measuring the cost of lighting a single room. This was a measure that didn't depend on technology.

Obviously, lighting a room with an open fire or candle is different than with electric lights or a flashlight app, but the consumer benefit was the same. This gave the academic a tool to see how much work was required to pay for lighting a room.

Among other things, he found that "an hour's work today will buy about 300,000 times as much illumination (than) could be bought in ancient Babylonia."

By comparing centuries of such figures with official measures of living standards, Nordhaus reached a stunning conclusion. Traditional statistics understate economic growth "by a factor between 900 and 1,600 since the beginning of the 19th century."

In other words, since America's founding, its standard of living has increased about 1,000 times as much as the official records indicate.

There is no doubt the same phenomenon exists today. Consider the smartphone. What would you compare it to from the 1970s? A landline phone? A calculator? A camera? Board games? The cost of mailing a letter?

The true answer is that there was nothing even remotely comparable to a smartphone in the 1970s, and our standard of living is much higher today because we have it.

What all this means is that most political debates based upon official economic statistics are like an episode of "Seinfeld," a show about nothing.


Scott Rasmussen is founder and president of the Rasmussen Media Group. He is the author of “Mad as Hell: How the Tea Party Movement Is Fundamentally Remaking Our Two-Party System,” “In Search of Self-Governance,” and “The People’s Money: How Voters Will Balance the Budget and Eliminate the Federal Debt.” Read more reports from Scott Rasmussen — Click Here Now.
 
 

© Creators Syndicate Inc.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Ex-senator Larry Craig Ordered to Pay Back Campaign Funds

Wednesday, 01 Oct 2014 06:23 AM

Former Idaho Republican senator Larry Craig has been fined for illegally using campaign funds to cover his legal expense . . .

Cop Killer's Commencement Address Angers Officer's Widow

Tuesday, 30 Sep 2014 23:17 PM

The decision to allow a man serving a life sentence for killing a police officer in 1981 to deliver a college commenceme . . .

Michelle Bachmann: 'Impossible' Obama Didn't Know About ISIS

Tuesday, 30 Sep 2014 21:21 PM

It is "absolutely impossible" President Barack Obama was unaware how powerful the Islamic State (ISIS) had become before . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved