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Tuesday, February 26, 2008

The Problem of Accuracy of Economic Data Philipp Bagus

Here are two quotes from this article which appeared on mises.org.

"With all these difficulties [of measuring economic data] in mind, would it not be very important, not to mention more honest, to provide an error estimate for national income statistics? However, nothing is said about the degree of accuracy in the publications of the national income statistics. We have to rely on our own estimates about their accuracy or about the expertise of those who make these judgments."

AND

"Simon Kuznets, an expert on national income statistics, argues that an average margin of error for national income estimates of about 10 percent is reasonable. [5] Considering this, it makes no sense to state changes in GDP with an accuracy of 1/10 of one percent! That is like having a yardstick and stating that a certain distance would be 4,312 yards. It aspires to an accuracy that is impossible. However, many economists take national income statistics at face value and use them, for instance, to confirm or falsify econometric models of the business cycle. In the light of Morgenstern's analysis this is completely futile."



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