Official unemployment, inflation and GDP growth figures do not represent the true picture in the economy. How does the US government get away with fudging the figures? Aren't there enough economists to challenge them on this deception?
Economists? As in mainstream, mostly tenured academics, mostly Keynesian, mostly left of center, mostly government funded? Those economists?Originally Posted by Lethalmiko
Well, even if they have a wrong philosophy, they can at least be honest about the true numbers.Economists? As in mainstream, mostly tenured academics, mostly Keynesian, mostly left of center, mostly government funded? Those economists?
Have you ever encountered a religion before? These things are articles of faith, not fact, and if the facts need to be altered to accommodate faith, so be it.
That is a pity. Economists are trained in the scientific method which includes a whole course in statistics. I am still a little baffled that the government can get away with this since it has serious implications for planning if fake numbers are being used. In the end, one wonders if there will be any numbers left that are actually accurate.
What should be included in calculating the figures? They can be more complicated than they at first seem. Let us for example consider the unemployment figure. Should we just count everybody not working in the entire population and figure that as a percent of the entire population and use that for our unemployment number? If somebody is not looking for work- for whatever reason- should they be counted as unemployed? If I don't want a job right now and you count me as unemployed that does not give a realistic figure of the number of people looking for work. What about babies or retired people or those in prison? Should they count? Students (more and more student do work- at least by high school or college)? Stay at home moms? If you include these then the unemployment rate will be higher but doest that give you any useful information as to whether people actually looking for jobs can find one?
It is true that today there are a lot of people who have given up looking for a job. If they were to suddenly start looking again, the unemployment rate would rise- without any changes in the number of jobs available.
See, the thing is, each of the numbers themselves don't tell us that much about how the economy is doing but if you look at a lot of different numbers, you can get a better idea what is going on. At this point, a growing economy could actually lead to a (temporarily) higher unemployment figure- say the economy grows faster and working becomes more attractive to people not looking for jobs and they decide to seek one. Unemployment rises. So we need to also look at the other side - employment. Are the number of jobs rising? Are they rising fast enough to be able to absorb those seeking jobs?
Maybe the numbers of jobs are increasing but people are taking more than one so you could have the number of jobs go up but the unemployement rate still rise if those seeking jobs stays the same but those with jobs have two or three.
Sorry Zippy but the changes in the way these figures are reported indicates that they just trying to hide the increases. Why is it if we report these figures the way they used to they are much higher? Did we all of a sudden learn something new about unemployment and inflation in the last 50 years?
The only figure that I know of that has had its measure changed over time is the inflation (CPI) calculation. Every ten years, based on surveys from the census, a new "basket" of goods is created to base the number on. That is done because what people buy and what percent of their income gets spent on it changes over time. If we kept the exact same basket of goods and the exact same weightings, it would become even more meaningless over time. For example, in the past people used to spend as much as one third of their income on food so the impact of food prices on the overall inflation rate was .333 of the total number. Today, people spend about eleven percent of their income on food so its weighting is down to .11 percent of the final CPI number. If they kept the same .333 then food price inflation would be overweighted today.
What they buy changes too. A TV when it first came out was maybe 14 inches, black and white and cost a big part of a person's income- and hardly anybody owned one. Today you can spend a bit chunk of your income and get a 50 inch color LCD and most houses have multiple TVs. Celll phones and computers did not even exist. The changing basket does the best it can (it still isn't perfect) to try to capture the differences.
Unemployment is calculated the same way it has been for decades.
Last edited by Zippyjuan; 02-10-2012 at 01:49 PM.
Sorry I am not knowledgeable as I would like to be.
Then what is your opinion on shadowstats.com?
But you do have a desire to learn. That is good.Sorry I am not knowledgeable as I would like to be.
I believe that Shadowstats uses an older basket of goods to try to do their calculation of CPI. The size of their inflation rate may not be the same but it tracks direction (raising or falling) the same as official stats.
http://www.shadowstats.com/alternate...flation-charts
The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.
On his unemployment numbers http://www.shadowstats.com/alternate...loyment-charts he seems to try to add back in discouraged workers who have given up looking for work- but if you are not looking for work should you really be considered "unemployed"? (he is using government figures for the chart:
Some claim that the government removed food and energy from calculating inflation but that is not accurate. They always report two numbers- one with them included and one without.The U-3 unemployment rate is the monthly headline number. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.
Last edited by Zippyjuan; 02-10-2012 at 02:27 PM.
Thanks for your detailed explanation that sheds a lot of light. Perhaps more critical questions for me would be: What is unemployment? Which method accurately measures it according to the definition?
Unless I am mistaken, I have heard Ron Paul say that the way unemployment is calculated was changed during Clinton's administration to remove people who are not collecting unemployment benefits. Apparently, only people collecting benefits are counted, which if true produces distorted figures. Comments?
Paul also says that government expenditure is included in GDP calculations which seems very dishonest because the money comes from taxes which come from productivity. Govt produces nothing.
Last edited by Lethalmiko; 02-10-2012 at 03:33 PM.
Statistics is not a component element of scientific method. Based on the evidence of their behavior, most economists learn no scientific method whatsoever - they are more like math-oriented marketing staff than scientists.
I am not too sure. Statistics can point you to a possible relationship between two things that are not yet understood. You can then narrow down your investigations and finally get to the full answer which you may not have been able to had you not used statistics. Let me give you an example. There are statistics on temperature changes in the earth derived from ice-core data in Alaska. There are also statistics of sun-spot activity. Comparing the two sets of numbers shows correlated variations. From this, one can postulate that global warming is actually caused by the intensity of sun-spot activity. Experiments can then be used to test the hypothesis. Can you say the original statistical analysis was not part of the scientific method?
You simply come up with your own way to calculate unemployment, inflation, etc. That is how those in charge get away with it.
Real unemployment is around 10-11% not 8.3% or whatever the bogus number is today. Hey, let's not count people unemployed and by our equation, the unemployment number goes down.
If Rand does not win the Republican nomination, he should buck the controlled two party system and run as an Independent for President in 2016 and give Americans a real option to vote for.
We are all born libertarians then something goes really wrong. Despite this truth, most people are still libertarians yet not know it.
A statistic, in the absence of scientific method, is propaganda.
Science in the absence of statistics is still science.
Statistics are a tool, just like a gun is a tool. It can be used for good purposes and for bad purposes. Mainstream economists use them to confirm their own biases.
obligatory video
I agree that stats are misused and abused by all sorts of people with agendas. I am just a little unclear about your first statement. A statistic like a temperature measurement is an objective fact in reality and I do not understand how it becomes propaganda of itself under any circumstances. A person can give false explanations about what the numbers mean or suggest, but that is a separate issue from the use of the numbers as part of a larger scientific investigation. Perhaps you can clarify.
BTW I saw that video last year and loved it.
Last edited by Lethalmiko; 02-11-2012 at 03:09 AM.
I'm an economics major and I'm doing some research outside of the classroom in regards to this type of stuff. Zippy, what is your economics background and would you mind chatting about a few topics?
Returning to the earlier point made by Zippyjuan, the International Labour Organization defines unemployment as occurring "when people are without jobs and they have actively sought work within the past four weeks". It seems the US govt does not use this definition in their calculations. How you capture data for the efforts to find work I am not sure. The whole exercise is complicated. In an ideal world, the govt should not even be worrying about such numbers because they would have very little to do with the economy.
If anybody would like more detailed info on how unemployment is calculated- here is the info from Bureau of Labor Statistics:
http://www.bls.gov/cps/cps_htgm.htm
Exerpts:
The basic concepts involved in identifying the employed and unemployed are quite simple:
People with jobs are employed.
People who are jobless, looking for jobs, and available for work are unemployed.
People who are neither employed nor unemployed are not in the labor force.Some people think that to get these figures on unemployment, the Government uses the number of persons filing claims for unemployment insurance (UI) benefits under State or Federal Government programs. But some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits. So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed.
Other people think that the Government counts every unemployed person each month. To do this, every home in the country would have to be contacted—just as in the population census every 10 years. This procedure would cost way too much and take far too long. Besides, people would soon grow tired of having a census taker come to their homes every month, year after year, to ask about job-related activities.Who is counted as employed?
Not all of the wide range of job situations in the American economy fit neatly into a given category. For example, people are considered employed if they did any work at all for pay or profit during the survey week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Persons also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were:
On vacation
Ill
Experiencing child-care problems
Taking care of some other family or personal obligation
On maternity or paternity leave
Involved in an industrial dispute
Prevented from working by bad weather
And some of the survey questions:Who is counted as unemployed?
Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities:
Contacting:
An employer directly or having a job interview
A public or private employment agency
Friends or relatives
A school or university employment center
Sending out resumes or filling out applications
Placing or answering advertisements
Checking union or professional registers
Some other means of active job search
Passive methods of job search do not have the potential to result in a job offer and therefore do not qualify as active job search methods. Examples of passive methods include attending a job training program or course, or merely reading about job openings that are posted in newspapers or on the Internet.
Workers expecting to be recalled from temporary layoff are counted as unemployed, whether or not they have engaged in a specific jobseeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the 4 weeks preceding the interview and be available for work (except for temporary illness).
1.Does anyone in this household have a business or a farm?
2.LAST WEEK, did you do ANY work for (either) pay (or profit)?
If the answer to question 1 is "yes" and the answer to question 2 is "no," the next question is:
3.LAST WEEK, did you do any unpaid work in the family business or farm?
For those who reply "no" to both questions 2 and 3, the next key questions used to determine employment status are:
4.LAST WEEK, (in addition to the business,) did you have a job, either full or part time? Include any job from which you were temporarily absent.
5.LAST WEEK, were you on layoff from a job?
6.What was the main reason you were absent from work LAST WEEK?
For those who respond "yes" to question 5 about being on layoff, the following questions are asked:
7.Has your employer given you a date to return to work?
and, if "no,"
8.Have you been given any indication that you will be recalled to work within the next 6 months?
If the responses to either question 7 or 8 indicate that the person expects to be recalled from layoff, he or she is counted as unemployed. For those who were reported as having no job or business from which they were absent or on layoff, the next question is:
9.Have you been doing anything to find work during the last 4 weeks?
For those who say "yes," the next question is:
10.What are all of the things you have done to find work during the last 4 weeks?
If an active method of looking for work, such as those listed at the beginning of this section, is mentioned, the following question is asked:
11.LAST WEEK, could you have started a job if one had been offered?
If there is no reason, except temporary illness, that the person could not take a job, he or she is considered to be not only looking but also available for work and is counted as unemployed.
Well I think you have unwittingly identified part of the problem. Economics is not a science to which the traditional scientific method can or should be applied. Since there is no way to create isolated experiments or form control groups, conclusions are always tainted by the danger of fase attribution. Economics is instead far better approached as an exercise in logic.
RebelYell
By that "logic," astronomy, geology, meteorology, etc. cannot have the scientific method applied to them, either.
No, that's the ridiculous method that has given us the exercise in dead-end intellectual masturbation that is mainstream neo-classical economics.Economics is instead far better approached as an exercise in logic.
I don't agree with this point. It is simple to create theories and conduct controlled experiments to test them that allow you to draw conclusions about astronomy, geology and meteorology. Simple tests measuring the motion of bodies in the earth's gravitational field confirmed early astronomical theories. More recently particle accelerators have allowed all sorts of experiments to test theories on astronomy. Cloud formation has been experimented on in water vapor chambers etc. Some theories are of course harder to devise controlled tests for - climate change is one, hence all the controversy and confusion around the subject.
Well I'm not sure what you mean by mainstream neo-classical economics - but I'll assume you are referring to the what is more commonly referred to as the neoclassical synthesis, the combination of neoclassical microeconomics with Keynesian macroeconomics? In which case I would argue that what is wrong with this line of thought is not at all an over-reliance on logic, but rather precisely the opposite - it is the over-reliance both onNo, that's the ridiculous method that has given us the exercise in dead-end intellectual masturbation that is mainstream neo-classical economics.
- observing actions in simple situations and attempting to generalize the results to more complex situations
- creating complex mathematical models based on the above which are then tested against statistical data which in turn is interpreted as proof of their correctness when of course it is nothing of the sort.
This was the basis of Mises' argument against empirical observation as the basis of economics, and of course one of the (what I believe are) flaws in Keynes' thinking. It is certainly true that the Austrian method does not allow for quantitative conclusions about the economy, nor accurate preductions of the timing of future events - but then again despite claims to the contrary, nor does the mainstream neo-classical synthesis either... hohoho.
If you are referring to something else, perhaps you could explain?
RebelYell
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