Thursday, June 11, 2009

The case for independent statistical agencies

It is by now well established and accepted that the judiciary, the press and central banks should be independent from the government. What about statistical agencies? They inform the public about the state of the economy, so why would the government want to fool the public in this regard? We all know about the bogus statistics that former Eastern Block countries were spewing out, but nobody was fooled by that as it was common knowledge they were uninformative.

Facundo Albornoz, Joan Esteban and Paolo Vanin give the example of a situation where the government would want to fool people. Suppose there are distorting income taxes. By revealing wrong information, the government may want to counter the distortion, i.e., add a new distortion. It can increase the labor supply by hiding information in recessions, thus potentially canceling the decrease in the labor supply due to the income tax distortion. That would be precisely the opposite of last Fall when Paulson and Bernanke where claiming everywhere we were on the verge of a Great Depression. This may still happen, but they can be blamed for making it happen, following this theory.


Real Estate in Toronto said...

Very interesting idea and I must agree. Statistical agencies have a huge influence on people along with media. It's the strongest weapon in the war for power so why give it to the government. Thanks for an interesting read.

Take care, Elli

Nexpider said...

I agree with you the Statical agencies have huge influence on people it is the strong agencies.