Thursday, March 02, 2006

How do we know how the economy is doing? 

By spending money, of course. Do we spend enough to find out? Menzie Chinn takes a look. The key quote:
The cost of skilled/educated labor necessary to gather and analyse the data is going up faster than the overall CPI, but the cost of information and communication technology is going down rapidly. Overarching this discussion is the increasing complexity of the U.S. economy and the interactions with the rest-of-the-world. As many of the previous posts have highlighted, many of the statistics we currently have now are not up to the task of tracking the economy.

But this assumes that all the data we need must be collected by the government. If, say, BLS was shuttered, wouldn't there be another survey that estimated unemployment using private means? It's not like privatization hasn't already happened. Take a look at the history of the NBER, or the privatization of U.S. leading economic indicators.

The question then becomes: is there more private information about the economy now, replacing that which the government has collected?