Diane Coyle asks if our use of economic statistics is distorting policy and making it focused on the short-term.
When the same question crops up in some very different places, it is a signal of the importance of the issue. In two events recently, participants have challenged the role of the media in the economy. Does the relentless media focus on the quarterly figures on the growth of Gross Domestic Product (GDP) and the constant flow of statistics on the economy lead politics and policy to be overly driven by short-term economic growth at the expense of sustainability or of non-economic values?
This question was posed to Sir Charles Bean at a Royal Statistical Society meeting discussing his current review of economic statistics in the UK. Did he believe journalists placed too much weight on the quarterly GDP figures, one participant asked? After all, there are three separate releases each quarter, a preliminary figure for the quarterly change based on partial data, a revised figure, and a ‘final’ figure with the full detail of the components. Even that ‘final’ figure is subsequently frequently revised. The actual quarterly change, which could be a figure like 0.2 or 0.6 per cent, is itself within the normal range of uncertainty, but the degree of uncertainty is rarely reported.
Should the Office for National Statistics be publishing the figures less frequently, or with much stronger health warnings? Others at the meeting thought the blame needed to be shared with the official statisticians, arguing that they should provide more interpretation with their publications, rather than 70 page notices that journalists and others have to make sense of by themselves. The ONS has also faced criticism for the scale and frequency of the revisions it makes to some statistics, particularly the headline GDP numbers. As one participant complained, “The future is always the same but the past keeps changing.”
One notable recent example came in 2013, when early estimates of the quarterly GDP figures led to the conclusion that the UK was experiencing a ‘triple dip’ recession (a recession being defined as two successive quarters of declining GDP). Not only the third but also the second dip was subsequently revised away. The counterargument is that the media use of the term ‘recession’ had anyway been overblown, given that the quarterly changes in question were of the order of minus 0.1 or 0.2 percentage points.
The second forum was the Greater Manchester Economic Conference, which included a panel on economics and the media featuring three of the UK’s leading economic journalists, Larry Elliott of The Guardian, Ian King of Sky news, and David Smith of the Sunday Times. Interestingly, responding to the same question about media exaggeration of the meaning of key statistics, they agreed that headlines do often overstate the importance of individual economic statistics. But they, too, argued that they report what is published. What other role should they fulfil? What’s more, the conventional media face increasing competition from fact checking organisations such as Full Fact, so there is a greater check on their ability to distort any published statistics, whether that is GDP or more ‘political’ figures such as the migration or benefit claimant statistics.
Discussing the issue with the three types of participant in the debate about economic statistics – the official statisticians, the journalists and the policy and political users of statistics – it is clear to me that all of them feel unable to spring the trap in which they find themselves. Everybody knows that too much weight is being placed on the limited information provided by one quarter’s change in GDP. But journalists write about it because politicians care about it, and they care because they will be held to account for whether or not the economy is performing well on this measure. The statisticians produce it in part because they are required to do so by international organisations, but also because the politicians and media focus on it.
It is also clear (not least because of the surprising degree of interest in my own book and working paper on this subject) that many people from leading policy makers to ordinary citizens feel the focus on short-term growth performance measured by GDP is distorting priorities. Many of the leading experts on the subject favour moving to standardised publication of a ‘dashboard’ of indicators of economic well-being, including growth but also a range of other measures of progress. This includes a high profile international commission led by two economic Nobel winners.
There are also many other issues the Review will need to cover, from the lamentable state of statistics at the sub-national level – vital for democratic accountability in the devolved nations and English city regions – to the way statistics are lagging behind changes in the digital economy. This makes the Bean Review an important opportunity to move the UK’s publication and reporting of economic statistics to a different footing in order to serve the public better. The first hints of its conclusions will come in the Chancellor’s autumn statement.