Truck and Barter: The Data of Truckers and Voters

December 17, 2004

The Data of Truckers and Voters

By Kevin

As most of you know, I'm writing a doctoral dissertation on error in economic data. As motivation I wrote small "stories" exploring ideas and concepts that were useful to me. Unfortunately, most of these stories had to be deleted to leave room for the scholarly material. However, they will be reproduced here in a series entitled "Deletions from a Dissertation". Here's the first:

With persistence, it is possible to uncover data about almost every aspect of the natural and manmade worlds. Do you want to know the number of cars on the street in your town at 3AM, or the number of books in the local library, the number of trees in a local park, or the average number of man-hole covers per Manhattan city block? Some person probably knows or can calculate usefully accurate estimates of these population parameters, because he has made it his business. (Finding this person is another matter). People crunch and store data when the numbers are to be used to monitor or solve a problem they are interested in. Uncovering data for data’s sake is a worthless enterprise.

Equally worthless is generating publicly available data for “problems” that are already “solved” or “monitored” by spontaneous orders, institutional frameworks, business enterprises, and professional cadres. Do you concern yourself with the speed and throughput of national check processing systems, or the efficiency of late-night maintenance operations of a shopping mall, or with ensuring that enough Pop-tarts are on the shelves during a hurricane? Of course not—unless it’s your occupation to manage or work in these positions; the division of labor sets aside a separate private sphere so that check writers, mall shoppers, and Wal-Mart vendors can address their own specific problems without public scrutiny.

Why do some people, passionately driving for “social justice” through legislative or administrative action, acquire data to tackle one perceived injustice, but tacitly trust a whole network of systems that could just as likely endanger them? As a specific instance, why do the same people who daily trust their lives to an engineer who computes bridge stress tolerances, mock an economist who computes an output forecast wildly deviating from consensus? The short answer presented here is that long experience of repeated trial-and-error has created extraordinary expectations of the performance of the engineer, and almost complete unfamiliarity with the actual performance of the economist.
Public data about a system are acquired when people have no basis for trusting that system, regardless of the actual outcomes the system produces.

Engineers have demonstrated the soundness of their theories and data through repeated testing by those who have driven over road bridges. The honesty of engineers is persistently tested against reality; of course bridges do fail, but only under extraordinary circumstances, which is precisely how bridges are intended to function. In bridge engineering, issues of competency, reliability, quality, and fraud are left to narrow interest groups, federal and local government regulators, and sometimes advocacy groups. The average trucker does not have an opinion of bridge quality, except perhaps for preferring a smooth road surface to a river of pot-holes.

In contrast, discussion of political economy is almost universal; talk about the economy is a social and political phenomenon independent of professional economists’ superior understanding of theory and performance. Historically, economic issues have been discussed at some level by almost everyone—politicians, press, punditry, and populace—everywhere, during every epoch. Unlike engineers, economists are not routinely tested by the real world; hence, economists utilized the only clear means of convincing others (or one another) that their theories are sound or data are truly trustworthy. Today, “the economy” is considered a problem without a one-time solution; in good times and bad times, the necessity of somebody tinkering with the economy is the only certainty.

For example, despite the comparative wealth of free-trading nations, there is no simple, everyday, repeatable test to demonstrate the correctness of the results of the theory of comparative advantage. The political discussion of free-trade does not die down. The role of political institutions in the economy is always open for discussion and controversy. Economic issues are not left to professional economists, regulators, and advocacy groups to sort out.

Everyone “has an opinion” on economic matters. With the advent of government statistical bureaus in an age of mass media, data releases have become public events, spectacles—part of the core of routine democratic public life. People want public data about “the economy” because they believe, rightly or wrongly, that the economy is not running properly. The level of public concern is as if, every few years, the economic “bridge” were to fall down as everyone were driving over it.

Most members of the general public have a limited ability to understand the requisite physical theory and mathematics of bridge construction and maintenance. Because it would be ridiculous for automobile drivers to stop and judge the quality of every bridge crossed, a system of law and informal institutions evolved such that drivers can and do trust—without doubt or second thoughts—the stability and safety of bridges, and trust that the engineers who design and build them are accurately portraying their structures’ strengths and weaknesses. The institutions encompassing the engineering disciplines and professions are so highly developed—and so trusted—that very few people think about safety at all until an infrequent failure occurs.

What could be termed “the bridge system” has been simplified to the point where only a few signs and indicators are needed for it to run smoothly. Bridges are designed so that the average trucker does not have to think hard, or need to know in detail how bridges are built; when encountering a bridge, he needs to know only two pieces of information: the height and weight of his truck. Passing under a bridge is simple. As long as the minimum vertical clearance of a bridge (usually posted accurately to within an inch) is greater than truck height, a trucker knows he can pass under. Riding over a bridge is not much different—a trucker must not pass over if the bridge tolerance is less than his truck’s weight.

However, the weight tolerance of a bridge is not simple to measure; the actual weight tolerance of a given bridge is usually much higher than posted limits. To ensure that no trucker pushes the limits, engineers deceive the public into thinking that the bridge is far weaker than it actually is.

But of course most of the time these bridge limits do not have to be examined at all. Truck routes are pre-planned, widely known, standard paths with all road surfaces meeting clearance and weight tolerance levels. Truckers do not stop on the road unless they have to.

The general public’s same limited ability to understand difficult theories applies to understanding of political economy. Only in this case, the public insists on a continuous “pulse-taking” of the system. Policymakers regulate, control taxation and government expenditure, and frame the rules of the economic game. In order to understand the actual effects of these complicated government policies (or lack thereof), those who want to understand the economy (let’s call them “voters”), need longitudinal and time series data about macroeconomic performance. But these data, as actually produced, have only limited scope, application, and adequacy—even with cutting-edge safeguards to ensure data integrity and accuracy. Hence, in their drive to understand the economy, voters must “stop at every bridge” to check economic data quality; it is as if they do not trust the posted weight tolerances or clearances. But when they try to check for quality, they find that nobody can tell them how accurate are the measurements of the clearance and weight tolerance of the bridges they have to use.

The economic system is so complex that anybody trying to navigate it must learn in detail the construction of economic data and the workings of the political process. To judge “the performance” of “the economy” requires more than estimates of aggregate output, employment, interest rates, and inflation—the Keynesian economists’ bridge clearance and tolerance. Economic data do not come with a simple context for comparison. A trucker can compare truck height to clearance, and truck weight to stress tolerance. To what can a voter compare historical data and forecasts of CPI, GDP, the overnight lending rate, and non-farm payroll employment? Even if accurate, what can he do with those numbers?

Based on revealed preference, the general public believes it needs economic data, even though these data are not what they appear. Even if they were accurate, they cannot be used in a simple manner to understand or judge the economy. What voters really want is an economic system they can trust without thinking about it—just like the bridge system. This being practically (and politically) impossible, voters utilize their second-best solution: a straight-forward means of using data to judge the performance of the economic system. The public task of economics is not to demonstrate in detail the accuracy and relevance of the data; the public does not want economists to show off. Instead, the public task of economists is to make those expert judgments, and present them to the public through macro and micro media. Much of macroeconomics is grounded in a debate about the relative outcomes of alternative policies proposed or actually enacted. The data being more than imperfect, economists cannot simply state numbers to make convincing arguments about which policies are “best”. To tell the public what the data actually imply about the economy, economists must incorporate the data’s likely error into their analyses. They must already have determined whether macroeconomic data are accurate enough to make decisions about which policies should be pursued. If the data about a system cannot be had accurately enough to choose between options, is it not irrational for people to concern themselves with learning and modifying the system? How is a choice between options using inadequate data different from that same choice using no data at all? Aren’t both the equivalent to throwing darts?

Posted at December 17, 2004 03:38 PM

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