Comparing indicator evolution in five first-mover countries

Lead-researcher

Daniel Mügge

National governments have embraced different calculations for macroeconomic indicators, and they have adapted them over time – concerning for example how real-estate prices show up in inflation measures or who counts as unemployed. This project will map and analyze the evolution of formulas for four macroeconomic indicators in France, United Kingdom, Germany, the Netherlands, and the USA since the 1950s, when statistics had become deeply entrenched in economic policy.

The project focuses on measures for inflation, economic growth, unemployment, and public deficits and national debt – highly salient, and central to public policy and debate.

First movers, not late-comers

The five countries in question have stood central in the historical development of national statistical systems and macroeconomic management. Because they set up home-grown measurement models, studying these countries, rather than late-comers who mainly copied foreign systems, is particularly enlightening.

This sub-project approaches the evolution of indicators inductively. The politics of indicators are too complex, and the field has been studied too little, to take guidance from hard and fast hypotheses. At the same time, there are clear hunches. Macroeconomic measurements are very technical, which favors secluded expert deliberation at the expense of public and politicized debates of what should be in and out of measurement formulas.

Have better arguments simply carried the day

Still, at key junctures the evolution of these formulas may mirror the interests of powerful actors. Politicians may opportunistically rejig for example growth or public deficit calculations to boost their chances of re-election. Unions or employers might also matter, as might lobbyists for hard-to-measure sectors that want to look good in the statistics, such as financial services, ICT services or military production.

To be sure, formulas have converged quite a bit over the decades. But why? Have better arguments simply carried the day? To what degree of countries been tempted, or arm-twisted, by international organizations such as the United Nations, who have strongly propagated harmonization?

Inside the European Union, the dynamic has been different. The single market, and even more so the single currency, have created strong pressures for uniform measurement models, in particular of budget deficits – a process that stands central in sub-project 2. Even then it is unclear, however, why in some cases harmonization was successful and not in others.

How do citizens see the numbers?

One dynamic is already becoming clear: some indicators don’t readily align with our own intuitions as citizens. Inflation indicators, for example, often show something very different than what people feel is happening to their own purchasing power.

There are different reasons for this gap. But the tension can become politically powerful: when official numbers are felt to hide ugly economic truths, statisticians may eventually have to amend their formulas, even if they remain convinced that their formulas had it right.