EKIP– Expert Club for Economics and Politics A Different Opinion
Today we truly live in the Age of Statistics. In a country and an era in which statistics are revered as “scientific” and as offering the key to all knowledge, and in which vast amounts of data of all kinds and forms are showered upon us. Most of it from the government.
Murray Rothbard
While private agencies collect and process certain data to meet the specific needs of business, the bulk of statistical information is produced by the government. The overall information about the economy - as well as the popular "gross national product" - which allows economists to pretend to be clairvoyants - comes from the government.
In addition, many statistical data originate from government agencies: from the Internal Revenue Service we receive tax data, from unemployment assistance agencies we receive employment information, customs provide us with foreign trade data, the Fed provides us with banking statistics, etc. As new statistical methods are improved, more government institutions are created to take advantage of them.
The flourishing of government statistics is the source of several obvious evils for the libertarian. First, it is clear that too many resources are concentrated in the collection and production of statistics. In a completely free market, the amount of labor, land, and capital expended on statistics would shrink to a much smaller proportion than they do today. It has been estimated that the federal government alone spends $48,000,000 on statistics, employing more than 10,000 full-time employees.[1]
The hidden cost of information
Second, much of the government's statistics are collected by force. This means not only that the data are the product of unwanted actions; it means that their cost to Americans is significantly higher than the tax dollars spent by government agencies. Private industry and consumers must bear the cost of storing and providing the data required by the statisticians. Not only that; these fixed costs are relatively high, especially for small businesses, which have a harder time dealing with mountains of rigorous documentation. Thus, seemingly innocent statisticians cripple business and hinder the entire private sector. A panel of the Hoover Commission, for example, found that:
" No one knows how much it costs American industry to fill out the data required by the government. According to reports from the chemical industry alone, the price paid by it to satisfy the government's needs is $8,850,000. Utilities have spent $32,000,000 on statistical reports."
Anyone who uses peanuts for industrial production must declare it to the Department of Agriculture. After the Task Force intervened, the Department agreed that from now on, only those who process more than 10,000 pounds per year will fill out reports …
If small changes were reported in two reports, the Task Force estimates that $800,000 per year could be saved from just one industry.
Many employees in private businesses are busy compiling data for government statistics. This presents a challenge, especially for small businesses. The manager of a small tool store in Ohio estimated that 29 percent of his time is spent filling out statistical forms. It is not uncommon for people who work for the government to keep multiple records to meet the various needs of federal agencies.”[2]
Other objections
There are other, less obvious, reasons for the libertarian to distrust government statistics. Not only does the collection of data exceed the government's functions of protecting the population and property; not only do resources have to be spent and reallocated for the needs of statistics, and taxpayers, industry, small businesses, and consumers are made to suffer. But statistics are also vital to all interventionist and socialist activities of governments.
The individual consumer in his daily affairs has little need of statistics - through advertisements, through information from friends and from his own experience, the individual understands what is happening in the markets around him. The same applies to industry. The businessman must measure his own market, establish the prices of the goods he buys, calculate the profit on those he sells, etc. But none of these activities is dependent on government statistics. The businessman, like the buyer, gets to know the market through his daily activities.
Market data proxy
Bureaucrats, like statistical reformers, are concentrated in a completely different sphere. They purposefully avoid the market. Therefore, in order to "enter" the sphere they want to reform, they must acquire knowledge that is not personal, knowledge that is not acquired from everyday experience. The only form of this knowledge is statistics.
Statisticians are the eyes and ears of the bureaucrat, the politician, the social reformer. Only through statistics can they know, or at least get an idea, of what is happening in the market.[3]
Only through statistics can they know how many elderly people have arthritis, or how many young people have fillings, or how many Eskimos have defective seal skins. Statistics are the only way politicians can know who “needs” what in the economy, and direct federal money accordingly.
The master plan
Of course, even a single attempt by the federal government to plan, regulate, control, or reform various industries—or to impose central plans on the entire economy—can only be accomplished through statistics. If the government had no data on the railroads, how could it regulate prices, financial, or other matters? How could the government impose price controls if it had no idea what was being sold in the market and what the prices were already?
To repeat: statisticians are the eyes and ears of the interventionist: of the reformer, of the politician, of the government bureaucrat. Remove these eyes and ears, destroy these keys to knowledge, and the entire threat of government intervention is almost completely eliminated.[4]
It is true that even without all statistical knowledge of the nation's actions, the government can still try to intervene, to tax and subsidize, to regulate and control. It can try to subsidize the elderly without having any real idea of their numbers or where they are located; it can try to regulate an industry without knowing the number of firms or any other basic knowledge of the industry; it can try to regulate the business cycle without knowing whether prices and business activity are rising or falling. It can try, but it will not get very far. The chaos that will ensue will be all too obvious even to bureaucrats, let alone to citizens.
And this is especially true given the fact that one of the main reasons why government intervenes at all is to “correct” market failures and make the market and the economy more rational. Obviously, if the government is deprived of all knowledge of the economic situation, there can be no question of any rationality in its actions at all.
The lack of statistical data would certainly frustrate any attempt at socialist planning. It is hard to see, for example, what central planners in the Kremlin would do to plan the lives of Soviet citizens if all information about them was missing. The government would not know who to give orders to, let alone plan the complex national economy.
Thus, of all the measures that have been proposed over the years to limit government or deter it from intervening, the simple and unobtrusive rejection of government statistics would be the best and most effective measure. Statistics, so essential to its near-namesake, statism, is also its Achilles heel.
*You can read the original here: http://mises.org/daily/2589/
Daniel Vassilev, Michael Tonchev and Silvia Yanakieva worked on the translation.
