In 9 of the last 14 years, I have written the Wall Street Journal article that appears the day after the Nobel prize in economics is awarded. I missed 1999, 2000, and 2002 because I was in Europe and not near my files. I missed 1998 and 2007 because I didn’t know enough about the winners. I’ve done it all the other years. I’ll be getting up early Monday morning to see if I know enough to write the piece and, if I do, to make my pitch to the Journal.
In his recent book, Intellectual Capital: Forty Years of the Nobel Prize in Economics, Thomas Karier asks a question about my thoughts on the 2001 winners that he didn’t bother asking me directly. He writes:
David Henderson, writing in the Wall Street Journal, acknowledged that markets can fail due a lack of information, but he warned against assuming that government can do any better. In his opinion, most government information was “almost useless.” Did Henderson really mean most government information or was he just being rhetorical? Perhaps he wasn’t fully aware of the immense wealth of government information covering economic data, basic research, public health, space flights, weather, and the census, to name a few areas.
Of course, I was being rhetorical, in the original sense of that word. I think that by “rhetoric” he means “bluster.” But rhetoric has to do with argument, and I was making an argument. I think most government economic data is worth little. He has a stronger point on basic research, the weather, and the census. I think, though, that this is a tiny percent of government’s information. So I stick with “most.”
READER COMMENTS
Daniel
Oct 11 2010 at 9:17am
Just out of curiosity, why do you think that most government data (other than the examples you mention) is worthless?
I have a professional interest in this question since I help produced them (I work for the Bureau of Labor Statistics).
In my ten years there, I’ve generally be very impressed with the technical knowledge of the people who take the raw data and generate estimates from it. True, the raw data itself is sometimes less than perfect, but I don’t know of anyone in the private sector with access to anything better (and, in general, what they use tends to be significantly worse).
Perhaps what you mean is that it’s worthless for planning, since you believe (ala Hayed) that government planning is itself futile. There I wouldn’t always disagree with you.
But if you meant that the data is nearly worthless for answering the questions it purports to answer (e.g., what is the unemployment rate, what is the average wage of economists in the private sector, etc.) then I’m curious as to the basis of your belief.
Surely such a broad statement at least deserves a link.
David R. Henderson
Oct 11 2010 at 10:19am
@Daniel,
You wrote:
Perhaps what you mean is that it’s worthless for planning, since you believe (a la Hayek) that government planning is itself futile. There I wouldn’t always disagree with you.
Yes, that’s what I meant. And it was clear in the context of my article, to which I couldn’t find an ungated copy, that that was my meaning. Not that you should know, but Karier should have.
I use unemployment data all the time and have some confidence in them.
Douglass Holmes
Oct 11 2010 at 10:16pm
And the key question is; When the markets do fail, does the government have adequate information and incentive, to provide a better solution? But wait! There’s more! Will the solution set precedent that will distort future markets? (think about mohair subsidies) Will the government solution shift the problem to a disenfranchised group? (the current method of drug prohibition shifts most of the violence to Mexico and the most likely to die, Mexicans, do not vote in the US)
I have to agree with David Henderson. We should not assume that the government solution to a perceived market failure will be any better.
Tom Grey
Oct 16 2010 at 6:48pm
Actually, because the gov’t solution will inevitably involve MORE use of gov’t force, there is good reason to suspect that it will be worse than the alternative of peaceful win-win deals, or no-win/no-loss non-deals.
All gov’t solutions are win-lose, with the taxpayers and/or customers being losers, although they may also be winners.
The Moral Hazard of bailing out Long Term Capital Management includes … the TARP fiasco 10 years later.
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