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Sep 03

The Long View: Official figures aren’t carved in stone

THE LONG VIEW

Official figures aren’t carved in stone

By Manuel L. Quezon III

There is, apparently, a debate going on about the origin of the famous aphorism that there are three kinds of lies: lies, damned lies, and statistics. One source noted in a University of York Department of Mathematics website quotes Sir Robert Giffen (1837-1910).

In the Economic Journal in 1892, Giffen wrote, “An old jest runs to the effect that there are three kinds of comparison among liars. There are liars, there are outrageous liars, and there are scientific experts. This has lately been adapted to throw dirt upon statistics. There are three degrees of comparisons, it is said, in lying. There are lies, there are outrageous lies, and there are statistics. Statisticians can afford to laugh at and profit by jokes at their expense. There is so much knowledge which is unobtainable except by statistics, especially the knowledge of the condition and growth of communities and growth of communities in the mass, that, even if the blunders in using statistics were greater and more frequent than they are, the study would still be indispensable. But just because we can afford to laugh at such jests we should be ready to turn them to account, and it is not difficult to discover one of the principal occasions for the jest I have quoted, and profit by the lesson.”

I was reminded of this famous aphorism (regardless of its origin) when the government released its latest item of happy economic news, which produced glowing headlines around the world and some skeptical responses here at home. The President, incapable of mirth at the best of times, got cranky again when the latest glowing economic statistic got questioned at a press conference. When a reporter questioned the recently unveiled 7.5-percent GDP growth rate for the second quarter, the President snapped, “Are you saying our people are liars?” The President kept shaking her head and insisted, “never been!”

I don’t know about the “never been” part. William Pesek of Bloomberg pointed out the public’s memory may be short, but investors (and I’d assume, the President’s fellow economists) have elephant-like memories. As Pesek put it, when he wrote in June 22 of how the President seemed frustrated that her optimism wasn’t being shared by investor’s services, “Unfair as that may sound, investors have a funny way of remembering when a government defaults on debt, as the Philippines did two decades ago.”

I’ve never been one of those who’ve disliked the President’s exhibitions of temper. My only criticism is she tries to hide it too often, when in many cases, it was not only healthy (for her: you know the old saying, better one day red than three days blue), but more often than not, the objects of her anger had it coming due to incompetence. And in the present case, the President, when she got snarky, was actually doing it out of a sense of professional solidarity. Before she was ever a politician, she was a member of academe; and academicians jealously guard their reputation for professionalism and objectivity.

So, when the President rhetorically asked, “are our people liars?,” she knew that even her critics who are also economists concede that the NSO and NSCB, which crunch the numbers and produce GNP figures, are apolitical professionals. The most they will say, is what Felipe Medalla’s suggested, which is to take a second look at the methods by which the official figures are arrived at.

So do the bureaucrats who produce official statistics lie? They don’t. They merely adjust the figures at a later date.

For example, take past official figures concerning GDP growth. The 7.15-percent First Quarter 2004 GDP growth figure was eventually adjusted to 6.4 percent, while the 7.10-percent Second Quarter 2004 GDP growth figure was eventually adjusted to 6.2 percent. Earlier this year, the government had joyfully announced that GDP growth for the First Quarter was 6.9 percent, which was already remarkable and indeed, a cause for celebration in many respects. But more recently, it revised the figures and said GDP growth was 7.3 percent. With these changes, laymen like you and me can surely be pardoned by the President for asking why these numbers change.

My understanding is that these (earlier) adjustments are understandable, and in fact, the only surprising thing is if government didn’t adjust its figures after scrutinizing them over and over again as more data comes in. This doesn’t mean any deception is automatically involved, either prior to, or after, the adjustments. But just as the official figures are constantly reexamined by government itself, economists and other people outside government do the same thing.

And this includes constantly inquiring as to how the original and subsequent figures were arrived at. CV Jugo, a Filipino in Singapore, maintains a very interesting blog called “Placeholder” and in one entry (http://cvjugo.blogspot.com/2007/06/philippine-quarter-gdp-growth-dashboard.html) he pointed to Boo Chanco pointing to Peter Wallace, who asked the painful question of whether or not increased smuggling ending up distorting official figures.

Taking into consideration the reality that even among the experts, at times furious debates over the numbers and what they mean, can (and should!) take place, the President, as the teacher-in-chief, can take the lead in welcoming public debates on the official figures.
As it is, it’s safe to say that what the President announced, her fellow economists are now analyzing, because that is what they do, always. Sometimes, that includes daring to ask the same thing the public always asks: Is anyone lying?

The point is, we should trust the experts, not out of blind faith or because their findings, properly explained, makes sense even to non-experts, but rather because what experts say are constantly challenged by their fellow experts, too. That’s the scientific method.

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