(Ab)uses of statistics

What's the point of the coalition's assertion that real take-home pay is rising?

I ask because voters' base their decisions not upon politicians' assertions about statistical aggregates, but upon their own individual perceptions (which of course might well be biased). Put it this way. When Ed Miliband talks of a cost of living crisis, voters might react in one of two ways. They might think he's talking rot, in which case the Tories should keep quiet on the Napoleonic principle that one should never interrupt your enemy when he is making a mistake. Or they might think his talk chimes with their own experience - in which case they'll not believe Tory claims to the contrary, even if these are correct on average, which is doubtful*.  In the first case, the Tory claim is redundant, in the second it's implausible.

Macroeconomic data do not, and should not, over-ride individuals' local, dispersed knowledge of their personal situation.

You might think this is an Austrian point. But it is also a Keynesian one. Keynes described macro aggregates such as the price level or aggregate output as "vague and non-quantitative concepts" which are "unsatisfactory for the purposes of a causal analysis." To use a good if over-used metaphor, macro stats are only an imperfect map, not the terrain.

It does not automatically follow, however, that macro stats are useless. They could be a rough guide to policy. Targeting 2% inflation, for example, doesn't mean ensuring that prices rise 2% per year, but merely that they don't rise too much.

In this sense, Alasdair MacIntyre identified the purpose of macro stats - the claim to possess them is a claim to power: "What purport to be objectively-grounded claims function in fact as expressions of arbitrary, but disguised, will and preference" (After Virtue, p107). This sounds like a Foucauldian point, but it has been shared by people who wouldn't know Foucault from off stump. When he was Financial Secretary of Hong Kong John Cowperthwaite stopped his officials from collecting macro data** because "If I let them compute those statistics, they’ll want to use them for planning.’’

It's in this context that we should interpret the coalition's claim. They aren't talking to voters but rather to fellow members of the political class; journalists, party supporters and suchlike. The claim "incomes are rising" really means "our policies are OK." It's a claim to power.

This, though, is dangerous. If we focus upon macro data to the detriment of individuals' actual experience, we risk mistaking the map for the terrain. Which is one reason (of several) why Kenneth Boulding was right to say (pdf) that "almost all organizational structures tend to produce false images in the decision-maker."

* The claim that incomes are rising for all deciles is consistent with many people suffering a fall in income if they drop down into a lower decile. When Miliband is targeting only 35-40% of voters, this means his talk of a cost of living crisis might be good politics even if it is wrong on average.

** Strictly speaking, "data" is the wrong word. It comes from the latin for "something given", but in fact macro data aren't given at all but rather constructed.

Comments

[Shinsei1967]

Because many voters want to base their decisions not "on their individual perceptions" but on the actual facts.

It's the same with immigration or welfare stats. We know that public perceptions of the number of immigrants is far higher than the real numbers or that the amount spent on teenage mothers or lost to benefit fraud is thought to befar higher than is actually the case.

Do you want to get rid of all economic stats and just rely on people's perceptions.

I'd have thought it was an actual duty of government to counter people's (biased & prejudiced) perceptions with actual fact.

[Thomas Byrne]

Does this link in with migration then? You and most other writers simply brandish the macro data when it comes to migration and write off the experiences of people.

Not that I'm suggesting the data is necessarily wrong, the question is simply in what instances does this apply to?

[Will Davies]

There's also the constructivist and historicist point made by Alain Desrosieres, that statistics acquire their authority because they are implicitly Rousseauian. Desrosieres looks at Quetelet's obsession with finding the 'average man' as being in debt to some notion of the 'General Will' - a normative consensus which we hold publicly, but not privately or individually (also like Kant's notion of 'public reason'). It is true that this was exactly the metaphysical stuff that the Austrians were most out to destroy in the socialist calculation debate. But one *could* argue that the Conservatives are in the tradition of Enlightenment optimism, by suggesting that what matters is the consciousness of the whole, and not individual/private perceptions of it.

[rogerh]

Running an economy seems largely a matter of confidence - confidence that things will work out better next month, next year and so on. And of course there is an election coming. So two good reasons to talk up the economy. Whether people's take-home pay really is rising depends a lot on how you measure it and who you measure. In any event the fundamentals still look pretty weak and very vulnerable over the next year or so. The numbers are one's very flexible friends but only useful as a rear view mirror.

Cameron's call to onshore seems a bit hopeful which leaves us back with finance and services which is where we were at ten years ago. The UK is still a high cost and hidebound place to do business. Miliband offers higher taxes - which seems rational but not exactly an election winner, otherwise his options seem very limited, essentially Tory-by-a-different-name.

Whether Cameron will win - maybe - usually incumbents lose elections through electoral boredom or sleaze or all the chicken coming home to roost, oppositions rarely win through making a better and credible offer. So a bad year for Cameron must be Miliband's best hope. The more it changes the more it stays the same.

[chris]

@ Thomas - fair q. Polls show that only a minority of the public think immigration is a problem in their own area - where, presumably, they have actual experience:
http://www.ipsos-mori.com/Assets/Docs/Publications/sri-perceptions-and-reality-immigration-report-summary-2013.pdf
Note, though, that it's easy to fall into a bias here; we might see both immigration and unemployment in our area, but it wouldn't necessarily be correct to link the two.

[Williamthruxton]

@chris

Ditto with perceptions that crime is rising although actually it has plummeted:

http://www.theguardian.com/uk/2011/aug/04/public-perception-crime-higher

I am not sure I follow the article's point. Public policy must be based on the most accurate account of what is actually happening. True, it must also deal with the fact that many people choose not to believe official stats. But one could hardly base crime policy on the erroneous view of a majority of people that crime is rising.

[Charlie W]

"It's in this context that we should interpret the coalition's claim. They aren't talking to voters but rather to fellow members of the political class; journalists, party supporters and suchlike. The claim "incomes are rising" really means "our policies are OK." It's a claim to power."

Surely all politicians have to pronounce 'this country is in a good state, and better than when we found it', and variants of. Or possibly, 'things are good for X; maybe things are also good for you'. They're making claims about conditions in aggregate, or about representatives of those conditions, and hoping to persuade individuals in so doing. Why would an individual be persuaded? In the same way that you might think moving to Florida is a good idea because the weather seems to be nice there. Will your life go better if you move to Florida? Maybe not, but people do seem to think in this way.