Indirect Measurement

When I want to know how much I weigh I step on a scale, read the dial, and find that I weigh 235 pounds. Plus or minus a little from time to time, but I stay close to that. Same as I weighed in high school, by the way, although distributed a bit differently,

If the government wanted to know how much I weigh they would launch me in a rocket into orbit around the moon, then use my orbital speed around the moon and distance from the lunar surface to calculate my weight. They would then botch the process entirely by adding the phase of the moon into the calculation and come up with the answer that my “seasonally adjusted” weight is 428#.

It’s called “indirect measurement,” and it not only gets the wrong answer much of the time, it’s usually incredibly more expensive to perform than a direct measurement would be. Such as launching me into lunar orbit to determine, inaccurately, how much I weigh.

If the government wanted to know how many people are employed, they could go to the Social Security database and query, “how many unique numbers had transactions?” in a certain period, and they would have their answer in a few minutes. They would have to tap a couple other computers in similar fashion to get the count of government workers who are not subject to Social Security withholding, but the process could be made all-inclusive quite easily.

It is claimed that they cannot do that due to “privacy reasons,” but that is utter nonsense. The database query can be asked and answered without knowing anything whatever about any of the data other than how many numbers were involved; say, 84,650,133 records with different identification numbers had wages reported in the month of July.

So what the government does is have thousands of government employees make phone calls to tens of thousands of putative workers and ask them questions about their work and personal habits, questions which are presumably not invasions of privacy. They then do some fancy mathematical extrapolation with that sample of the population to extend it to the population as a whole and apply some mysterious “seasonal adjustments” to report the number of people who are working.

The government also has thousands of government employees making phone calls to tens of thousands of businesses ask them questions about their current hiring. They then do the same kind of fancy mathematical extrapolation with that sample to extend it to all businesses and apply similar mysterious “seasonal adjustments” to report the number of people who are employed.

The number of working people reported by the “Household Survey” often differs wildly from the number of employed persons reported by the “Business Survey,” but that doesn’t seem to make anyone disbelieve either number. They just use which ever number suits their purpose, and no one asks any questions about the validity of the methods by which we arrive at these numbers,

Similarly, if we want to know the value of the goods and services produced by the nation’s economy it would seem to be a pretty simple matter to turn to the federal government’s income tax database and add up the reported incomes of the entities which are producing goods and services.

But no, we measure, instead, how much consumers are spending on goods and services. Then we add how much the government is spending on goods and services. Then we subtract the portion of that spending which is items being bought from overseas, and we add the items being produced which are being sent overseas and which, therefor, aren’t reflected in internal spending. Finally, we add “investment,” which is a term so loosely defined as to be almost meaningless. Buying a US Treasury bond, for instance, is not “investment” in terms of contributing to the GDP.

So we measure the Gross Domestic Product not by measuring production, but by measuring consumption. And, in addition to getting a number which is probably wrong, we get a number which, in terms of measuring the economic health of our nation, is utterly meaningless.