Essay January 20, 2025
Politicians and economists promise higher standards of living. Are there reliable, objective measures to help determine when their policies are achieving this goal?
At present, most analyses of the question draw primarily on aggregate numbers computed regularly in every country, offered with little commentary on their reliability, either conceptual or in measurement. The numbers draw on a roughly century-old academic field of computing national statistics and a field of study called “macroeconomics.” Economists largely initiated this global record-keeping. However, the various government departments and international institutions that compute the numbers rarely comment on key factors that are highly relevant to understanding their significance.
As economists have sharply and repeatedly pointed out, these statistics can mean very different things in countries with more centralized or decentralized decision-making. It is highly misleading to compare statistics originating from centralized countries to decentralized ones. This is especially important because governments can use these national aggregate statistics and models to rationalize bad policy, raising false hopes for improvements in living standards that are unlikely to materialize.
In many ways, the entire “macroeconomic sector” is comparable to the astrology that guided people’s decisions centuries ago. In a future essay, I will discuss alternative data—objective ones, alluded in this essay’s very last paragraph—that governments can rely upon if their goal is to raise standards of living, rather than staying in power and controlling the economy. Perhaps the timing is right, and the DOGE can start getting rid of macro-mythology and institutions based on it. That would be a huge win for good government, and for human prosperity more generally.
From Law&Liberty, here.