Comparing indicator evolution in five first-mover countries


Daniel Mügge

National governments have embraced different calculations for macroeconomic indicators, and they have adapted them over time – concerning for example how real-estate prices show up in inflation measures or who counts as unemployed. This subproject has mapped and analyzed the evolution of formulas for four macroeconomic indicators in France, United Kingdom, Germany, the Netherlands, and the USA since the 1950s, when statistics had become deeply entrenched in economic policy.

It has focused on measures for inflation, economic growth, unemployment, and public deficits and national debt – highly salient, and central to public policy and debate.

First movers, not late-comers

The five countries in question have stood central in the historical development of national statistical systems and macroeconomic management. Because they set up home-grown measurement models, studying these countries, rather than late-comers who mainly copied foreign systems, has been particularly enlightening.

This subproject has approached the evolution of indicators inductively. The politics of indicators are too complex, and the field has been studied too little, to take guidance from hard and fast hypotheses. At the same time, there have been clear hunches. Macroeconomic measurements are very technical, which favours secluded expert deliberation at the expense of public and politicized debates of what should be in and out of measurement formulas.

Have better arguments simply carried the day

Still, at key junctures the evolution of such formulas may mirror the interests of powerful actors. Politicians may opportunistically rejig for example growth or public deficit calculations to boost their chances of re-election. Unions or employers might also matter, as might lobbyists for hard-to-measure sectors that want to look good in the statistics, such as financial services, ICT services or military production.

To be sure, formulas have converged quite a bit over the decades. But why? Have better arguments simply carried the day? To what degree have countries been tempted, or arm-twisted, by international organizations such as the United Nations, who have strongly propagated harmonization?

Inside the European Union, the dynamic has been different. The single market, and even more so the single currency, have created strong pressures for uniform measurement models, in particular of budget deficits – a process that stands central in subproject 2. Even then it has been unclear, however, why in some cases harmonization was successful and not in others.

How do citizens see the numbers?

One dynamic has been clear right away: some indicators don’t readily align with our own intuitions as citizens. Inflation indicators, for example, often show something very different than what people feel is happening to their own purchasing power.

There are different reasons for this gap. But the tension can become politically powerful: when official numbers are felt to hide ugly economic truths, statisticians may eventually have to amend their formulas, even if they remain convinced that their formulas had it right.