From The Weekly Standard, No Statistics, No Mischief, A modest proposal for the new Fed chairman, by Andrew Ferguson.
The name is familiar to economic historians, academics in postcolonial studies, specialists in the tax policy of the Far East, and avid libertarians, but less well known to normal people. Cowperthwaite was a lifelong government bureaucrat who should be lionized by anyone who loathes and fears bureaucracies. In 1945, as a member of His Majesty’s colonial administrative service, he was sent to Hong Kong, which was then (and remained until 1997) a British protectorate. Hong Kong was in bad shape at the end of the war. Things only got worse when hundreds of thousands of refugees streamed in as the Chinese Revolution raged next door.
Cowperthwaite rose through the ranks and became financial secretary of the colony in 1961. For the next 10 years he had near-total control over the economic laws and regulations governing Hong Kong. By the time he left office, in 1971, the number of Hong Kongers in poverty had dropped by two-thirds, average wages had risen 50 percent, and Hong Kong had gone from one of the poorest places on earth to one of the richest.
At other times Cowperthwaite suggested the causality works the other way around: Statistics themselves are what create, or at least justify, high taxation and other interventions in the economy. In a way it’s a supply-side problem, if you’ll forgive the expression. Say’s law tells us that supply creates its own demand. A supply of statistics will spontaneously generate a flock of people who will want to study them, and who, having studied them, will reach conclusions about them, and then, still worse, will want to shape their conclusions into government policy that will tug the citizenry this way or that, distracting workers and businessmen alike from the important task of minding their own business.
Cowperthwaite went on:
One of the honourable Members who spoke on this subject said outright, as a confirmed planner, that he thought that [economic statistics] were desirable for the planning of our future economic policy. But we are in the happy position, happier at least for the Financial Secretary, where the leverage exercised by Government on the economy is so small that it is not necessary, nor even of any particular value, to have these figures available for the formulation of policy. We might indeed be right to be apprehensive lest the availability of such figures might lead, by a reversal of cause and effect, to policies designed to have a direct effect on the economy. I would myself deplore this.
Stripped of his numbers an economist would have to resort to the old home truths about how the world works: If you tax something you get less of it; as a general rule an individual manages his own affairs better than his neighbor can; it’s rude to be bossy; the number of problems that resolve themselves if only you wait long enough is far larger than the number of problems solved by mucking around in them. And the cure is often worse than the disease:
In the long run, the aggregate of the decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is likely to do less harm than the centralized decisions of a Government; and certainly the harm is likely to be counteracted faster.
A fascinating perspepctive. Perhaps the ability to collect data far exceeds our ability to influence them. This recalls the quote often attributed to Einstein, Not everything that counts can be counted, and not everything that can be counted counts.
The problem is not the data, but the conclusions drawn, and lack of understanding of the principles underlying the data. But his point that the volume of data feeds their delusions is worth noting even if it is not the cause of the problem.