Saturday 9 March 2013

Why economists can add but not subtract

More than a decade ago, I wrote a book called The Tyranny of Numbers, which was an early attempt to puncture a hole in the cult of statistics, evidence-based policy and the corrosion of intuition and common sense that goes with it.

It had a whiff of naivety about it, I admit.  Of course there are times when a good bit of measurement can take a situation by surprise.  You don't want to lose that option.  But I was staggered recently, working in a government department at rather closer quarters than usual, to find how much the cult of measurement has progressed - almost no conversation seems possible without it being littered with statistics, some of them helpful, some of them really rather dodgy.

The great problem with this is that numbers look authoritative, but they tend to be attached to descriptions.  The numbers look hard but they are chained inexorably to words, which are endlessly malleable.  What looks so objective and certain is actually nothing of the kind.

Worse than that.  The most important things in life are not actually measurable at all - disease and violence may be measurable, but health and love are not.  You have to take measurements of something else and hope that they relate to each other - and usually they don't.

But of all the sins of statistics which we are lumbered with every day, really the bogus economic cost-benefit analysis takes the biscuit.

I thought of this earlier in the week when I was confronted with a suspect study commissioned by the pro-Heathrow lobby which claims that £8.5 billion will be lost if Heathrow isn't expanded.

Here the consultants at Oxford Economics have gone away and worked out what the potential spending power of visitors to Britain would be from China is Heathrow was expanded.  That is all it is.  But they seem to have ignored the disbenefits - the costs of expanding Heathrow in terms of health, destruction, climate change and pollution, and sleepless nights for those living in west London.

Would the UK actually be richer because of the money?  No, because there are also costs involved and those haven't been factored in - because, for some reason, economists seem unable to do subtraction.

It was the same with the studies urging the government to end restrictions on supermarket opening hours, explaining how much extra earning there would be - but nothing about the costs at all.

GDP is the same: it adds up the goods but doesn't subtract the bads.  Or as the economist Clifford Cobb and his colleagues put it in their 1994 article 'If the economy is up, why is America down?': "The nation's central measure of well being works like a calculating machine that adds but cannot subtract."

It is time someone called time on this nonsense.  Time, in fact, for a Campaign for Real Knowledge, not hedged around with bogus cost-benefits and which is capable of describing the world as it really is.  And to do that, numbers are really too much of a blunt instrument.

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