ECONOMICS

Beyond fake news lies the fog of fake figures

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The debate over fake news is no doubt amusing to any attentive journalist capable of sifting evidence. Claiming that much of the news is fake is a little like discovering that water is wet.

GDPIt has long been the case that the forces arrayed against the media have been overwhelming, and, with journalistic ranks thinning, there is less and less resistance to spin, disinformation and propaganda. George Orwell's vision in 1984 is beginning to look like old news.

It is not just fake news that is the problem. Increasingly, we live in a world of fake figures, especially of the financial type. There is a cliche in management that 'what gets measured gets done'. In public discourse that might be translated to 'what gets measured is considered real'.

A little thought shows this to be nonsense. If someone claimed that the beauty of Mozart is 145.3 per cent greater than Brahms, it would obviously be ridiculous. But it does not mean such beauty does not exist. It just means that it is not accessible to quantitative measurement.

To push this measurement bias, a distinction is often made between 'anecdotal' and 'quantitative' claims. It is true that stories are necessarily partial. But that does not mean that quantitative measures are the solution. Often, they have even greater problems.

One obvious fake figure is gross domestic product, or GDP, which is taken as a measure of national wellbeing. In fact, it is just a measure of transactions. If money changes hands because something disastrous happens then GDP will rise. The recent tsunami in Japan, for example, led to a rise in that country's GDP. Yet it was hardly an indicator of national wellbeing.

GDP is not even a proper measure of production. As the economist Michael Hudson has noted finance, insurance and real estate do not produce anything; they are parasitical. If they are taken out of GDP it shows most developed economies withering. This is not a new insight; Robert F Kennedy pointed out decades ago that GDP measures 'everything except that which is worthwhile'.

Alternative quantitative measures of national wellbeing rarely convince. For example the Peace Index is superficially impressive, but does not withstand much scrutiny. It is based on normalisation of national statistics, which must be considered a gigantic leap of faith given the poor quality of number collection, especially in poorer countries.

 

"Any quantitative measurement of human activity often ends up being a precise calculation of nothing at all."

 

It suffers from the vice of positivism: the belief that something is only real if it can be measured. A related intellectual trap is nominalism: the belief that naming something makes it real. Use a word like 'peace' often enough and eventually it will seem that it has an independent existence. The next step is to make peace into a 'thing' that can be examined in isolation: an intellectual error known as reification.

It is all illusion. Even if one accepts that there is a measure of peaceful and non-peaceful behaviour, it is only behaviour. Peace within a person, and a society, has at least three elements: behaviour, intentions and self-awareness. The first may be roughly measurable, but the second is subjective and unknown and the third is notoriously difficult even to define (especially as people can be aware of any measure you make of them).

The subjective simply cannot be measured objectively, and the subjective is at least as important to peace, especially the intentions of those who control today's weaponry — Donald Trump's and Kim Jong-un's current intentions, which can only be known by themselves, being a case in point.

Quantitative measures, and the lists created from them, make for attractive media fodder by reducing national comparisons to the level of a sporting contest. But any quantitative measurement of human activity often ends up being a precise calculation of nothing at all (at least GDP is a measure of something).

When measurable differences are stark enough, quantitative measures can inform. For example, the fact that America has about 800 foreign bases when Russia and China only have a handful can be considered an indicator of those countries' peaceful intent. That America spends almost as much on its military as the rest of the world combined might also be considered revealing.

But too often quantification is as much a trap as a way of revealing the truth. When it comes to figures, it is well to assume that many, if not most, have at least an element of fakery.

 

David JamesDavid James is the managing editor of businessadvantagepng.com. He was involved in a project related to the Peace Index.

Recent articles by David James.

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Topic tags: David James, Donald Trump, Kim Jong-un

 

 

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Existing comments

When I heard our Prime Minister say that the Adani Mine in the Galilee Basin would create tens of thousands of jobs, I knew that to be fake news. But even if he were to say this mine would create 1000 jobs, which would be much closer to the truth, there would still be an element of fakery, because he didn't mention the 70 000 jobs on the Great Barrier Reef that this mine would help to put at risk. The fakery of politicians is not always in what they say, but in what they don't say. Minister Canavan is now talking up the promoting the establishment of a new coal fired power station in North Queensland. He doesn't tell people that a solar power farm would be much cheaper and again I haven't heard him mention the damage that burning more coal would do the the Reef. One thing that isn't fake is the dependency of some political parties on donations from the big polluters. While such donations are allowed, there will be a degree of fakery about our democracy. He who pays the piper calls the tune!
Grant Allen | 02 May 2017


A more appropriate measure of economic performance than GDP is an itemised "NATIONAL BALANCE SHEET" showing Assets, Liabilities and Equity. It is these figures from which most accounting ratios can be applied and we will also know whether we have been sold down the drain!
Cam BEAR | 03 May 2017


While David James makes a worthwhile contribution to the 'fake news' discourse, it would be a pity if his statement that most figures have an element of fakery became his take home message. Some measurements, such as the re-entry profile of a space capsule are critical. They can clearly be demonstrated to be either right or wrong. Some measurements, such as attitudes or voting intentions are clearly softer and far more contextual. For one thing, without rigorous sampling such measurements are close to useless. But before we descend into the complete relativism of the 'everything is equally true and equally fake' variety, we need to revisit fundamental questions about the nature of measurement - What is being measured (including the question of whether it is measurable)? How is it being measured and for what purpose? And what are the limitations in the methodology and any conclusions drawn. Quality journalists can capture these issues in ways that avoid sensationalism while keeping the reader engaged.
Lawrence Moloney | 03 May 2017


David, you make some very good points, but even you seem to admit that real facts an be very useful: why the % is of school children that can read at age 13 is pretty poor in Australia and going backwards,for example, does tell us something important about educational effectiveness, even if doesn't tell us the cause. The then needs objective research. In fact, subjective "qualitative" research has become very respectable in academic circles in recent years, and of course makes huge money for all sorts of "social research" companies across a huge spectrum. and one cannot go to any meeting now without filling some questionnaire a about its usefulness. This is all good.
Eugene | 03 May 2017


Fake whatever is the New Truth and I am glad to add GDP to that group. My wife died recently, thus adding more to the GDP in one day than either she or I had contributed in the last twenty years. All the heroic costs of cancer care, nursing home and funeral should cover my pension for the next twenty years. So can I feel smug and ask for a rise? John Lewis
John Lewis | 03 May 2017


David, within your article is an important kernel of truth, in my view. But the ubiquitousness of the term "fake news" these days has led to conflation of different part-truths. GDP was never touted originally by economists as a measure of well-being, but simply as a measure of total economic activity within a country in a given year, What is fake is using that figure as if it measured well-being, i.e., as if only totaL economic activity mattered in well-being. This is an error among the touters of "trickle-down economics" because it ignores the degree of disparity in the distributioon of the benefits of economic activity. It also ignores, of course any attempt to take into account non-material aspects of any assessment of well-being. The fact that the cost of a flawed venture that creates a disaster and the cost of cleaning up the disaster are both counted in GDP (albeit probably in different years) is indeed a weakness in the definition of GDP, but that does not make the figure fake -it simply makes it misleading. Something that is seriously misleading is the current definition of the unemployment percentage! That to me is purely politically, not economically, based.
Dennis Green | 05 May 2017


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