Macroeconomic Data Is a Tool for Government Intervention
It is common for commentators and economists to refer to something called the “economy,” which sometimes performs well and at other times poorly. The “economy” is presented as a living entity apart from individuals.
For example, various experts report that the “economy” grew by such and such percentage, or the widening in the trade deficit threatens the “economy.” What do they mean by the term “economy”? Does such an entity actually exist?
Within this framework of thinking, the “economy” is assigned a paramount importance while individuals are barely mentioned.
The “economy” produces goods and services on this way of thinking. Once the output is produced by the “economy,” its distribution among individuals in the fairest way is required.
In reality goods and services are not produced in totality and supervised by one supreme commander. Every individual is preoccupied with his own production of goods and services. Consequently, there is no such thing as the total national output.
By lumping the values of final goods and services together, government statisticians concretize the fiction of an “economy” by means of the GDP statistic and other economic indicators.
It is held that once the “economy” is concretized by means of various economic indicators policy makers could navigate the “economy” along the growth path that is considered by the experts as desirable.
Again, by means of constructed economic indicators such as GDP government and central bank policy makers can now have control over the so-called economy.
According to Rothbard,
Bureaucrats as well as statist reformers … in order to get “into” the situation that they are trying to plan and reform, they must obtain knowledge that is not personal, day-to-day experience; the only form that such knowledge can take is statistics. Statistics are the eyes and ears of the bureaucrat, the politician, the socialistic reformer. Only by statistics can they know, or at least have any idea about, what is going on in the economy.
It is true, of course, that even deprived of all statistical knowledge of the nation’s affairs, the government could still try to intervene, to tax and subsidize, to regulate and control. It could try to subsidize the aged even without having the slightest idea of how many aged there are and where they are located; it could try to regulate an industry without even knowing how many firms there are or any other basic facts of the industry; it could try to regulate the business cycle without even knowing whether prices or business activity are going up or down. It could try, but it would not get very far. The utter chaos would be too patent and too evident even for the bureaucracy, and certainly for the citizens. And this is especially true since one of the major reasons put forth for government intervention is that it “corrects” the market, and makes the market and the economy more rational. Obviously, if the government were deprived of all knowledge whatever of economic affairs, there could not even be a pretense of rationality in government intervention. Surely, the absence of statistics would absolutely and immediately wreck any attempt at socialistic planning.1
Once expressed in terms of various economic indicators such as the GDP statistic, the “economy” is expected to f
Article from Mises Wire