October272011

Lagging indicators…

Ezra Klein’s piece Could this time have been different?  got a ton of link love. As well it should. It is a masterful essay. And you know you are in like Flynn when Mr. Krugman blogs: “Ezra Klein has a generally reasonable analysis of the Obama administration’s failure to respond with sufficient force to the economic crisis.” On the rigorous Krugman scale of ten, that muted response measures as an eight.

Yet for all the counterpoints generated by the essay, no one seems to have noticed a delicious dangling Newton’s apple in Klein’s paragraph space. Perhaps because to see the apple in front of one’s nose needs a constant struggle? Maybe. Admittedly I was hungry for the pome. I’d seen its gravid outline on many different economic blogs. And it helped that Mr. Klein’s essay made this apple its core point. Of all the things that have happened since the crash, this Klein paragraph contains one of the most vital observations:

The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; they didn’t know that it had been run over by a truck.

The Bureau of Economic Analysis took months to get the wrong answer. And then got it hugely wrong, not once but twice. In a world full of networks, computers, statisticians, instant information, that is simply unacceptable. It’s intolerable. It wants fixing…

Can you imagine Steve Jobs running Apple this way? Waiting months for wrong information to be updated in error again? And yet I hear no calls for modernization. No shouts to advance the science of economic data into real time. Why aren’t econbloggers screaming for upgrades? Don’t tell me it can’t be made faster. Fix it.

Compare the lumbering acceptance of bad and slow economic information with the quick, world-straddling work of those in the ChokePoint Project. After Egyptian authorities pulled the plug on the net to chill dissidents:

The outage inspired James Burke and Chris Pinchen - both members of the P2P Foundation, a group that monitors how data is shared online - to begin work on the ChokePoint Project. The idea is to compile a real-time interactive map of the entire internet and identify potential choke points - the physical and virtual locations where internet access could be easily compromised - and who has the power to strangle them. 

These guys can measure the entire internet in real time. They can gird the planet in an eye blink. And we got a government that can’t get economic data correct until three years after the fact? That’s just lame. Fix it. 

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