Are we better off than we thought? | Bleader

Are we better off than we thought?

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Senior economist Terry Fitzgerald of the Federal Reserve Bank of Minneapolis tries to figure out why different measures of the same thing -- individual incomes of average Americans -- look so different:

"In brief, it seems that individual workers and households have experienced stagnation, while the national economy has grown robustly. How can it be that these two sources of data -- microeconomic data on individual wages and household income, and macroeconomic statistics covering the national economy -- lead to such different conclusions? Since a nation comprises a group of individuals, these statistics would seemingly be compatible."

In the first of three articles on this subject, Fitzgerald finds that it helps if he uses the same correction for inflation in both sets of data, and it helps some more if he counts benefits as well as cash wages. Both adjustments tend to show that middle-American incomes have not stagnated in recent years.

To this non-economist, this looks like an admirable piece of scientific work, trying to figure out why different measurements of supposedly the same thing don't match up, and how to make them more accurate. Whether the end result is what I might prefer politically is irrelevant.

The existence of the discrepancy in the first place isn't all that surprising, since these measures were designed originally for different purposes. The discrepancy doesn't prove that economics is a fraud, nor that the creators of either data set were conspirators or tools of a capitalist conspiracy to deceive people. This rather obvious point should give pause to intellectually honest conservatives who take it for granted that economics is good science, while making up reasons to disbelieve climatology because they don't care for its well-established findings about our civilization's uncontrolled effects on the earth's climate.

Propagandist Don Boudreaux at Cafe Hayek is quick to jump to his own politically preferred conclusion -- that we're all much wealthier now than 30 years ago -- without waiting for Fitzgerald's next two articles. I think Boudreaux is probably right, but only by accident. I look forward to his thinking more clearly about other sciences in the future.

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