Macroeconomics – is it all underpants?

A couple of days ago, Simon Jack of BBC Radio 4’s Today Programme interviewed me about unconventional economic indicators. We chatted about the cranes index, written up by Chris Giles in the FT as a marker of regional imbalance in the UK economy, about hemlines, lipstick, champagne sales. One new to me, unearthed by the researcher, was Alan Greenspan’s supposed interest in sales of men’s underpants. I thought it was in Greenspan’s book, , where he does talk about his interest in detailed economic statistics, but it turns out the source is a 2008 NPR interview about the book.

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My discussion on the radio was mildly frivolous, but the light-heartedness covers a serious point about macroeconomics, namely how studiously unempirical it is. This might seem a contrarian statement, given how frequently macroeconomists bandy about debt-GDP ratios, GDP growth rates, inflation and unemployment rates. But in fact Greenspan was something of an exception with his obsession with the statistics underpinning the aggregates. Most macroeconomists trade blows with the same aggregate figures drawn from the same online databases, and their differences are disagreements about the interpretation of the figures in the light of their prior beliefs about a ‘true’ model of the economy. They demonstrate confirmation bias in finding aggregate figures to support their views.

One of the problems with macroeconomics, therefore, is how little attention its practitioners pay to either understanding the construction and intellectual framework underpinning the aggregate statistics they do use (none of them being natural entities, all analytic constructs – see my forthcoming GDP book), or to collecting new statistics. So I’m with Alan Greenspan on this point, and think sales of underpants could be more revealing than the conventional figures.


3 thoughts on “Macroeconomics – is it all underpants?

  1. The data is always from the past, near or some time earlier. Gathering that data can never really be 100% accurate even if attempted scrupulously and as truthfully as possible. But if the economics is attempting to indicate the future, not only will future events and developments differ from the past the data methods may become less and less applicable. Then there is always the unexpected. There is always more to learn which is the problem. We know now that the Delphic Oracle of the past owed much to neurological “highs” induced by gassy vapours but nobody did then or for a very long time after. So what gassy vapours are we getting at the moment?

  2. Surely the revelatory capacity of underpants depends entirely upon the cut? Which depends upon prevailing beauty standards, availability of fabric and shaping techniques, population skills.. oh, it’s all interconnected, how awkward.

    Sriously, it’ll be lovely when economics wakes up and starts collecting data and throwing out theories that are not compatible with the data like a proper science.

    Fair enough to say that you can only measure from the past, but cosmology manages it..

  3. Pingback: How not to do economic forecasts | The Enlightened Economist

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