Tuesday, August 16, 2016

OMG: Thoughtfulness on Significant Digits

The Summer Olympics are running right now.

And in swimming there are a lot of ties.

How is it possible that there are ties when we can measure time accurately to 3 to 6 digits?

Here’s why: because in 0.001 seconds a swimmer travels about 2 millimeters, but the construction tolerance for differences in pool lane lengths is plus or minus 30 millimeters (due to expansion and contraction from heat and cold).

FINA (which governs international swimming) recognized 40 years ago that improvements in timekeeping simply is not differentiating swimmers better. Here’s the link, although it’s not required.


Why can’t we do this in macroeconomics?

It’s not official, but the popular site usdebtclock.org certainly tries to give people the impression it’s counting off each dollar of national debt. JustFacts.org asserts that on August 4, 2016, our national debt was $19,379,566,441,022. They get this from TreasuryDirect, which sounds like a government site but isn’t.

These numbers are not credible. I would be OK with a figure of $19T, but even that is dicey. We simply do not have the ability to measure things that accurately.

How about GDP? The BEA asserts it was $18,437,600,000,000 in 2016 II. That 600 is 600 million. So they are claiming they have this down — in a country of about 300 million people — to an average of within 2 dollars for each of us? Heck, I don’t know my income in a quarter within 2 dollars. Ever. And I am mostly paid in regular paychecks.

How about economic growth? The most recent figure is 1.2% for that same quarter. Could you feel it if it was 1.3%? Or 1.1%? I have asserted for years in principles that we have trouble feeling GDP growth rate differences of sharper than 1% (and unemployment rate differences of sharper than 0.5%, which is actually consistent with Okun’s Rule).

Why can’t we get bureaucrats be as forthcoming as swimming officials?


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