By Luigi Zingales
The Bureau of Labor Statistics had not finished releasing the surprisingly good September data that a number of commentators started raising doubts about the truthfulness of the data. There is no doubt that the data were a boost to President Obama, a boost coming at a difficult moment, when the President’s lead is faltering. Yet, is this motive sufficient to convict?
I generally like conspiracy theories, but I find this one highly implausible. Not because statistical offices could not be affected by political pressures. The Greek statistical office lied on Greece public deficit for years. And in Argentina, the official inflation number appears substantially below what most observers believe the true inflation to be. But I refuse to believe this could be happening in the United States of America. Not because politicians in this country are incapable of such acts (Richard Nixon comes to mind), but because I have sufficient trust in the American system to doubt that it would work.
How many people would have had to be corrupted or bullied for such a number to be distorted? Too many. In particular, too many for the news not to leak out. In a country where even private conversations, whispered at a fund raiser, are broadcasted worldwide, can we really think such pressures would remain secret? How many millions of dollars would a newspaper pay to the first employee of the Bureau of Labor Statistics to blow the whistle?
It is not a trust in the superior integrity of the individuals, but a trust in the system, that makes me dismiss the claim. The support it received on the blogosphere is a worrisome sign of the increasing level of mistrust Americans have not only for their elected representatives, but for the overall system.
Yet, the most surprising endorsement of this conspiracy theory came from Jack Welch, the former CEO of General Electric. Not only because Welch is a
Democrat Republican (corrected thanks to Erik Brynjolfsson) but because he is a former CEO, who had to release a lot of important statistics every quarter. Welch twitted that “Unbelievable job numbers .. these Chicago guys will do anything .. can’t debate so change numbers.”
One has to wonder whether this cynicism about data is reflecting his experience in GE. Academic research shows that a person’s trust is directly related to his own trustworthiness or, in simpler terms, that one expects others to behave the way he himself behaves. After all, Welch’s GE was famous to consistently beat analysts’ expectations every quarter. Does this explain Welch’s jumping to conclusions?
One does not need to resort to a conspiracy theory to explain the September’s number. Unfortunately, the news is not so good to be unbelievable. Much of the increase in employment came from temporary jobs. The recovery is progressing, but at a very slow pace. This slowness is partially due to the excessive amount of leverage. But it is also due to the increased mistrust in in the system. If we want to restart growing at healthy rates, it is this mistrust we have to cure.