Ed Dolan on ShadowStats
It is hard to think of a website so loved by its followers and so scorned by economists as John Williams’ ShadowStats, a widely cited source of alternative economic data on inflation and other economic indicators.
So begins economist Ed Dolan in “Deconstructing ShadowStats. Why is it so Loved by its Followers but Scorned by Economists?”
I’ve blogged about this before, but I’ve never done close to as thorough a job as Ed has done. His post–and it’s long–is simply outstanding.
For those of you have commented on my previous posts and have not been convinced that the Bureau of Labor Statistics does a much better job of measuring inflation than John Williams does, I highly recommend his piece.
I have not yet worked through Dolan’s analysis near the end in which he claims to show (and I’m willing to bet he does show) that Williams is double-counting.
For those who think he’s simply bashing Williams, I recommend especially Dolan’s last two paragraphs, not for the analytics–those are elsewhere in the piece–but for the good will it shows on the part of both Dolan and Williams:
It is worth noting that Williams himself makes no such claim. He is a fierce critic of BLS methodology, but he acknowledges that the agency follows its own published methods. He argues that the BLS has adopted methods that produce low inflation indicators, but not for motives of short-term partisan politics. Rather, he sees the choice of methodology as driven by a longstanding, bipartisan desire to reduce the cost of Social Security and other inflation-indexed transfer payments. It would be hard to deny that he is at least partly right about that motivation.
Finally, in closing, I would like to thank Williams for taking the time to make detailed comments on an earlier draft of this post. Our private dialog has not yet led to a complete resolution of the issues I have raised here, but I hope that he will address them in future public comments. The search for alternative inflation indicators goes on.