Move Over, Stock Market: The U.K. Statisticians Are Contending
By David Henderson
In 1996, U.K. statisticians estimated 10 recessions between 1955 and 1995. In 2012, other U.K. statisticians “disappeared” 3 of them.
In 1966, the late Paul Samuelson stated that the stock market has predicted 9 of the last 5 recessions.
That’s a propos of an email I received today from San Jose State University professor of economics Jeffrey Rogers Hummel. Jeff wrote:
As several of you know, I’ve criticized the regular comprehensive retrospective revisions in the U.S. National Income and Product Accounts because they sometimes change the estimates considerably. The classic example, first exposed by Rich Vedder and Lowell Gallaway in their neglected book, Out of Work, is when the 1960 revisions “discovered” a major post-World War II recession that no one knew about at the time.
I wrote about this post WWII case in my Mercatus study “The U.S. Postwar Miracle,” November 2010. I wrote:
According to official government data, the U.S. economy suffered its worst one-year recession in history in 1946. The official data show a 12-percent decline in real GNP after the war. A 12-percent decline in one year would fit anyone’s idea of not just a recession, but an outright depression. So, is the story about a postwar boom pure myth?
If you ask most people who were young adults in those years (a steadily diminishing number of people, so talk to them soon) about economic conditions after the war, they will talk about “the postwar boom.” They saw it as a time of prosperity. Why is there a disconnect between their perceptions and the data? There are two reasons.
I titled this section of the paper “What Are You Going to Believe: The Data or Your Own Lying Eyes?” but the editor insisted on toning down the subtitle.
In reading Ken Rogoff’s The Curse of Cash, I discovered that he notes the same problem with U.K. measures of real GDP (pp. 151-52). Citing the paper “Vintage Does Matter, The Impact and Interpretation of Post War Revisions in the Official Estimates of GDP for the United Kingdom” by Enrico Berkes and Samuel H. Williamson, he points out that “the number of technical recessions experienced by the United Kingdom between 1955 and 1995 is ten if we use the 1996 official UK historical GDP series, but it drops to seven if we use the 2012 series.”