Statistics and Government Decision Making
I have been reading news papers on among other things about what they write about economic affairs for the last 50 years or so. They come up with the same conclusions in different languages every x number of years. The same conclusions, of course valid ones, on the quality, reliability, timeliness and comprehensiveness official statistics have now come up again for the nth time. Statistically good performance by newspapers: only they are yet to learn the habit of referring back to the dates when they had published the same conclusions. That would be too much of statistical work to expect of journalist!
Founded by Professor P.C. Mahalanobis in Kolkata on 17th December, 1931, the Indian Statistical Institute gained the status of an Institution of National Importance by an act of the Indian Parliament in 1959. The Government of India had a Central Statistical Organization, a Planning Commission. So many statisticians are employed by the Central and State governments. Like IAS there is a IS (Statistical) S. What the people in ISS have been doing for all these years? Producing unreliable, inadequate and out-of date statistical information for decades (rather more than half a century)? In any case, even if data were collected with diligence, processed accurately and reliable information generated without much time-lag, how that is going to help? If the inflation is high, or food scarcity is acute or the fiscal deficit is high or electricity and coal pilferage is high, Government will still continue to say that they are taking all the various measurers to solve these problems. Quality Statistics is useful in the hands of or to the brains of Quality Decision makers. Poor quality decision-making brains cannot be compensated by improved quality statistics. How much of even the quality statistics currently available helping the Nation? What more information do we need to know more accurately and timely about the percentage of females in the age-group 18 -80 and the conditions of women in order to select women candidates to represent political parties in elections or reserve constituencies for women? How much time we require to decide on these: 60 years or14 years? How much more information did we need to know that which farmers have the lowest productivity in wheat/ rice production per labor or per acre or per kg of fertilizer? What information more is required to decide about what is the optimal pricing of fertilizers?
Statistical information is the staple food for analysts and researchers. They need more information and quality information to search out underlying trends, patterns and probable truths. Statistical information is also required to impress others about the great knowledge that one has: speakers in conferences, political gatherings, elected representative bodies and public debates and TV panels need to give out statistics (relevant or irrelevant, true or contrived, partial or misleading) to make an intellectual impression on the audience and other speakers).
But Statistics has also other probably no less important uses. One of this is for decision-making., rather informed decision –making. When decision-makers require they get out the best possible statistical evidence and take calculated risks to arrive at decisions. Decision-makers know what statistics they need and also know that they cannot get all the statistics they need because statistics data collection has a cost. They therefore follow the rule of working with the minimum but critical statistical information. Good decision makers and policy makers do not complain about statistics not being available: they ensure that the minimum critical and reliable information gets collected. But such good decision makers capable of and actually relying on quantitative statistics are rare. The Government decision-making being a time consuming process involving political, inter-departmental/ ministerial bargaining and clash of ego-based/ ideology-based opinions/ beliefs, seldom does availability of reliable, up-to-date and comprehensive statistics seem to matter much. Only when people trust statisticians on the reliability of statistics they supply, both raw and analyzed, and the decision-makers shed their hunches, beliefs and hidden interest in the decision-outcome, there is a meaning of spending money in collecting and processing statistics. Democratic processes do not make a very congenial atmosphere for effective use of statistical information and methods as decision-making inputs: rather they make a mockery of the use of statistics. Citizens tend to disbelieve the statistics supplied to support official decisions. My observations are simply untested hypothesis: they can be tested by statistics and statistical methods. But such attempts would never be made possible in democracies even if it was possible to effectively enforce the right to information, unless, however, there is a separate and independent government decision evaluation commission that continuously review each government decision on a continuing basis and sends its report directly to the office of the President for record.
Sunday, March 14, 2010
Sectoral Shadow Growth Boxing
Manufacturing jealous of Services?
In recent decades, services sector has grown fast and faster than industry and agriculture. More than half of the GDP or National Income is accounted for by the services sector. When people came to know about this surprising achievement of the services sector for the first time in the early 1990s, they could not believe that half of the GDP had become false (they felt that services sector did not produce something concrete and valuable). The people attached to or employed in industry, especially the engineers had the most resistance to accept the reality of the dominance of the services sector. As an economist or finance person, whenever I talked in seminar or in-house training with engineers as participants, they would point out that this statistics is a serious ailment of the Indian economy and has to be corrected. I had told them that here is no way you can do this. They would give me a smile to acknowledge my foolish belief in the services sector. And, the people born and/ or brought up under Neheruvian Socialist State planning thought that this was due to liberalization and globalization and corruption. They thought this was unacceptable. But we now know the writing on the wall at that time in the past..
Recently, some intelligent young Indians were trying to find out what is important for the future of India: Manufacturing or Services Sector? They, true their inheritance from their forefathers and old teachers, continues to believe that India needs to do great so that Industry again beats services in growth.
There is a general belief that something physical is better than something tangible. Manufacturing is good because you can see them: so TV is good, computer is good, so are cards, soaps, houses, food products, clothing, air-conditioners, mobiles and the like. . The truth is that if the production and consumption of these grow, there is no way one can stop the growth of traders and retailers, construction workers, government employees, bank workers, transportation workers, newsreaders, TV serial actors and actresses, film editors, musicians, cine-technicians and the like benefiting from increased economic activity. Unfortunately, these categories of workers are all producing services in the services sector and not in manufacturing.
We need more schools for our children and hospitals for our people: we invest in schools and hospitals. This investment is in service sector. School and university teachers are providers of service: they are not manufacturing real goods people like to see to feel good. When we invest in schools, hospitals and roads and also get more policemen and government employees to serve the citizens and fight the terrorists, these service sector people not only increase the contribution of the service sector to the national economic growth, they create demand for need various industrial products like cement, paper, books, ink, pen, computers, cars, arms, office equipment and thereby creating growth for manufacturing as also increase demand for more services.
If we know all this, why do we have shadow boxing over whether industry or sector should or can grow faster than the other and waste our energy in artificial controversies created by the economists, politicians and economists? Such shadow boxing does not manufacture anything useful. Nor, does it lead to enhanced quality service to the Nation.
There are countries in the World that have no agriculture and yet rich. Many small countries without much industry have grown because of services sector growth. As household incomes rise they need more of services than they need manufactured or agricultural products. Our country is unable to produce as much food as the people need. Let agriculture grow at least at half the rate at which services sector is growing. We can think of agriculture beating services later. Industry in growing at a few percentage points lower rate than the services sector. Let industry increase its growth rate from its current level. That will however only further increase the growth rate of the services sector. Sector growth rates are inter-linked: no sector can grow faster than what other sectors allow. Instead of thinking about who is better for us, manufacturing or services, let us make agriculture grow faster. With agriculture in such poor shape neither industry nor services will grow fast for long. Sectors do not fight for growth: they help each other to grow.
In recent decades, services sector has grown fast and faster than industry and agriculture. More than half of the GDP or National Income is accounted for by the services sector. When people came to know about this surprising achievement of the services sector for the first time in the early 1990s, they could not believe that half of the GDP had become false (they felt that services sector did not produce something concrete and valuable). The people attached to or employed in industry, especially the engineers had the most resistance to accept the reality of the dominance of the services sector. As an economist or finance person, whenever I talked in seminar or in-house training with engineers as participants, they would point out that this statistics is a serious ailment of the Indian economy and has to be corrected. I had told them that here is no way you can do this. They would give me a smile to acknowledge my foolish belief in the services sector. And, the people born and/ or brought up under Neheruvian Socialist State planning thought that this was due to liberalization and globalization and corruption. They thought this was unacceptable. But we now know the writing on the wall at that time in the past..
Recently, some intelligent young Indians were trying to find out what is important for the future of India: Manufacturing or Services Sector? They, true their inheritance from their forefathers and old teachers, continues to believe that India needs to do great so that Industry again beats services in growth.
There is a general belief that something physical is better than something tangible. Manufacturing is good because you can see them: so TV is good, computer is good, so are cards, soaps, houses, food products, clothing, air-conditioners, mobiles and the like. . The truth is that if the production and consumption of these grow, there is no way one can stop the growth of traders and retailers, construction workers, government employees, bank workers, transportation workers, newsreaders, TV serial actors and actresses, film editors, musicians, cine-technicians and the like benefiting from increased economic activity. Unfortunately, these categories of workers are all producing services in the services sector and not in manufacturing.
We need more schools for our children and hospitals for our people: we invest in schools and hospitals. This investment is in service sector. School and university teachers are providers of service: they are not manufacturing real goods people like to see to feel good. When we invest in schools, hospitals and roads and also get more policemen and government employees to serve the citizens and fight the terrorists, these service sector people not only increase the contribution of the service sector to the national economic growth, they create demand for need various industrial products like cement, paper, books, ink, pen, computers, cars, arms, office equipment and thereby creating growth for manufacturing as also increase demand for more services.
If we know all this, why do we have shadow boxing over whether industry or sector should or can grow faster than the other and waste our energy in artificial controversies created by the economists, politicians and economists? Such shadow boxing does not manufacture anything useful. Nor, does it lead to enhanced quality service to the Nation.
There are countries in the World that have no agriculture and yet rich. Many small countries without much industry have grown because of services sector growth. As household incomes rise they need more of services than they need manufactured or agricultural products. Our country is unable to produce as much food as the people need. Let agriculture grow at least at half the rate at which services sector is growing. We can think of agriculture beating services later. Industry in growing at a few percentage points lower rate than the services sector. Let industry increase its growth rate from its current level. That will however only further increase the growth rate of the services sector. Sector growth rates are inter-linked: no sector can grow faster than what other sectors allow. Instead of thinking about who is better for us, manufacturing or services, let us make agriculture grow faster. With agriculture in such poor shape neither industry nor services will grow fast for long. Sectors do not fight for growth: they help each other to grow.
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