Friday, July 12, 2024

Lies, Dammed Lies and Beauty Contests

Economists with the slightest measure of common sense treat statistics with great caution. They have good reason, especially so in developing countries where there are few resources for something that is considered by policy makers as ‘irrelevant’ as statistics .But in developed countries the statistics that are provided by agencies responsible are often very questionable and depend on political interests of those in power. A statistic is an attempt to capture a very complex reality in one number and so it is bound to be flawed- but not all statistics are born equal, some are more flawed than others.

Tourists Galore As a young economist doing my first teaching job at the University of Dar Es Salam in Tanzania in 1980 I was asked to analyse what had happened to the nation’s foreign exchange earnings from tourism. I noticed something really odd. The number of tourists arrivals in Tanzania had been increasing by 10% every year even after Tanzania had closed its northern border with Kenya in the 1970’s. This was the main entry point for tourists and hence the statistics made no sense. So I decided to get away from my computer, a thing rarely done by economists even then, and to determine how this was happening. After considerable effort I got an appointment with the individual in the immigration department responsible for tourist arrivals. He was nice young man sitting behind a wooden desk and behind him, piled to the ceiling, were the neat piles of immigration forms that each of us fill in when entering any country. I enquired how many staff does he have helping him collate these figures. He said that he worked alone and when I asked how he could possibly do this job he answered that he didn’t. So how were the statistics compiled? He replied ‘I made an estimate one year and increased it by 10% each year…..it makes the minister very happy’ Compiling good and accurate statistics is an expensive matter but policy makers generally feel data is of little direct and immediate importance to the country. The effect of what happened in Tanzania is that both the government and the private sector were putting up, largely empty hotels, based on the projections of future tourist arrivals which were simply a figment of the young man’s imagination. These were just poor statistics gathered on the cheap but for Tanzania it proved very costly.

Facts?- Ask the Delphic Oracle

But what happens when the statistics you want can’t easily be compiled or simply doesn’t even exist or are just too expensive to collect. Let us say you want to know which country is more corrupt- Botswana or Namibia and by how much? You cannot easily get a measure ÔÇôcorrupt officials normally do not publish the bribe you have to pay to pass the theory tests for the driver’s license. So if you want to know you ask Transparency International and they will give you a statistic. But then how do they get their numbers? They ask the Delphic Oracle. The Delphic Oracle in ancient Greek mythology was the priestess at the Temple at Delphi who had great knowledge and wisdom because of her connection to the Greek god Apollo. In statistics the Delphic approach is that when you don’t have data you simply ask people who should have great knowledge. Increasingly more and more institutions such as the World Bank, World Economic Forum and Transparency International are using this Delphic approach to gathering ‘data’ about questions that are almost impossible to get objective numbers or simply because it is by far the cheapest way of doing it.

So who are these modern day Delphic Oracles that are increasingly the source of what passes for data? Normally they are businessmen and women? Increasingly data from a whole host of institutions is nothing more than opinion surveys- the collective views of the business community. I have the highest regard for some businessmen ÔÇô some are educated astute and often quite clever. But I also know a lot of business people who are uneducated but who have nothing more than a basic and a very good gut instinct for how to make money. Increasingly they are being asked for their views and these are compiled into statistics and bingo! You can have a statistic for how corrupt a particular country may be and how well an economy is managed. This approach when stripped of the niceties is little more than an economic beauty contest. World Economic Forum- please go home!!

The most egregious abuse of this approach to gathering so-called data came to light just a couple of weeks ago when it was reported that the World Economic Forum, those nice people who organize lovely meetings from the great and not so good, had ranked South Africa as 143 out of 144 countries for teaching mathematics and science, slightly ahead of Yemen. Now this extreme result may be true but you would certainly think that such a ranking would be done on the basis of objective criteria like children’s test score in exams etc. Not a chance, instead the WEF used the Delphic approach and asked 45 executives in South Africa ‘How would you assess the quality of mathematics and science education in your country’s schools’. It is well known that the South African education system is seriously flawed but this ranking tells us more about the professionalism of the WEF which published this ‘evidence’ than it does about the South Africa education system. Throughout much of the developing world policy makers are making a fetish of their ranking on these sorts of economic beauty contests created in Washington and Switzerland and if they fall in a ranking they consider it a reflection on their economic virility. Last week the Economist Intelligence Unit issued its own results from the company’s economic beauty contest on which country’s are most investor friendly.

While its results are better quality than most as only half its measures are based on opinions it comes with a list and ranking similar to most other agencies. The ten best countries to invest in were all developed and very rich countries ranging from Singapore to Canada to Australia but investor friendly doesn’t necessarily equal profitable. Only dollars and cents and not opinions will tell you what is profitable but gathering that data is very expensive. Being unfriendly to business does not help a country but in fact those countries that have over the last decade been the most attractive to investors ( eg China India, Brazil etc ) are by no means amongst the most business friendly in any of the indexes used. The WEF and the World Bank who increasingly use opinion surveys as though they were facts should listen to my grand mother’s sage advice as she was far closer to the Delphic Oracle than many of the people they interview. As a child she would advise me that if I have nothing useful to say then I simply should not talk. I learned in Tanzania that bad and inaccurate data often creates horrendous policy and so it may be wise to say nothing.

These are the views of Professor Roman Grynberg and not necessarily any institution with which he is affiliated

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