Lies, damned lies and statistics

Friday, 28 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

A newspaper has reported that the Department of Census and Statistics has removed bread from the household basket and included biscuits instead so that the increase in the Cost of Living Index will not show up.

The Central Bank is planning a new Cost of Living Index to cover up the increase in inflation. It is true that the pattern of consumption changes over time but that is over a long time as in the case of the former Colombo Consumer Living Index of 1952.

But to argue that the consumption pattern has changed from 2004 to now (the base of the present Index) is a lie and a subterfuge. Ultimately the Central Bank itself will come to believe its own lies and then fail to correct inflation. This is what it is doing today, printing money galore to support the rupee at an unrealistic value by pegging it.

The saying ‘lies, damned lies and statistics’ arose from the suspicion that Government statistics are damned lies. A British civil servant who ran Hong Kong’s finances from 1961 to 1971 said that governments should not therefore collect them.

All governments are tempted to tweak the numbers they are judged by. But in doing so, they deprive themselves of the best guide to future policymaking. They will create a spiral of distrust in which even the numbers they have not distorted are not believed.

We have determined our own poverty line, for example, which is some Rs. 3,335 per month but the World Bank poverty line in US$ 1.50 which even according to the under-valued non-PPP based rupee (Rs. 110 to the dollar) works out to Rs. 137.50 per day or Rs. 4,125 per month. It should be converted at the real effective exchange rate of Rs. 125 at least.

Since no one can live even on this amount, our poverty line should be higher. But on this local poverty line, the poverty numbers are down to less than 15% and with inflation the poor will disappear altogether (of course the department will revise the poverty line perhaps without increasing the numbers).

But how many will believe these numbers? Instead of a household survey to change the Cost of Living Index, the bank should conduct a household survey to determine the base income to define poverty.

The numbers produced by professionals should be free from political interference, which includes interference from politically-appointed officials whose performance will be shown up not only to the people but to their own political masters. But is this fudging in the interest of the political masters?

For 70 years the Communists in the former Soviet Union deceived the people with their figures and rhetoric. But the lack of bread and the long queues for every consumable item in Moscow made the public realise that something was amiss.

The West, of course, knew all along that it was all a hoax. So despite their Messianic belief in a society where everybody would soon be equal, they finally dumped communism.

The changes in technical matters such as the composition of the basket, the introduction of new series (however justifiable) if carried out on political instead of technical considerations will mean that the public will not trust the new statistics. Even if the numbers are correct, the public will lose trust in them if the Government spokesmen put spin on them.

For example, the failure to point out that the growth rate this year in the third quarter is less than the second quarter and instead to compare the rate with the low growth recession prone 2009 quarters is spin.

In Argentina some years ago its statisticians took to the streets to protest the removal of the official in charge of inflation figures after she refused to change the way they were calculated. Are we heading for a country where statistics are damned lies?

In developed countries, there are independent organisations making their own statistical calculations. Our private business chiefs should fund an independent organisation to do so.

- R.P. Perera