Information, Measurement, And Prediction In Economics [report]

Victor Zarnowitz
1979 unpublished
This paper examines the flow of production and use of economic information and analyzes the effects of measurement errors, particularly as transmitted through expectations and forecasts. Economic data are subject to a variety of errors, and the uncertainty about economic measures tends to increase further with the amount and complexity of the processing performed on the underlying data as well as with the distance between the user and the processor. With some exceptions, economic time series
more » ... omic time series lag signifi-4 The process of compiling and communicating the information proceeds in several stages ( Figure 1 ). First, events are observed and recorded in the form of primary data. This function of data collection, which may also be called inquiring or surveying, is performed for private purposes everywhere in the economy at least in some informal fashion. Public information on the economy, however, is compiled for the most part by government agencies from primary data collected from firms, households, and other units in the private and public sectors. These data are then processed, classified, aggregated, and subjected to various other statistical procedures, e.g., types of "massaging" (interpolation, extrapolation, splicing, smoothing). These operations transform the primary data into the economic measures introduced in the preceding paragraph. It is generally these measures rather than the underlying data that are transmitted to the public by various modes of reporting--releases, telephone, print, etc. In the form in which the economic measures become available to the user, they constitute, from his point of view, "signals" to work with. The events, data, measures, and signals are variables, generally random. The operations whereby events are transformed into data, data into measures, and measures into signals, can and normally do generate errors--systematic, random, or both.
doi:10.3386/w0318 fatcat:czbcq6inyveyda56xt25peqvvi