Alex Nowrasteh and Adam N. Michel
President Donald Trump recently fired Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer hours after the agency released unexpectedly weak job growth figures, accusing her of manipulating the data without evidence. He has now nominated E.J. Antoni, chief economist at the Heritage Foundation, and a well-known statistical charlatan, to lead BLS.
Antoni would be seen as a partisan head of BLS who risks politicizing its economic data and sinking the reputation of a justifiably respected government statistical bureau. Yet this partisan attack raises a deeper question: Should the federal government produce economic statistics at all?
The answer is no. Statistical offices, like the BLS and the Bureau of Economic Analysis (BEA), do not supply public goods, but rather crowd out private production of statistics and create a pretense for government economic intervention in the private economy to our detriment. Ending the BLS and other government statistical agencies would likely improve the quality of economic information, encourage innovation, and reduce government-caused economic distortions. Devolving these functions to private markets would insulate them from the political corruption, congressional funding battles, and institutional rot that accompany centralized control.
Economic Data Are Not True Public Goods
By economic definition, public goods are nonrivalrous (one person’s use doesn’t reduce availability for others) and nonexcludable (it’s hard or impossible to prevent nonpayers from using them). Governments produce data because they are valuable to the government, not because they are true public goods. Official statistics are nonrivalrous, but they are excludable. Private data services are often gated by usage restrictions or lags, making them club goods, not public goods. There is no theoretical reason why firms could not produce robust and comprehensive economic data if it were valuable to markets.
This is not just a theoretical argument. Multinational businesses invest significant capital in countries with poor or absent official statistics, instead relying on their own or private data firms and analysis. Private services already fill some demand for economic data and could play a much larger role.
The Crowd-Out Effect on Private Innovation
Private firms produce data that are similar to government economic statistics. For instance, ADP releases payroll figures from its own proprietary sources and methods, not without criticisms. Bloomberg, Nielsen, and IHS Markit offer price and market analytics. The Case-Shiller Index and Zillow report home price data, and the Billion Prices Project showed it’s possible to construct near-real-time inflation measures.
If private firms like China Beige Book can uncover economic statistics in communist China, then they can do so in Trump’s America. There’s every reason to think that private data collection and reporting firms would improve in the absence of the BLS, just as many private sources spread and improved to fill gaps in official data during the pandemic.
Calculating other data products, such as GDP, may seem harder. But this is simply a function of existing government data disincentivizing private innovation and investment in potentially superior methodologies or statistics. For example, satellite images of nighttime lights produce excellent data that closely correlate with GDP figures and often correct politically manipulated statistics in authoritarian countries like China and Ethiopia. Benchmarking everything to US government statistics does not guarantee accuracy; it guarantees correlated errors.
Furthermore, private actors have stronger incentives to produce accurate data, since their reputations, profits, and investment outcomes depend directly on getting the facts right. Government, by contrast, holds a monopoly on official economic data. In virtually every other market, economists agree that monopolies tend to produce lower-quality goods and services: they face no competitive pressure to innovate, correct errors quickly, or tailor products to user needs. An absence of government statistics would very likely improve the useful details, accuracy, and timeliness of economic statistics.
Would Abolition Worsen Policy Decisions?
Probably not. The normative case for BLS data relies on the assumption that policymakers would be blind and behave erratically without them. Yet the government is blind and behaves erratically with these data. Often, the data, such as measures of the so-called trade deficit, even encourage erratic behavior like Trump’s tariffs. Perhaps Trump would have imposed those tariffs anyway, just like there were tariffs before detailed international trade data were available, but public policy is already quite erratic and getting more so as we have more and better data.
On the one hand, what gets measured gets managed by the government. Government statistics create both the tools and the temptation to manage the economy. When responding to Milton Friedman’s question about the paucity of official economic statistics in Hong Kong, its Financial Secretary, Sir John James Cowperthwaite, said, “If I let them compute those statistics, they’ll want to use them for planning.” As a supporter of free markets, Cowperthwaite worried about how the supply of government data could create its own demand for intervention. For example, detailed, government-centric economic indicators make it easier to rationalize large stimulus packages and support the Federal Reserve’s conflicting dual mandate of maximum employment and price stability.
On the other hand, private institutions could fill the gap, and the government could purchase their data just like it purchases office chairs and paper. The government could even be a monopsonist for certain types of data, which would transfer de facto control over methodologies to the government, which wouldn’t change much from the status quo. If private firms create even better and more useful statistics than the BLS, which we hypothesized above, the government may be even more tempted to intervene in the economy because of its greater confidence.
Ending agencies like the BLS wouldn’t end all economic intervention. But policymakers would have to rely on a more diverse set of market-based data sources that could foster a healthier skepticism toward activist policies by reducing overconfidence in a single government-produced number. Regardless, there’s no reason for the government to create the statistics even if there is no ultimate difference in economic policy.
Private Institutions Are More Robust to Political Corruption
Trump’s nomination of E.J. Antoni to the BLS has spotlighted how it and other government statistical agencies are vulnerable to politicization. Trump said that Goldman Sachs should fire its chief economist, but he is more insulated than the head of a government agency, who can just be fired in a social media post. If McEntarfer were as insulated as the chief economist at Goldman Sachs, then she’d still have her job.
Dishonestly manipulating statistics for political gain, whether by government or private actors, is harmful and should be categorically rejected. However, the very fact that we are debating the political neutrality of official data should be a warning sign and a call to action. More government functions ought to be devolved to the market to protect them from political winds, outright corruption, and institutional decay.
The existence of private economic data and the success of markets at meeting every other consumer demand mean that there is little downside to ending the production of government economic statistics, and the upside is potentially enormous.
