Economic Data Without Good Economic Theory Is Useless

by Frank Shostak

In order to make the data “talk,” economists utilize a range of statistical methods that vary from highly complex models to a simple display of historical data.

It is generally held that by means of statistical correlations one can organize historical data into a useful body of information, which in turn can serve as the basis for assessments of the state of the economy.

It is held that through the application of statistical methods on historical data, one can extract the facts of reality regarding the state of the economy.

Unfortunately, things are not as straightforward as they seem to be. For instance, it has been observed that declines in the unemployment rate are associated with a general rise in the prices of goods and services.

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