A couple of hours ago, US stock investors finished taking a bath—the worst since 9/11—precipitated by a collapse in the Shanghai market. And front and center on its home page, the New York Times already has up a minute-by-minute chart showing today’s progress for the Dow Jones Industrial Average. (Hint: it’s mostly down.)
Fair enough, I suppose. Measurement is important. And if the stock market ever deserves media attention, today is the day. But I have to confess that I’m baffled by a couple of things.
First off, the DJIA is a terrible indicator of general stock market performance. It’s an antiquated relic based, in part, on a fear of long division. We’ve already gone into this in some detail, so I won’t repeat it all now.
Second, why do we insist on clocking and and endlessly discussing every movement in stocks in a way that we do for little else? Are there no other important economic benchmarks? Or is it just that we’re collectively obsessed with shiny new numbers, no matter how irrelevant they may be?
Want to know about trends for middle class incomes in your state? The most recent data are 2 years old. And you can’t break it down by household size, so it lumps single-income households in with two-earner groups. The data have a number of other problems too.
What about poverty? Nope, sorry. The only reliable data for poverty and child poverty are also 2 years old. And the best analysis of those outdated numbers showed poor Americans heading off a cliff like the Dow did today. Too bad we won’t know what happened in 2006 until sometime next year. And even when we get the new numbers, they’ll be based on several specious assumptions.
There are many more examples, but I’ll spare you for now. I simply think it’s worth noting that what is measured well, we obsess over, and we try to improve. It would be nice, then, if what we measured well reflected the values and priorities of all of us—not just the highest-earning 1/5 of Americans, who own 90 percent of all stock market assets. And not just whatever bright new numbers happen to be readily at hand.
You’re absolutely right that what gets measured gets fixed, but there is also a methodological difference between these various statistics. Market pricesbe they for stocks or emissions credits or pork belly futuresare inherently easy to report instantaneously, at least where the market is computerised. Stats about things like wages, on the other hand, unavoidably have a certain time delay because they are compiled retrospectively, rather than on the basis of today’s batch of wage negotiations. It’s still absurd and unhelpful that it takes two years, but unfortunately we’re never going to get real-time wage statistics, which means they will never be able to compete with the Dow and NASDAQ indices for shinybleepyexcitingness in the eyes of the news networks.
Re/ the China Stock Mkt and the US nervousness I’d like to know: about how much of our debt is owned by the Chinese? The whole thing seems like a giant confidence game, and they seem to continue to have confidence in US industry…, so so far so good… Do we have reason to be worried?