A few weeks ago, China announced that its gross domestic product (GDP) grew 7.8 percent in 1998. China's economy is booming, but many economists question whether it is really doing quite as well as the official numbers indicate. If it is in fact massaging its growth statistics, China is not the first -- nor will it be the last -- country to do so.

• During the "Great Leap Forward" in the 1950s, for example, China's agricultural output figures were so wildly exaggerated that officials were caught unprepared when actual output came in far below expectations, leading to a famine that killed millions.

• More recently, China admitted to 60,000 cases of false statistical reports in 1993 alone.

• In 1997 the Russian government exaggerated economic growth by adding an estimate for the underground economy to GDP that year, making it seem as if growth increased over 1996, when it actually fell sharply.

• Some countries have simply made up the numbers -- as the director of statistics for Mongolia as much as admitted a few years ago -- and partly for this reason, a recent World Bank study found just about all of the trade data for Africa was "virtually useless."

Even large industrialized countries have problems with their key statistics. Last year the Bank of England was forced to halt publication of a major data series due to doubts about its reliability. Federal Reserve Chairman Alan Greenspan has criticized many European inflation statistics. And the frequent and large revisions to key U.S. economic statistics must make one skeptical -- at least of initial reports, which are often radically revised.

Poor data often lead to mistaken policies. Improving the quality of economic data both here and abroad should be a higher priority than it is.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, February 17, 1999.

For full text http://www.ncpa.org/oped/bartlett.html