It doesn’t take a brain surgeon to decipher the unemployment rate

Unlike the brain, the unemployment rate is fairly simple. Human brain via www.shutterstock.com

This is a fun time of year for me as a professor. I am finishing my final exams, celebrating Mother’s Day with my wife and kids and getting ready for one of the more exciting events of the year at Emory: commencement on the quadrangle.

As a student, guest or professor, I can almost count my age in total graduation events attended and can attest that Emory knows how to put on a good show. This year’s speaker is novelist Salman Rushdie, and ex-California Governor Arnold Schwarzenegger is among those who have addressed graduates.

In 2012, it was the eminent neurosurgeon Doctor Ben Carson.

Ben Carson’s commencement address.

Ben Carson has been in the news a lot lately – he’s become a presidential candidate – but he’s also been talking economics, especially his disapproval of the way that economists define unemployment. As an economist, my immediate response is, “Hey, when you’re doing brain surgery, I don’t tell you where to put the knife!”

Why some people don’t trust the numbers

Since I’m a labor economist, I was pleased this past Friday when the Bureau of Labor Statistics (BLS) released the April unemployment figure: just 5.4%. This is a great number.

First, it’s a low number. When it comes to unemployment, we like it low. Second, it reveals that the general trend in unemployment has been downward (again, we like downward). Lastly, the unemployment is at its lowest since May 2008. Below is a graph of the unemployment rate for the last ten years.

The unemployment rate has dropped to its lowest level since before the recession. BLS

Once upon a time, news that the unemployment rate is at a seven-year low would have been received really well. We are in different times.

“People” do not trust the unemployment rate because they are being told not to. Doctor Carson, for one, stated at a campaign rally the other night: “what you have to know is that you can make the unemployment rate anything you want it to be based on what numbers you include and what numbers you exclude.”

I may be picking on Doctor Carson and his comments on the campaign trail because they land close to home for me, but most if not all politicians are guilty of dismissing expert opinions and data whenever they don’t conform to their views, regardless of the topic or party.

For example, a Pew Research Study found that although 84% of scientists agreed that the Earth’s warming trend is brought about by humans, only 30% of Republicans feel the same. On the other side of the coin, 70% of scientists believe that the US should expand its nuclear power capabilities, yet only 45% of Democrats agree.

But Doctor Carson’s quote is a particularly egregious example because he should know better – he’s a board-certified physician. People often skirt prickly issues (that aren’t really that prickly) by claiming they aren’t scientists or mathematicians or trained in any way that enables them to judge or make a reasonable assessment. But he’s been in a profession that relies on data being collected in a systematic fashion, yet disregards a systematically collected set of data.

Systematic and deliberate

Now, of course, technically, he’s right. If I were calculating an unemployment rate, which is, by definition, the ratio of the number of people unemployed to the number of people in the labor force, and I put seven in the numerator and 100 in the denominator, I would have an unemployment rate of 7%. So, I’ve proven his point; you can make the rate anything you want by including and excluding numbers.

But, of course, I’m not responsible for calculating the unemployment rate – the BLS does that job. And its staff don’t randomly choose numbers to place in the numerator and denominator. Those numbers are revealed through a very systematic and deliberate process. If, as Doctor Carson suggests, the BLS can, and does, use any number, then why wouldn’t the unemployment rate look like this?

This is how it might look if the government just made it up to fit its own agenda. Ben Carson Inspired Reverse Number Generator, Author provided

Under this new scenario, the unemployment rate dropped to its lowest levels right after President Barack Obama took his oath of office. How amazing for him. Of course, it didn’t – the unemployment rate took a huge swing upwards as the economy suffered from the housing bubble shock.

What if the governator had a headache

What does this mean and why do we care?

Doctor Carson is playing around with the idea that we can just change the definition of something to suit our needs. Or, we can just disregard a technique or process if we don’t like it and re-insert our own technique and process because we like it more.

Suppose that, when Doctor Carson gave his Emory address, Governor Schwarzenegger had also shown up to get his medical opinion about a headache. To treat Schwarzenegger’s hypothetical headache, Carson would have likely run a series of standardized diagnostic tests and read the results in an objective, professional way.

Or, perhaps not. Carson could have, I suppose, just considered whether he liked Arnold, and if the doctor wanted him to feel good or bad. Because, hey, why not? We live in a world where nothing means anything except how the audience reacts.

Slippery definitions

But he wouldn’t have. Doctor Carson is a medical professional who would not play fast and loose with results. And, when it comes to the unemployment rate, we can’t just disregard a number because we don’t like it, or because it doesn’t fit the world we wish to see.

Now, it is worth noting that Carson did follow up his initial thought on unemployment to focus on the labor force participation rate.

This number has been depressed – meaning even a very low unemployment rate could be masking other problems – and is worth examining for context. But Carson’s argument comes down to this: don’t believe the first number because the BLS is out to get you, but do believe the second number because it’s important and it’s collected by a bunch of very smart people (who also happen to be called the BLS). Really?

We fix on definitions and keep them consistent so that members of a profession have a precise understanding of what they mean when they converse, and so they can compare similar phenomena observed at different times. If we apply Ben Carson’s slippery definition of the unemployment rate to that of Ronald Reagan’s term, it would look very different than the one economists have established and would make long-term comparison impossible.

But, thinking of Ronald Reagan, I can never forget that his White House physician was Doctor Daniel Ruge, another eminent neurosurgeon of his time who cared for the president after he was shot. One of Doctor Carson’s specialties is pediatric medicine with a focus on the surgical repair of craniosynostosis, which is the premature closing of the “soft spot” on an infant’s skull. If skilled surgery isn’t performed almost immediately, the infant will suffer disfigurement and brain damage.

I had that diagnosis at birth. I am a survivor of that surgery, thanks to the rapid intervention of Doctor Ruge. I can show you the scars. My wife tells me that I’m not deformed, and Emory hired me – so I guess it worked out.

As a result, I have a special fondness for all neurosurgeons, Doctor Carson included. So, I don’t want to talk trash, but pardon me if I say that I’m really glad that some economist-turned-politician didn’t show up in Doctor Ruge’s surgery to give an opinion on gray matter – particularly mine.