Separate Regulation from Statistical Reporting

This is the general principle. Those responsible for regulating an industry should not be the ones to collect and publish the numbers on it. There is an unavoidable conflict of interest: if they are being responsible, regulators want to influence the behavior of the industry they regulate; otherwise they are captured, which is worse. In either case, their motivations can interfere with disinterested data-gathering and the single-minded pursuit of accuracy.

We have already seen this in the field of occupational health and safety. OSHA requires firms to maintain logs of safety incidents, but, hoping to avoid OSHA’s regulatory reach, firms cook the books. There is substantial evidence that the statistics coming out of OSHA are deeply unreliable. Meanwhile, NIOSH, which has no direct hand in regulation. conducts its Census of Fatal Occupational Injuries, which, in its narrower domain, is comprehensive and credible.

So now the call has gone out for more transparency in the monetary and financial data reporting of the Fed. This is a step in the right direction, but the best course would be to hand off the job to another agency, like the Bureau of Economic Analysis, which regulates nothing at all, publishes tons of statistics and does an excellent job.