Bradley Prize acceptance remarks

I am overwhelmed, I am speechless.

Well, almost speechless.

You may ask: how do I fit in to this august circle of Bradley Prize winners?

Though trained in economics, I'm not a Nobel Laureate like Gary Becker-nor an obvious future short-lister, like Marty Feldstein, or Al Harberger, or Allan Meltzer, or John Taylor. I do not man the Constitutional barricades, defending Americans' freedoms, like today's awardees Ed Meese and Chip Mellor. Unlike Ed Feulner, I'm not good at running anything, much less a now-famous Washington institution. And I certainly can't do what George Will does: Lord, no one can do that!

I earn my living as-well, you might call me a Professor of Arithmetic. There are a lot of really complex public policy questions out there-and for over 30 years I have been trying to tackle some of them with the help of my trusty friends: arithmetic, subtraction, division and multiplication.

For better or worse, ours is an era saturated with, and conditioned by, data, numbers, and statistics. The whole globe over-not only in slave states and under command economies, but also in open societies and free countries-figures and estimates are regularly used not only to guide policy, but to govern it. Back in the 1950s the great sociologist Pitirim Sorokin decried what he called "quantophrenia"-but since then the march toward "rule-by-numbers" has progressed without cease, both in America and overseas.

There is perhaps something beguiling in the notion of a meritocratic, meliorative world in which the best minds make use of the best information for the betterment of all. But what happens when the data or statistics that governments depend on turn out to be wrong? Or when the best and the brightest in the academy and the policy elite commit egregious but elementary errors in analysis? Or when critical facts challenging the prevailing consensus are available for all to see, but somehow seem to hide in plain sight?

That's when you call in a Professor of Arithmetic.

I know such work doesn't sound very elegant. But getting the right number of zeros in your estimate, and figuring out whether the arrow should be heading up or down, and even determining whether the sign in front of your calculation should be positive or negative, can be surprisingly useful when the issues at hand are matters of national consequence.

To be clear: sophisticated econometric models and calculations have their place in promoting the common weal. But often, it is better to be approximately right than precisely wrong.  

Let me give you a couple of examples.

Take the US government's effort to describe the Soviet economy during the Cold War era. In terms of manpower, talent and expense, this remains the greatest social science research project ever undertaken. By the start of the Gorbachev era, the American intelligence community and its helpers in the academy had spent over three and a half decades refining and perfecting their assessment of Soviet economic performance.

So, how did they do? In the year 1985, according to the CIA, the GNP of the USSR was larger than the GNPs of Britain, France, Italy and West Germany-combined!   That same year, by the CIA's reckoning, the per capita GNP of the Soviet Union was nearly as high as Britain's-and significantly higher than Italy's.  The CIA also reported, incidentally, that East Germany's 1985 per capita GNP was higher West Germany's (2.15 percent higher, according to the Agency's calculations-this was highly precise work!).

Of course we should immediately acknowledge that the CIA's assignment here-to  translate the performance of centrally planned economies into market terms-was and still is a truly daunting, indeed confounding, task.   But there was one serious problem with all this impressive, seemingly authoritative handiwork. It could not pass the most basic of all statistical tests: the laugh-out-loud test.

Thanks to the pioneering demographer Murray Feshbach, we knew that the Soviet Union was in the midst of a health crisis:  life expectancy was falling-even Soviet infant mortality rates were rising. Could a system manned by workers suffering Third World levels of mortality really be achieving British levels of productivity?

The great émigré economist Igor Birman, who among other things pinpointed the hidden but crippling Soviet budget deficit long before it was officially admitted, tried to explain to US analysts that their Soviet economic assessment was-well, barking nonsense: but all his warnings were ignored, even scorned, out at Langley .

In 1990, near the end of the Soviet era, Igor and I organized a conference that brought together CIA economists, reform-minded Soviet economists, and independent Western economists for three days of detailed and exacting comparisons between the US and the Soviet economies. No impartial specialist could have emerged from those sessions maintaining that the existing US estimates of Soviet performance were tenable.  And of course, there is there is absolutely no doubt today that the contrarians were right in this debate, and the intelligence establishment was wrong.

Note that these profound errors did more than just mislead our policymakers about the strength of the Soviet economy. In badly mis-estimating the size of the Soviet economy, US intelligence also seriously under-estimated the Soviet "military burden"-the ratio of defense outlays to national output-and thereby provided Washington with fundamentally flawed counsel about the Kremlin's commitments, priorities and intentions during the dangerous Cold War epoch.

Fortunately, the Cold War is now long over. Our domestic War on Poverty, however, is not. Our country is devoting extraordinary resources to this ongoing war against want: over two trillion dollars in 2010 went to transfer payments to mitigate poverty or support the elderly. Yet according to federal statistics, that same year over 15 percent of the American population was living below the official poverty line, even after these vast payouts. Our official poverty rate today is higher than it was 10, 20, or 30 years ago-higher, even, than in 1966, back in the Johnson years. And since that poverty rate tracks a fixed poverty threshold, this means the proportion of Americans living in absolute poverty is higher today than back in the Vietnam era.

Somebody-anybody-is there a Professor of Arithmetic in the house?

What such poverty trends suggest about life in modern America is positively alarming. Or would be-if those numbers were any good.  But they aren't. Let me try to be diplomatic: our official poverty rate is more than an embarrassment, it is a statistical freak-show mirror that can only offer Bizarro-world reflections of reality.

Just how far off is the poverty rate?  Well, for starters, it is out of sync with just about every reliable indicator bearing on material progress or poverty alleviation in our nation: even if they all improve, our poverty rate can still get worse.

  A poverty rate worthy of the name should at least be able track with trends in material deprivation. But ours can't even do that. Despite ups and downs in the business cycle (some of these severe, like the one we're in now) it is incontestable that material living standards and consumption levels for Americans of every stratum today are not only higher, but dramatically higher, than 40 years ago.  America's poverty population may still be poorer than the rest of the country, it is but they live in larger and better furnished residences, own more cars and vehicles, report higher levels of education, and enjoy more and better health care than at any time in the past.

All this is demonstrable, beyond any serious debate. But you'll never hear this in Washington. The index that guides our national antipoverty efforts won't ever report it. In fact, it can't.  Because the official poverty rate was built to look at the wrong thing! It follows trends in income, whereas material want and deprivation are determined by consumption. And as it happens, there is a huge gap between income and consumptions for the poorest these days. In the year 2010, for example, the bottom fifth of US households spent about two-and-a-half times more than their declared after-tax income-and that before all the in-kind government benefits that don't get counted.

You'd think that if our government really wanted to help the poor, as most of us do, it'd want accurate and not grossly distorted information to work with. Unfortunately, Washington stubbornly clings to a broken compass in charting the course of our national antipoverty policies. Is it really any wonder those policies have fared so-well, poorly-in the nearly 50 years since the official poverty rate was devised?

By this point some of you may be getting the feeling that my worklife is-say, a little boring?  Au contraire: nothing could be further from the truth. We Professors of Arithmetic are international men of mystery. We cut a dashing figure. We even sort of get death threats from North Korean officials!   

Actually, that last part is true.  Many years ago, with my then-Census Bureau colleague Judith Banister, I reconstructed North Korea's postwar population trends. This otherwise perhaps eye-glazing report contained a small passage on North Korean military manpower: since Pyongyang had no trained demographers at the time, they didn't know the scant tidbits they had divulged would permit a specialist to see how many men and women the North Korean government thought it had under arms. That happened to be a very big number: over 1.2 million, and total had jumped by over 500,000 in less than 15 years.

Being the sociable sort, I shared a copy of our study with a North Korean diplomat.  Some time later, he gave me a ring. As I recall, this is what he said: "Mr. Eberstadt, you must understand your problem. We know where you live. We know about your wife. We know about your children. You must not publish that study".     

Now, the North Korean government may not be good with statistics, but they have a reputation for being very good at subtraction. Be that as it may: the study was published, and I am here today to tell you about it.          

I'm sure you all know the old saying, "it takes a village to raise a Professor of Arithmetic". I have accumulated a great many debts on the long road that brings me before you tonight.

I am, to begin, the grateful pupil of a constellation of educational all-stars. Some of them-like Miss Elderkin, Mr. Tokieda, and Judge Mason-you may not have heard of; others, including Roger Revelle, Dwight Perkins, Nathan Keyfitz, Lord Bauer, and Peter Timmer, you may know. I have also been privileged to learn over the years from a host of luminaries who were very much my teachers, though not formally my professors: among them, Theodore W. Schultz, Angus Maddison, Robert Scalapino, Daniel Patrick Moynihan, Andrew Marshall and my AEI colleague Charles Murray. 

For the better part of three decades the American Enterprise Institute has been my intellectual home and my professional haven.  In my view there is no better or more exciting place today in America, or the world, to pursue the sorts of research I attempt. AEI is the house that Chris, and David, and Arthur have built-you know who you are. Special mention should go to Henry Wendt, who endowed the eponymous Chair I am honored to hold at AEI: Henry, thanks for taking that big gamble on me. Special thanks as well to Rich Ellings and the National Bureau of Asian Research, with whom I have collaborated so happily for over 20 years.

The basic building block of society, the starting point of our moral and practical education, is the family: and it is to my family that I, like most of us, owe my very deepest debts. In my case, I've learned the biggest lessons from the cradle onward from my family.  By now, in fact, I am long used to being outsmarted by all of them: starting with my beloved father, Frederick Eberstadt, here this evening, and my son Frederick William Eberstadt, who tests me every day. (Intellectually, that is. Some days I even pass.)

From my earliest memories, I've been surrounded brilliant women, from my sister, the novelist Fernanda Eberstadt, to my daughters-Catherine, Isabel, and Alexandra-who outshine me at almost every turn.

Then there is my beautiful wife, the love of my life, Mary Eberstadt. George Will calls her "intimidatingly intelligent"-his words! How can I hope to improve on that? 

Finally, there is my mother, Isabel Nash Eberstadt.  Time tonight does not allow the accolade she deserves. Suffice it to say that she was an inspiration-and not only for me. I only wish you all could have met her.

God bless you, Mom. And God bless you all.

 

 

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Nicholas
Eberstadt

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