“There you go again” – Government regulations, the economy and data abuse.

I expect bias when reading articles from certain sources. In my attempt not to succumb to withdrawing into my own comfortable, information cocoon and read only news that I know will support my existing positions I continue to read articles from sources with known points of view including the Wall Street Journal. But in reading an article published on December 15th titled “Regulation for Dummies” I have to do something I’ve rarely done before and quote Ronald Regan who, in a 1980 debate with Jimmy Carter, famously said “There you go again” in response to a Carter statement on Medicare.

In the case of this article I say “there you go again” for trying to use partial data to support an already established point of view. I was drawn to the article because I was trying to evaluate the validity of the premise that government regulations are hindering an economic recovery by restricting business growth.

The first indication that the article wouldn’t help me refine my position was that it quoted information from the Mercatus Center. In a previous post,” Index of Personal Freedom – when good statistics go bad”, I noted the intentional bias and abuse of data by the Koch brothers funded center. Citing the Mercatus Center as a source immediately raised my index of suspicion regarding the credibility of the article.

The authors also presented a graph showing the rise of regulations in the Obama term but it seemed odd that the data began in 1995. The data source was the “Unified Agenda” and currently it contains reports only back to 1995.

Economically significant regulations as reported by the Wall Street Journal

However, the same website, The Office of Information and Regulatory Affairs, has a different set of reports beginning in 1981 that also looks at economically significant regulations. These reports provide historical context to the regulation story that is critical to interpreting the limited data set presented in the Wall Street Journal article and clearly shows there was greater regulatory activity from 1991 to 1994 that in the Obama years.  During that period of “high government regulation” there was also healthy growth in GDP as the country emerged from the 1990 recession.

Comparing the number of economically significant regulations and GDP growth from 1981 to 2010.

Does that mean that a higher number of economically significant regulations caused the GDP growth? The fundamental difference between the Wall Street Journal article and my perspective is that I can say I don’t know. In fact, there isn’t enough information for anyone to know.  The correlation between GDP growth and the number of regulations is -0.47 indicating that there is not even a meaningful correlation between the two.

Although the Wall Street Journal article has many flaws perhaps the greatest is that it attempts to portray correlation as causation – a cardinal sin of statistical inference. To attempt to assign causality to current regulatory activity for the sluggish economic growth is fundamentally flawed.

Data should be used to understand a problem and to help find a solution. Unfortunately articles such as this one transparently use incomplete data to support their preconceived opinion.

I read this article hoping to learn something about the impact of regulations on business growth. Instead, I learned that even once venerable conservative media sources have lowered their standards in order to advance their position. What a shame.

Even more of a shame is the large number of readers who be willing accept the overtly biased article as evidence that reinforces their opinion that government regulations are destructive.

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