Juking the Stats

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One of the concepts they introduce you to on The Wire is the practice of “juking the stats” as a crime reduction strategy. You code aggravated assaults as simple assaults. You code robberies as larcenies. And presto-changeo violent crime is down. And it’s not just on television, the availability of these tactics is why crime researches say that if you want to compare violent crime levels from city to city or within a given city over time, you need to just ignore most of the statistical information available to you and focus on the murder rate. It’s hard to miscode a murder as anything other than a murder.

One thing the show doesn’t go into detail over is that, in principle, this sort of flim-flam could actually bring about a reduction in the real crime rate. Confidence matters a lot for a city. When people have the sense that conditions in a given city are good and improving, businesses will invest and that creates jobs. And people become more inclined to move in, raising property values. Higher property values mean more tax revenues for social services and for public safety. And more jobs, by all accounts, leads to less crime. And with less real time, the stats will get even better, which builds confidence, etc., etc., etc. It’s a virtuous circle. Or at least it could be. In principle.

And though I’m by no means an expert, I think that’s basically the right way to think about this business of ending or suspending “mark-to-market” accounting. It’s not impossible that we’re facing a pure confidence issue here that could be solved by tweaking the accounting standards. But it’s much more likely that, just like a police commissioner juking the stats, this is a measure that will work as a temporary palliative that lets us keep muddling through but in a way that only makes things harder to resolve in the long run since it’s a “solution” that’s based on muddying the waters of what the problem really is. Ed Paisely has flagged Christopher Wood’s argument that “bad debts may be warehoused, Japanese-style, resulting in an extended period of lackluster growth in the U.S. — and indeed in Euroland, where financial problems are almost as critical, if rather less transparent.”