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Statistics corner: issues for official statistical systems in democratic market societies.

Note: The Common Market countries have agreed to provide technical assistance to the Eastern and Central European countries, which are facing the challenge of transition from a planned economy to a market-based economy. In order to make this transition, it is important both to improve existing statistics and to create new systems that will meet the needs of the transition. A maJor leadership role in these statistical activities is provided by Eurostat. Hence, it is especially important to consider the views of Yves Franchet, the Director General of Eurostat, as he addresses issues of official statistical systems in this guest article. - Joseph Duncan, Editor, The Statistics Corner.

AT THE END of the twentieth century, official statistics played a very important role in most democratic market societies. In these complex societies, very few people challenged the idea that governing cannot be done without accurate, timely, and relevant statistics. Information in general is now nearly as important to the decision making and production processes as labor and capital. And statistical information is a significant part of this information. Very few people challenge the idea that public institutions have to play a leading role in the collection and dissemination of statistics.

In a market economy, the actors of the market - citizens, business, government - need statistics to reduce uncertainty at times of decision. Governments in particular need statistics to formulate, monitor and evaluate the policies they implement in order to ensure that market mechanisms function properly. Governments also need statistics to take steps to protect the weaker segments of the population: the poor, the handicapped, the aged. Citizens and the general public need statistics about the conditions inside and outside their country, so that they can effectively participate in the democratic process.

On the other hand, the experience accumulated so far worldwide proves that the market mechanism fails in the production of the general information that is contained in official statistics. Official statistics are a basic infrastructure of market economies, costly and time consuming to produce, and private sectors of the market are not willing to invest enough time and money to build and maintain this infrastructure.

ROLE AND CHARACTERISTICS OF OFFICIAL STATISTICS

The role of official statistics can be summarized as supplying the quantitative information needed for a proper functioning of the democratic political process and of the market.

In an article written for the Journal of Official Statistics, the Director General of Statistics Sweden, Sten Johansson, syntheses the information system needed to serve the democratic political process into three basic elements:

1. Institutions based on freedom of opinion, and that insure the unrestricted and open forming of public opinion (media and various types of organizations);

2. Independent science, where scientists have the freedom to think and produce ideas independently in their domain, and submit their results to public debate;

3. An independent counting authority, which can serve as a basis of reference for all actors in the functioning of democracy. This authority produces official statistics, which have to be available not only to the government, but also to citizens.

The first paragraph of the Law on Federal Statistics of the Federal Republic of Germany reads as follows:

"Statistics for federal purposes (federal statistics) are designed, in the federal overall structure of official statistics, to provide, process, represent and analyze data on mass phenomena on a regular basis. They are covered by the principles of neutrality, objectivity and scientific independence. Data are obtained through the application Of scientific knowledge and the appropriate methodology and information techniques. The results of federal statistics throw light on social, economic and ecological relationships for the whole federation, the Lander, and towns, society, science and research. Federal statistics are essential for policies based on the principle of the social state. Information obtained for federal statistics is solely to be used for the purposes laid down in this law or other legal instrument covering federal statistics. "

ISSUES FOR OFFICIAL STATISTICS

In their response to their double objective - the democratic process and the market - the official statistical systems face a number of challenges.

The image of Official Statistics

As a source of reference in democratic debates and for market decisions, official statistics have to be accepted by all parties as objective, scientific, independent, and the best possible estimates available on the topics being discussed or analyzed. The good will and understanding of the respondents, both individual and enterprises, is ultimately the only safeguard of acceptable quality in the responses they submit to statistical enquiries.

It takes many years and many efforts to build a good image of official statistics in the public eye. This image can be destroyed very rapidly, especially when governments start manipulating sensitive estimates (prices, unemployment).

Building a good image requires statistical offices with excellent leadership, technical staff and methods, effective and recognized independence from the governments, and a large amount of marketing of statistics, their quality, their independence and their usefulness among the major segments of the population: government, business, medias, trade unions and various other associations. Marketing must be done to educate and inform these various segments of the population.

It is essential in particular to educate policy makers about the importance and difficulties of providing good official statistics. Protecting the integrity and independence of official statistics cannot be achieved through isolation from decision makers. And it is crucial that decision makers do not build unrealistic expectations, e.g., they do not believe that good statistics can be provided at short notice, at no cost and without planning.

Unless this good image is built up and maintained, the risk is high that official statistics remain unused, unbelieved and consequently under-funded, even if their quality is good, or adequate.

An independent status for the National Institute of Statistics is always, in democracy, a necessity to guarantee a good image for or confidence in official statistics. In some countries, the National Statistical Institute is part of a Ministry - Economy, Interior, Finance or others - and this independence as well as the professional immunity of its staff is guaranteed by laws and control mechanisms.

The Response Burden

In many market economies, responding to surveys is compulsory, particularly to surveys among business firms. The quality of statistics is highly dependent upon the response rate, and upon the reliability of the given responses. The longer a questionnaire, the more likely a lower response rate and a lower quality of the responses.

The growing complexity of market economies leads to more requests for new and more detailed statistical information from private and public decision-makers, and therefore more statistical surveys. The respondents complain about the response burden, the quality and rate of responses decreases and the quality of statistics becomes inadequate.

Several solutions exist to try and overcome this difficulty:

1 . Limit the response burden on citizens and businesses through better coordination of statistical surveys, the use of sample surveys instead of exhaustive inquiries, and the development of a high technology statistical collection from businesses in which statistics are collected as a byproduct of trade and production activities. However, responses to the basic statistical infrastructure surveys should be kept or made compulsory, in particular the response to population and economic censuses, and most surveys on business firms;

2. Educate respondents about the usefulness of statistics. In Japan, a "day of statistics" is celebrated each year, during which each child in school age writes an essay about the usefulness of statistics;

3. Discuss with associations of respondents the content of surveys and the wording of operations, and ask them to advocate the usefulness of surveys among their members;

4. Take into consideration the costs to respondents when statistical surveys are carried out, and try to estimate these costs with the help of respondent associations.

Confidentiality of individual Statistics

In all market democratic societies, privacy of individual citizens is protected by law, and statistics on individual private businesses and on individual citizens cannot be disseminated or published under any form. Official statistical surveys always guarantee total secrecy on individual statistics.

The issue of statistical confidentiality has been growing rapidly in recent years and is more and more controlled in various ways. In the Federal Republic of Germany, each Land has a Data Protection Commissioner who defines whether statistics can be collected or disseminated. Many statistics on individuals collected at Lander-level are transmitted to the federal level only in a tabulated and anonymous form. In France, the Commission "Freedom and Information" controls the collection and dissemination of all individual statistics. In both countries the National Statistical Office is not authorized to access individual computer records held by the Ministries in their administrative files. On the contrary, in many countries like the Netherlands, the Nordic countries and Canada, the Statistical Offices have access to administrative records of all Ministries, and consequently have been able to eliminate a number of statistical surveys, and reduce the costs of statistical production and the response burden. In these countries, access to these records is protected. This protection forms part of the declaration of ethical principles of the International Statistical Institute.

The issue of confidentiality is very sensitive and depends in particular on the perception of the public about the independence of official statistics from government intervention.

Issues Linked to Resource Constraints

All national statistical offices have budget resource constraints that have an impact on what they can do and how they can do it.

Because official statistics are essentially produced by public institutions, the largest part of their financial resources comes from the government budget. In the past twenty years, growth of demand for statistics has greatly outpaced growth of resources.

Many statistical offices have responded by improving their management efficiency and effectiveness. This change has implied a substantial amount of training of their personnel, and a mixture of different approaches, among which:

1. Productivity increase in statistical work, essentially due to computer technology. The introduction of mainframe, mini and personal computers has been by far the major tool of productivity increases. It has also changed in many respects the nature of statistical work, and will continue to change it in the next decades;

2. Improvements in priority setting, with a better definition of the needs for statistics from the various segments of the population, a better link between program requirements and their costs;

3. Increase the use of administrative records, which reduces the costs of statistical production. This access must then be highly protected;

4. Finding new sources of financing, essentially by selling a part of statistical production instead if giving it free. Charging part of the costs of a statistical publication to the users may help increase statistical production. It remains a small part of total resources of statistical offices, although it reaches 20 percent in some countries;

5. Sharing responsibilities for statistical production, dissemination and analysis with private institutions. Although most official statistics must be produced by public institutions, part of the statistics needed by business and associations may be privately produced, provided this does not break basic rules such as confidentiality, reliability and consistency principles.

Availability of Statistics to Users

Statistical production ends when the users dispose of the statistics they need in a form they can understand. This issue is a key to the effectiveness of statistical work. It implies that dissemination of statistics in the Statistical Offices be given a status comparable with that of other functions. In our present or future computerized society, a crucial issue will be to be able to extract efficiently usable and useful statistical informations from the huge amount of statistics available in many computerized data bases.

International Cooperation

One of the tasks of statistical production is to enable international comparisons between countries and worldwide. The gobalization of the world economy makes these comparisons more necessary in a growing number of areas and with further details. This implies that international cooperation be in the center of statistical work, particularly for the development of statistical standards and methodologies. This international cooperation also helps to exchange experiences and reduce the costs of statistical production. A specific example of intense and indepth statistical cooperation is that which develops in the European Community to accompany the achievement of the single market. This cooperation extends to the member countries of the European Economic Space, and to some Eastern and Central European countries, as part of their new cooperation agreements with the EEC.

RELEVANCE OF THESE ISSUES FOR ECONOMIES IN TRANSITION

In centrally planned economies, the nature of statistical systems is very different from market economies. Statistical systems essentially prepare planned decisions and check their results. When market mechanisms are introduced in these economies, the statistical system must adapt to monitor market changes and become part of the democratic discussions about economic and social decisions. A large number of private economic units will appear, and they have to be registered and statistically followed. Some of the issues that have been raised earlier are already familiar in statistical systems of centrally planned economies. Others will be new, and may pose a serious challenge to the development of statistical systems in transition.

Technical issues are probably the easiest to solve. In order to limit the cost of new statistical surveys and the response burden, sampling techniques should be used as much as possible. Very small and well designed samples based on good registers give results with low margins of errors, in a very efficient way.

One of the most challenging issues may be that of independence and credibility of statistics in the public. It will be crucial to convince all categories of respondents to statistical surveys that good statistics, which must be produced by public institutions, are essential to help a proper functioning of the market and democracy. It is hoped that the experience accumulated in market economies during the past decades can serve in this transition period. The growing cooperation between Eurostat and Poland is a good example of what can be achieved to work together in this new context. I also welcome the proposals made by the Central Statistical Office of Poland for the adoption of a European Statistical convention. It indicates clearly that common features must characterize all European official statistical systems.
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Author:Franchet, Yves
Publication:Business Economics
Date:Jul 1, 1991
Words:2347
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