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Theory and Measurement

Theory and Measurement

An Essay in Honor of Zvi Griliches

(p.15) 1 Theory and Measurement
Hard-to-Measure Goods and Services
Charles R. Hulten
University of Chicago Press

This chapter pays tribute to Griliches's contributions to measurement as a whole and to the importance he attached to the accuracy of economic data. In addition to reviewing some of the key issues of the theory-measurement dichotomy, the chapter builds on this theme by stressing the essential duality of theory and measurement and arguing that this dichotomy itself is potentially deceptive. First of all, “getting the data right” often requires “getting the theory right.” Second, theory and measurement are not separable aspects of economic activity in the sense that the accuracy of the data can affect subsequent economic decisions, and a complete economic theory must allow for possible feedback effects associated with inaccurate data. Finally, considerations of political economy come into play because the accuracy of economic measurement affects policy in a variety of ways, and changes in policy can, in turn, affect economic behavior.

Keywords:   economic measurement, economic data, economic theory, political economy

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