The Coercion Bias in Economic Measurement

Published by the Mercatus Center at George Mason University.

Vincent Geloso (chapter 4) discusses what he calls "coercion bias" in economic measurement. He begins by noting that in standard economic models, government's coercive powers are assumed to be used in a produc­tive manner-for example, state power is used to extract taxes to finance the production of value-added public goods. In these cases, both measured output and well-being will increase. Geloso notes, however, that when government engages in harmful coercion-for example, enslavement or repression­output (measured by national accounts data) will overstate well-being, hence the coercion bias in measurement. To illustrate the relevance of coercion bias, Geloso reconsiders debates over the economic consequences of slavery in the United States during the antebellum period, and debates regarding the role of economic freedom in stimulating economic growth. 

Find this chapter in The Legacy of Robert Higgs, available on Amazon.