Who Needs to Understand Statistics?

The New York Times has story about how the public's perception of the economy is different from the adminstration's. It seems to be that the adminstration does not have a good grasp of statistics.

The data he cited were averages, or means, and that can be misleading. "The average wage is a useful indicator if you want to know what's happening to the tax base, but it might not tell you what's going on for the individual worker," said Alan B. Krueger, an economics professor at Princeton and a former chief economist at the Labor Department. Consider a hypothetical country with 300 million workers. Say the chief executive of an investment bank gets a $300 million raise this year, while the other 299,999,999 workers don't get a raise. In the aggregate, the average per-capita salary has risen by $1, but only one person has more money in his pocket.

To see how typical workers are doing, it's better to look at median wages and incomes — the midpoint that separates the top 50 percent from the lower 50 percent. And median income, which was stagnant during President Bush's first term, is struggling to keep pace with inflation. "Median household income has gone nowhere since the turn of the decade," said Mark Zandi, chief economist at Moody's Economy.com.

Other effects like the rising price of gasoline, health insurance co-pays, home purchases, mortgage payments were also mentioned. Except for gasoline these are not well represented in the Consumer Price Index. Here one does not need to understand the math behind the stastics as much as the limits of statistics. The are not magic. If you do not put int he relevant data then you do not get a relevant number.

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3 Responses to “Who Needs to Understand Statistics?”

  1. Hi,

    do you know where one can see the actual distributions for, e.g., income or mortage payments or employment? Sometime the whole story is in the growth of the tail – the one on the high side or the other one on the low side…

    thanks.

  2. No. I don’t which is part of the point I was making. I am not sure that some of the people who are being discussed even realize that there is a distribution behind the statistics.

    This looks like one of those dry topics that any educated person should know, but few people other than specialists have the will to learn about.

  3. Hi my loved one! I wish to say that this post is awesome, great written and come with approximately all vital
    infos. I would like to see more posts like this .

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