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.