Many years ago I read a terrific book, A Mathematician Reads the Newspaper, by John Allen Paulos. It calls out and destroys myths about math in a very readable manner. Alas, in and amongst the books—one reader referred to my being inundated with books earlier in the day—I cannot find my copy of Mr. Paulos’ book. I do, however, have some pet peeves of my own when it comes to numbers and the news. Here are three:
Late afternoon drive time radio reports tell me “the markets were mixed today.” In stock-speak that means less than all of the Dow Jones Industrial Average, the NASDAQ, and the S&P (Standard & Poors) 500 are up or down at the market close. The DJIA measures 30 stocks, the NASDAQ about 3000, and the S&P 500 … 500! So if these three averages are not all up or down, the markets are mixed? And that tells me … exactly what? Each of the indexes will always have some up and some down stocks every day—the DJIA maybe has an all up or down every once in a while, but it’s surely a rare event and not worth noting—and the fact that one index is up and the other two are down, or some other variation, simply doesn’t matter.
For many years we heard reports that half of all marriages end in divorce. (Over time, apparently, the measure of divorces to marriages has shrunk, so we don’t hear the stories as often anymore.) The reports were based on the fact that in a given year there were about half as many divorces as there were marriages. OK! Fine! But what about the tens of millions of couples who married in a prior year and did not get divorced? Saying half of all marriages end in divorce, based on the available statistics, was nonsensical unless the 2:1 rate was maintained for decades and all of the long marriages ended when people died.
Federal income/expenditure numbers really drive me nuts. Government income and expenditures get reported without adjusting for inflation, population growth, or the size of the Gross Domestic Product. The Summary of Receipts, Outlays, and Surpluses or Deficits from the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, reports numbers in nominal and constant 2009 dollars. And guess what? Between 1942 and 1945 (the WWII years), the country ran deficits at an average rate of almost one half trillion dollars ($500,000,000,000) per year. And during the Reagan years, with no significant wars and Morning in America? Average deficits of more than $350,000,000,000 per year.
And in relation to GDP? During World War II deficits were between 14 and almost 30% of Gross Domestic Product, the measure of all of our economic activity. For most of the post war years the percentage was either slightly positive—we ran a surplus—or negative in the 1-5% range. The last few years have certainly been worse—in 2009 the percentage was 9.8%, and it has dropped to 4.1% for 2013—but we have also gotten through the worst economy since the early 1930s.
Context matters! We need to expect more from those who inform us, as the slapdash way in which numbers that matter get reported keeps us misinformed and allows people with agendas who mock the “reality-based community” to make silly, false statements.
P.S. I will have more soon on problems with how the federal budget gets put together, and how a different method would better represent what actually happens with our money.