… is from page 177 of the 2012 revised edition of Steven Landsburg’s great 1993 book, The Armchair Economist:
It is said that figures don’t lie, but liars figure. Perhaps a more serious problem is that honest people figure carelessly. The antidote is careful attention to exactly what is being measured, and how it differs from what you would really like to measure if you could.
DBx: Yes.
Everyone today understands that nominal dollar figures from the past must be adjusted for inflation in order to make the dollar figures of prices, wages, income, and wealth from the past comparable to those of the present. But other, equally important adjustments to quantitative data are necessary if we are not to be misled by these data. For example:
– If country A has a higher percentage than does country B of its households earning annual incomes of (say) one-half or less of its median household income, no conclusion – without further information – is possible about whether or not country A has more low-income households than does country B. If country A’s median household income is higher than that of country B, many country A households that are classified as ‘low income’ might well have higher real incomes than do many of country B households that are not classified as ‘low income.’
– Do figures on annual incomes include or exclude government benefits received and taxes paid?
– Do figures on hourly wages include or exclude the value of employer-provided fringe benefits?
– What criteria are used to determine if some activity is or isn’t classified as “manufacturing”?
– What criteria are used to determine if a particular kind of economic transaction in country A by residents of country B is classified as a purchase of country A’s exports or foreign investment in country B?
