Friday, March 9, 2012

The Value of Statistics?

Use of statistics can prove almost anything you want. Just take your political position and you can find, or create, statistics to support your view.

1. According to World Bank economist Branko Milanovic as reported in a recent story by CNN, 48% of the World's 1% Are Americans. According to his study anyone in the US who makes at least $34,000 a year (after taxes) is in the global income 1%, even after adjusting for local cost of living in the various countries around the world.

Wow, how can that be? However, this comes from a respected economist at the World Bank. The subtext of this article was that when Occupy Wall St. folks are complaining about the 1%, on a global basis, chances are most are complaining about themselves!

2. Another recent example, on the other end of the spectrum, is a recent New York Times article about US falling behind in economic mobility versus other advanced countries. They use all sorts of statistics and it sounded bad.

Then I read further in the article and I saw an explanation for the apparent lack of mobility ( buried at the end of the NYT story) and why those statistics may be misleading. European incomes are so compressed. The example given was that a Danish family could move up from the 10th percentile to the 90th percentile with a $45,000 increase in income, whereas an American family would need a $93,000 increase in income to make the same move. It raises the question of whether you'd rather be in the US making $90,000 more, even if that didn't put you into the 90th percentile here, or be in Denmark making only $46,000 more, but now be in the 90th percentile there.

The results were seemingly less upward mobility in the US and more in Denmark. But what does that really mean if those more upwardly mobile Danes aren't actually making more money. By the way all these numbers were adjusted for local cost of living.

I've lost faith in statistics because it's hard to get an unbiased analysis. In my recent research a line that I read struck me -- if opportunities in the US are so bad, why do so many people still want to come here rather than to Finland, Norway, Denmark and Canada who are ranked as the best for income mobility?

3. In addition, comparing the US to Denmark in all events is really like comparing apples and oranges. Our country is very large and very diverse, while Denmark is small and homogeneous. Are there any other "apples" to compare with our "apple"?

That's the problem with most of these US versus other advanced countries comparisons. The US is large and very diverse. Northern Europe and Japan are smaller and much more homogeneous, with many fewer immigrants.

This is true for lots of other country comparison like education that make little sense but are used over and over. The United States of America ( all 350 Million of us) is ranked behind Singapore, Shanghai (that's right a city not a country) Finland, Denmark , Hong Kong, South Korea and the like on various educational testing results.

Give me a break.

What do all of those countries have in common? Small and not diverse, with few immigrants. That's like just including just Minnesota, Iowa or Oregon, or just suburban DC ,Chicago or NY.

The truly large countries, China, India, Russia, Brazil, Indonesia (even France and Germany) rarely, if ever, are on the comparison list stories.

It also amazes me that if our education is so poor why are such a high percentage of the top world universities American? They can't all be foreign students.

Also we have so many more colleges and universities than other countries because we don't shut out student who haven't passed a national entry test, as so many other countries do. It may cost more, but many more American have the opportunity to go to college.

I guess my problem with the use of statistic was summed up by Mark Twain who said, "There are 3 kinds of lies-- lies, damn lies and statistics".