The Most Highly Abused Statistic

Advertisers and companies that sell products try to convince their prospective customers that a product or service is better than it actually is. In order to do this, the brand managers use appealing statistics to sway the opinions of their customers. The most evasive statistic measures the average of a group. The average can be used to represent mediocrity. The problem is that the average can be severely skewed without the customer ever knowing.

For instance, consider a real estate agent that is trying to sell a house to a couple who just moved into town. The agent will claim that the average income of a family that lives in the neighborhood is $150,000. The couple builds an impression of the neighborhood based on a statistic that is completely wrong.

The real estate agent computed the average by adding up family incomes in the neighborhood and dividing by the number of families. The statistic seems harmless at the beginning, but changes once the data is analyzed more closely.

The family incomes have a high variability and are not consistent within the neighborhood. Suppose that there are five families out of twenty-five that earn $500,000. The five family incomes significantly skew the average and hold up the families that make less than $150,000. After the five high family incomes are taken out of the group, the average is only around $62,500.

The real estate agent tries to use prestige to lure the purchasers into buying a house in a neighborhood that is not depicted in the correct way. A more appropriate statistic to convey the actual representation of family income in a neighborhood is the median. To calculate the median, the family incomes are listed from lowest to highest. The family income that is in the middle is the median. This eliminates the risk of outliers and provides an accurate portrayal of family incomes in the neighborhood.

Family incomes are not the only group of data that is skewed to eliminate the reliability of the average statistic. Prices of goods in a basket, height, and wealth are all susceptible to having outliers that impact the average. To further your knowledge and lessen your risk of being deceived by statistics, I recommend reading How to Lie with Statistics"" by Darrell Huff. He provides excellent examples of bias, misleading graphs, and ways advertisers massage numbers. Statistics are a powerful tool that can be used dubiously with a little bit of creativity.

Applied Comparative Advantage

In courses of Introduction to Economics across the country, a term known as comparative advantage is usually covered. David Ricardo first applied it as he used it to define trade between two countries. If two countries can produce the same good, but one can produce it at a lower relative cost, the fortunate country would benefit by focusing on that good and trading the surplus.

Comparative advantage can be useful for teamwork when analyzing group dynamics. When forming a team of any kind, it can be beneficial to have a wide range of specialists that are great at what they do. With each person having a different circle of competence, the overall group can achieve more in a shorter period of time. If a team consists of members who have the same area of expertise, the group member’s skills may overlap. Inefficiency would occur that would plague the team when working together on difficult problems. By having a broad spectrum of experts from different fields, comparative advantage will offer the greatest probability that problems will be solved swiftly.

After considering the positive benefits of creating a distinct group, here are a few questions that can be contemplated:

  • What actions can I take to become the best in one area of proficiency?
  • How can I work with a homogenous team that employee the same strengths and weaknesses?
  • Is it best to concentrate on improving old skills or learning new and unique ones?

Worries of Inflation?

As the recession ended, the interest rates have remained close to zero. This is an encouraging percentage because business and household investment is promoted. When businesses and people have the incentive to invest, they help the economy. Products that need demand to survive are being purchased and the economy is receiving the benefits of producers and consumers interacting.

The conundrum of investment and consumption appears when inflation increases. The real cost of products are increased and are less likely to be invested in. A wage-price spiral occurs when the consumers who were able to purchase goods at the low price demand a higher wage to keep up with inflation. Businesses have to raise prices to offset the added expenses of paying workers more. This causes margins to decrease and innovation to come to a halt.

Policymakers may decide to increase inflation to get out of the current situations, but it has been proven in other countries that it does not work. Inflation–when encouraged–can run-up rather quickly.

When policymakers are confronted with the issue of an increase in inflation, they greet it with an air of normalcy. They claim that inflation should be measured by core inflation and that inflation is not measured correctly. The true measure of inflation is not accurate because it includes the volatile prices of food and energy. Once commodity prices increase the public believes that inflation will be soon to follow. The problem is that the people that are hurt the most by inflation are the people who consume groceries and other products that are not measured by core inflation. Inflation must account for the food and energy prices to receive a fair assessment on the future of inflation.

Households are pessimistic as ever and do not seem to be persuaded that their income will increase over time. If inflation does increase as expected, the people in the middle-class will be hit the hardest. Here is a graph that indicates that households are worried that their incomes will not increase and stagnate at zero percent. The future could be in jeopardy for households if their predictions match the actuality.

(ClevelandFed)

In order for the economy to be boosted, innovation must be created and risk taking must be valued. If prices increase, the value created will need to provide a level of quality that has never been achieved before. In order for this country to prosper, goods cannot be made with less effort and determination.

Inside Education: Is the value of writing in schools deteriorating?

In high school, most students focus on the art of socializing and do not see the value of reading and writing. This inevitably handicaps them academically once they reach the undergraduate level.

In every class that I have taken, some form of writing has been involved. Whether it was biology, history, or economics, I always had to write some type of assignment or essay. The students who are able to write thoughtful and critical essays are the ones who will excel.

Teaching English has evolved negatively due to the increasingly high demands on high school teachers. Students do not want to write because the teachers do not make them. Kim Brooks, an accomplished fiction writer, commented on the burden of teaching English composition:

 At this particular school, every English teacher teaches five sections of English, and each section has approximately 25 students — a dream load compared to what teachers at, say, a Chicago public face. But that still means a three-page formal essay assignment would translate into 375 pages of student prose to be read, critiqued and evaluated.

When a teacher is only making roughly $30,000 a year, the incentives for assigning essay assignments is incredibly low.  The truly great teachers find a way to educate young people by emphasizing the importance of writing as an extracurricular activity. The select few are able to inspire and evoke the passion for writing, no matter the circumstances.

The future of writing lies in the critical thinking aspect of the writing process. Students need to be exposed to the value of thinking through a problem, collaborating with other people, and rewriting until the essay is perfected. This type of process needs to be encouraged by the connectivity of the Internet.

I do believe with the help of the Internet and eBooks, writing will come out of the funk that it is in. There has never been a time before in history that humans have been more self-expressive in the form of writing. With Facebook and Twitter, people across the world are now connecting more than ever. The short status updates are a form of writing and involve significant thinking. This is a small step that could lead the education system to develop the needed technology to improve the entire learning process.

The significance of writing may not be respected as much as it should, but I believe that we should be optimistic about the future of education. The great students will find a way to write and think in a way that will help them once they go off to college. Teachers need to motivate and encourage the fundamentals of writing to the students who will need the skills the most.