Misleading Economic Statistics

Why we need economics indicators? To understand the situation in the market and also to try to predict future market’s behavior. So understanding economics indicators or statistics is very important for economists. And it is not very difficult, but it also not very easy. A lot of people are often making mistakes analyzing diagrams or graphics. The cause of this is their (people’s who are doing mistakes)  inattention (or carelessness). Here some examples:

1) What Happens to GDP between 1973 and 1985? Many people will say, GDP is falling. However, this is wrong, because GDP is not falling, it is just increasing at a slower rate.

Here the statistics are not misleading. It is because we are asking a question about something different to what is displayed on the axis. The vertical axis shows GDP growth, but we ask about GDP. This is why there is the potential for being misled if we confuse rates of change with absolute changes.

 2)The following statistics suggest that 16-year-olds are safer drivers than people in their twenties, and that octogenarians are very safe. Is this true?

Solution: No. As the following graph shows, the reason 16-year-old and octogenarians appear to be safe drivers is that they don't drive nearly as much as people in other age groups. 

3) On November 13, 2000, Newsweek published the following poll results:

Since 9% said that Nader was the only candidate worth voting for, one would have expected him to get at least 9% of the vote in the 2000 election. He only got about 3%. What happened?

There was a biased statistic because the sample wasn't randomly drawn from the population. A disproportionate number of Nader supporters participated in the poll in order to make him appear more viable as a candidate.

4)  Consider these complaints about airlines published in US News and World Report on February 5, 2001:

Can we conclude that United, American, and Delta are the worst airlines and Alaska, Southwest, and Continental are the best?

Solution: No. The airlines that had the most complaints also had the most passengers. As the following graph shows, rates and percentages are often more informative than raw numbers.

5) This clipping from US News and World Report on 1/29/01 suggests that Alaskans are terrible parents. Is this true?

Solution: The difference in the abuse rates probably stems from different definitions for abuse in the various states. For example, Alaska (the "worst" state) says that a child is abused if his or her health or welfare is harmed or threatened. Pennsylvania (the "best" state) defines it as a recent act or failure to act.

6) The Monthly Labor Review published the following data, showing how earnings vary with education:

Can we conclude that getting a bachelor's degree will increase your earnings by almost $13,000 a year?

Solution: Not necessarily. Intelligence and drive also explain the differences in earnings, people with intelligence and drive are more likely to go to college.

So, as we can see, there are a lot of examples where people can be confused with diagrams and graphics. 

KOREA

Sometimes the government can use people's possibility  to be confused with statistics to get some benefits, like better reputation or confidence from people .

For example few weeks ago newspaper in Korea published that the country's GDP is near 15th in the world. So all people thought that Korea has real economic growth, but, actually,  per capita GDP had fallen to below $17,000. First, the misleading aspects. Every time Korea talks about being the 13th-, 14th- or 15th-largest economy in the world based on GDP, it is trying to report the impression that its economy is really the 13th, 14th- or 15th-best performing economy in the world. Clever economists, and anyone else who knows a thing about economic statistics, will instantly realize that that is not the case. 

A nation's GDP figure is used only for comparative purposes (as in comparing current numbers to that of the past year, several years ago, etc.) to determine whether a nation's economy has grown or contracted. Any economist will tell you that the real key statistic in determining an economy's performance is its per capita GDP.

Strangely, when it comes to the nation's GDP, you can always find its ranking fast available, instead of  with the per capita GDP, you can search high and low and never read about where Korea stands in the world (at least in the Korean media).

And I'll tell you exactly why. Korea's per capita GDP is near 48th, 49th, or 50th in the world, depending on which think tank's data you want to believe. The interesting thing is that citizens of at least 47 nations, at least 33 of which have lower national GDPs than Korea's, have greater incomes than Koreans.

The Korean media continues to trumpet the fact that the nation's GDP ranking is somewhere between 10th and 20th in the world, trying to stir up the belief among citizens that we can become an 'advanced nation'. Sorry to burst the bubble, but strictly economically speaking, Korea's economy must perform a whole lot better, and the per capital GDP ranking must rank at least in the top 20 before starting to talk about being an 'advanced nation'.

Now, if Korea ― like Sweden, Denmark, and Switzerland ― wants to become an 'advanced nation' culturally, with highly effective systems of social welfare, education and health care, then that is an entirely different matter. Such a goal is well within reach, assuming the Korean government does want it.

You can go ahead and be happy (or sad, depending on your perspective) that Korea's GDP is 15th in the world, despite the fact that such a statistic alone doesn't tell you anything meaningful. But as is the case with anything, if you want to know the real truth, you need to research deeper.