Today’s edition of Fun With Statistics comes via a hat tip to the Chronicle of the Conspiracy blog, which also goes by the longer and more amusing name of "The Conspiracy to Keep You Poor and Stupid," authored by economist Donald Luskin. As the headline on that blog post exclaims, "Oops!"
You know all that talk the last few years from pessimists on both the left and the right about the supposed "negative savings rate" in the US? About how we’re spending more than we’re earning, become a nation of indebted global beggars? Turns out it was all just a data error. On Friday the Bureau of Economic Analysis released a major revision of the last three years of national accounts data, and it turns out that US individuals earned, cumulatively, about $185 billion more than had been previously reported (equivalent to the entire annual GDP of Norway, oil and all). That’s enough to turn the savings rate positive. So all that talk, all that hand-wringing — it was just a data error. Poof! Any retractions forthcoming? Don’t count on it.
The lesson here is short: question statistics and metrics. In previous editions of Fun With Statistics we’ve shown you how underlying assumptions can lead to statistics being misinterpreted, which can lead to fundamentally wrong decisions. This time it’s even easier: the data itself may be just plain wrong. And unknowingly wrong at that, which is even more dangerous.
How confident are you in your sales, profitability, and market share numbers? Are you sure? What would you do if it was suddenly revised… in one direction or the other?