“Statistics make smart people smarter, and dumb people dumber.”

Mark Twain famously said, “There are three kinds of lies: lies, damned lies, and statistics.”

I would counter that it is much harder to lie using statistics than without statistics because statistics are so precise and relatively easy to verify.  Statistics are quantifiable measures and It is much easier to lie using vague qualitative assertions.  Most people are more influenced by anecdotes than by statistics anyhow even though the reverse should be true.  Liars can come up with an anecdote to support any position and it is much harder for them to find statistics that support lies.  Mark Twain’s famous quote reveals more about his own ignorance than about the truthfulness of statistics.  I would say that statistics make smart people smarter, and dumb people dumber.*  The problem with statistics is in knowing how to interpret them and understanding their limitations.  If you can do that, then statistics can only make you smarter because they reduce uncertainty about the world.  Statistics add information even if it is a limited kind of information that is hard to interpret.  Ignorant people interpret statistics wrong and then blame the statistics.  They feel lied to.

That is why it is important to understand the statistics we use for measuring economic progress, which is principly GDP.  The Great Recession that started in 2007 officially ended half way through 2009 because GDP started growing again.    Most Americans felt like this was incorrect because the median income kept dropping for two more years.  Americans felt like the statistics were lying because they did not understand what the GDP statistics meant.  Income growth among elites was strong in the latter half of 2009 which meant that total income (GDP) was rising even though most Americans’ incomes were still falling.

This ignorance of statistics is pervasive.  Even most economists seem to be unaware that they are misleading the average American by claiming that American income is growing.  Most economists are either ignorant or apathetic about the wellbeing of the average American and the misuse of GDP statistics can indeed make ignorant economists act even more ignorantly than they would act without the statistic.  The problem is not that the statistic lies, but that people unwittingly lie when they interpret it.

No measure is perfectly precise, and people need to be aware of its limitations when interpreting it.  Statistics are less precise (and have larger margins of error) than the kinds of direct physical measurements often used in physics, but all measurements have uncertainty.  Knowing the limitations of our knowledge is just as important as acquiring knowledge itself.  As Will Rodgers said, “It isn’t what we don’t know that gives us trouble, it’s what we know that ain’t so.”   When people are ignorant of the limitations of statistics, they make dumb conclusions.

*Surprisingly, according to Google, nobody has ever written the title of this post before, but the phrase “______ makes smart people smarter, and dumb people dumber” has been attributed to lots of other things: the internet, age, etc.

UPDATE: For an example, see: Lies (or Stupidity), Damned Lies (or Stupidity), and Statistics

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Posted in MELI & Econ Stats

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