A Illustration of How to Lie With Statistics
Bob Jensen at
Trinity University
July 17, 2012 Original Message from Jagdish
"Canadians, on Average, Now Richer Than Americans The average Canadian household is about $40,000 wealthier than their neighbors to the south,". by Elizabeth Hewitt, The Slatest, July 17, 2012 --- Click Here
The Reply from Jagdish on How to Lie With Statistics
The reply from Bob Jensen on How to Lie With Statistics
Introduction
On July 17, 2012 Jagdish Gangolly posted a message on the AECM.
I then challenged Jagdish to a pissing contest. I requested that he write down reasons why is message is a great way to teach students about how to lie with statistics.
At the same time I wrote down reasons why is message is a great way to teach students about how to lie with statistics. I did modify my reply somewhat after reading the reply of Jagdish.
We can now compare our reasons why his posting is a great illustration of how to lie with statistics.
July 17, 2012 message from Jagdish
Canadians, on Average, Now Richer Than Americans The average Canadian household is about $40,000 wealthier than their neighbors to the south. By Elizabeth Hewitt
http://slatest.slate.com/posts/2012/07/17/canadians_ wealthier_than_americans_ average_canadian_household_is_ 40_000_wealthier_than_in_the_ u_s_.html Economic times here in America are pretty tough, but things aren’t so shabby for our neighbors to the north.
Over the past five years, the net worth of the average Canadian has crept up, overtaking the average American’s wealth for the first time. These days, Canadian households are about $40,000 richer than American ones.
The figures from Environics Analytics WealthScapes, first published in Toronto’s Globe and Mail last month, place the net value of the typical Canadian household at $363,202 versus $319,970 below the border. And, writer Michael Adams points out, "these are not 60-cent-dollars, but Canadian dollars more or less at par with the U.S. greenback."
Not only are Canadians richer, Bloomberg View columnist Stephen Marche reported on Sunday, they're also more likely to have a job. According to the latest figures, Canada’s unemployment rate continues to sink down to 7.2 percent while the U.S. has held steady at 8.2 percent.
What's behind the economic success of the Great White North? It’s not necessarily that Canadians are more industrious and thrifty than their neighbors to the south. The 2008 economic crisis wreaked havoc on the U.S. housing market, sending real estate values plunging. So, Canadians’ houses are worth about $140,000 more than Americans. Canadians also own about twice as much real estate as Americans, and have fewer mortgages.
On a national level, assets like the Alberta tar sands certainly help, but, Marche proposes, it was a policy of "hard-headed socialism" that allowed the banks and the housing market to stay stable and weather the global economic crisis.
A sign of America’s failing system? Perhaps, Marche muses. Iceland, considering abandoning its current currency the krona, has taken note of Canada’s recent success and set its sights on the loonie.
Canadians on Average $40,000 Wealthier than Neighbors
"Canadians, on Average, Now Richer Than Americans The average Canadian household is about $40,000 wealthier than their neighbors to the south,". by Elizabeth Hewitt, The Slatest, July 17, 2012 ---
http://slatest.slate.com/posts/2012/07/17/canadians_wealthier_than_americans_average_canadian_household_is_40_000_wealthier_than_in_the_u_s_.htmlEconomic times here in America are pretty tough, but things aren’t so shabby for our neighbors to the north.Over the past five years, the net worth of the average Canadian has crept up, overtaking the average American’s wealth for the first time. These days, Canadian households are about $40,000 richer than American ones.The figures from Environics Analytics WealthScapes, first published in Toronto’s Globe and Mail last month, place the net value of the typical Canadian household at $363,202 versus $319,970 below the border. And, writer Michael Adams points out, "these are not 60-cent-dollars, but Canadian dollars more or less at par with the U.S. greenback."Not only are Canadians richer, Bloomberg View columnist Stephen Marche reported on Sunday, they're also more likely to have a job. According to the latest figures, Canada’s unemployment rate continues to sink down to 7.2 percent while the U.S. has held steady at 8.2 percent.
What's behind the economic success of the Great White North? It’s not necessarily that Canadians are more industrious and thrifty than their neighbors to the south. The 2008 economic crisis wreaked havoc on the U.S. housing market, sending real estate values plunging. So, Canadians’ houses are worth about $140,000 more than Americans. Canadians also own about twice as much real estate as Americans, and have fewer mortgages.
On a national level, assets like the Alberta tar sands certainly help, but, Marche proposes, it was a policy of "hard-headed socialism" that allowed the banks and the housing market to stay stable and weather the global economic crisis.A sign of America’s failing system? Perhaps, Marche muses. Iceland, considering abandoning its current currency the krona, has taken note of Canada’s recent success and set its sights on the loonie.
Reply from Jagdish
Bob,
You must realize that my mere posting of any article or quote does not mean I agree with it (I might not even have read some of them, and posted them because I thought some AECMers might find it interesting).
Second, there is no data dealing with economic (or accounting) issues that can seal the validity of ANY hypothesis. However, evidence can be compelling to some. So, ultimately, what matters is whether YOU find the arguments (and the data) compelling. I doubt ANY evidence will convince you that there might be a place outside the US where people are wealthier or happier. I can understand your sentiments, which were mine too, until I saw facts staring me in the face. It is for a good reason that Samuel Johnson once observed that nationality (the term he used was patriotism) is the last refuge of scoundrels.
I'll nevertheless make just one argument why Canadians statistically appear richer than us, and that has nothing to do with statistics: The precipitous fall in real estate prices which made most of us overnight poorer. But that is attributable to our fetish for red-in-tooth-and-claw capitalism and our reticence at regulating the sharks. Not nefarious Canadian "socialism".
Canada is the second largest country (by area) in the world, and larger than the United States. But it has a population smaller than the population of the state of California. And 90 per cent of that population lives within 160 km from the US border. It has the second largest oil and gas reserves in the world after Saudi Arabia, and is our largest supplier of oil and gas. So, we should not be surprised if the Canadians are at least as well off as we are.
However, twenty years ago the situation was not the same. Canada was brought to its knees and it was pretty close to being a candidate for rescue by the IMF. They turned the situation around by good fiscal management without jeopardizing their citizens' entitlements and without giving up whatever "socialism" if at all that they practiced. Today they are riding high. Their unemployment in June 2012 was 7.2 percent, a full percentage point below that of US, and the exchange rate for Canadian dollar has never been better. .
Bob, you must realize that the "socialist" Canadian government spends only 43.2 percent of GDP, just 1.3 per cent above the US government, but provides decent healthcare (you will, I am sure object to this, but you are probably among the few who think the healthcare system in the US is fair or equitable if you are poor). So, the difference between the Canadian "socialists" and the American red-in-the-tooth-and claw (as one author said) capitalists is a measly 1.3 per cent? No, the simple fact is that in the US, the whole public sector has become a den of corruption, influence-mongering, and nepotism. For that, you can point a finger at the "system", and at the politicians, left right or center. But you can not point a finger at the common man (or woman), and neither can you point it at Canadian "socialism". We are at the point that Canada was twenty years ago.
Regards,
Jagdish
Reply from Bob Jensen
Hi Jagdish,
When teaching students how to lie with averages we must first begin with teaching them to avoid proper statistical things to do when comparing averages. These proper statistical things include accompanying comparisons, of medians, variances, and kurtosis. Another factor, as you did point out, is the varying sizes of the populations being compared. Canada has only 10% as many people so when you are comparing wealth in terms of natural resources, you are dividing by a much, much smaller number when you compute averages. By the way, in addition to petroleum products (gasoline, heating fuel, natural gas, petrochemicals, etc) and ground minerals, you should also realize that Canada is our largest supplier of lumber.
Next we must teach students not to even raise questions about missing data,
especially when the missing data is much more of a problem in only one of the
populations being compared. A great example of missing data in U.S. household
income and wealth data is the recognition of a huge and very significant
underground economy in the U.S. that does not get reported in our macroeconomic
databases in income tax databases. I discuss and illustrate this huge problem at
http://www.cs.trinity.edu/~rjensen/temp/TaxNoTax.htm#Poor
You once advocated comparing Gini Coefficients of poverty between nations. It is well documented that such coefficients may be meaningful when comparing trends of a single nation, but they are nonsense when comparing poverty rates between nations. For example, the fact that North Korea and Canada have almost identical Gini Coefficients pretty well says it all when trying to compare poverty between two nations on the basis of Gini Coefficients. You pretty well get the same nonsense when comparing income and wealth data between nations. You cannot compare such things without knowing how cost of living inflates wealth and incomes.
For example suppose the University of South Dakota's new assistant history Professor XXXXX purchased a nice home for $200,000 and can live rather nicely in Vermillion, South Dakota. If Professor XXXXX had instead moved to Harvard, the identical house in Cambridge would be priced at over $1 million. Professor XXXX would probably have to settle for much smaller and poorer quality home to live as an Assistant History Professor at Harvard in spite of perhaps getting double the salary from Harvard.
I had Canadian research grants to live at the University of Waterloo for two summers. I was amazed at how much more it cost for house ownership or rent relative to comparable housing in the U.S. And the houses in Canada tend to have very small lots relative to our generous lots in most of the U.S. outside the urban centers. Thus is you are going to compare a $200,000 Vermillian house in the U.S. with a comparable Waterloo, Ontario house, be prepared to double the price in Ontario. I hope students will begin to see how tenuous it is to compare "wealth" of home owners in the U.S. versus Canada.
And there are other factors when considering cost of living differences between nations. Bus loads of Canadians come down from Canada into New Hampshire daily. They are not coming down for the views and recreation. They're coming down to shop at places like Wal-Mart. And they're not coming down for prescription drugs that are much cheaper in Canada. They're coming down for things like shirts, blouses, trousers, skirts, coats, swimming suits, gloves, shoes, boots, school supplies, computers, etc.
If you survey the parking lots of department stores in New Hampshire, the smallest percentage of vehicles will have NH license plates. A somewhat high percentage of the plates will be Canadian, although there are also high percentages of vehicles from bordering U.S. states. The same can be said for Dartmouth's Hitchcock Medical Center. Why you ask would Canadians come to Hitchcock for costly MRI scans and knee and hip replacements when the same surgeries are available in Canada at virtually no cost. The reason is that in Canada the painful wait time for such elective surgeries may be months and months.
Of course the U.S. incurs much higher annual costs for some things relative to Canada. The most noteworthy is the almost insignificant cost of a military force compared to the mind-boggling cost of the active and retired military in the United States.
And you must consider how much Canada saves by being stingy on punitive damages in courts of law. Medical malpractice insurance cost for Canadian physicians and hospitals are puny compared to the staggering insurance rates in the United States.
And you make a huge point that Canadian banks, real estate, and mortgages did
not collapse like they did in the subprime scandals of the United States that
were revealed in 2007. I would instead argue that this had nothing to do with
capitalism versus socialism. The Canadian Government simply had the good
sense not to separate mortgage lending risks of the lenders from mega-buyers of
mortgages such as Fannie Mae and Freddie Mack. There was not a Barney Frank
chairing a Canadian Banking Committee insisting that the government buy up
over-inflated and default-risk poisoned mortgages of people who had not chance
in hell of making the mortgage payments if they could not turn over the real
estate in less than a year ---
http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze
Criminals did not become mortgage lenders (like Country Wide and WaMu)
in Canada for the sole purpose of stealing from Fannie, Freddie, Bear-Stearns,
Merrill Lynch, and other buyers of poisoned mortgages. See the Story of Marvene
at
http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze
I could go on and on here, but I will close with questions about the
per-capita versus per-household wealth data itself. The Globe and Mail
article reports household income to be $363,202 on average in the Canada. versus
$319,970 on average in the United States. However, this is not consistent with the
per-capita wealth figures reported at
http://en.wikipedia.org/wiki/National_wealth#Differences_by_country
The per-capita wealth is reported a $184,000 on average in the U.S. versus
$173,913 on average in Canada
All this really points out is that figures don't lie by liars figure.
I hope our accounting students globally learn how to recognize how much reputable sources like the Globe and Mail do not understand how they are reporting nonsense as statistical comparisons.
PS
I've always been in favor of a nationalized health plan for the United States
---
http://www.trinity.edu/rjensen/Health.htm