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AVERAGES, MEDIANS AND POLITICAL ECONOMY

May 23, 2013

AVERAGES, MEDIANS AND POLITICAL ECONOMY

Whether a believer in classical laissez faire economics, dour austerity economics, Wild West libertarian economics or Keynesian views on how to fashion an economic system, you must have tools of measurement to prove that your view is the correct one in this eternal war of “systems” in divvying up what our politicized economy provides for its participants.

Almost all of us are familiar with averages and medians and how they are applied to raw data in order to make some sense out of the numbers. What we may not be acquainted with is how particular interest groups may choose one statistical method over another in a particular instance in order to taint (aka skew) the outcome in favor of their philosophical position (and which makes them the most money).

Say, for instance, that Democrats are making big political inroads with the poverty-stricken electorate by providing median numbers on income, i.e., the middle point of total income – 50% make more than this, and 50% make less than this. Republicans can take the same total income number and apply “the law of averages” to it and come up with a very different result. Why? Because taxpayers such as Bill Gates and Warren Buffet and Mitt Romney are in the mix. When doing medians, each of these superrich people is one, just the same as a panhandler on the bowery. When counted into an “average” statistic, it is bodies AND  income that are considered, and these and others (bank executives, Wall Street paper shufflers, and others of the “carried interest” crowd) have a lot of money – hence the disparity. Political lesson? Pick the statistical method that lends credence to your position (and fattens your wallet in the process).

There is a mantra of long standing that “you can prove anything by statistics.” In the very first lecture given by my now-deceased wife’s statistics professor in her doctoral program, he gave vent to this long-held view by announcing as follows: “Statistics prove that one of every four billion passengers who gets on a plane is carrying a bomb, so I always carry one when I fly to lessen the risk.” While the subject of his humor (bombs on planes) is not funny, the point he made was an important one – that statistical results can be skewed by human intervention in supplying divisors and dividends. Such a subjective addition to the formula destroys the objectivity of the result, rendering it worthless, and giving “statistics” a bad name (though it is not the “statistics” that is bad; it is human tampering with the formula for measurement that is bad).

So what is the lesson for us? When you read “median” or “average” in a show of supposed proof for a particular economic position, think beyond the box and ask yourself why a particular choice of measurement was selected. (Heritage by its recent choice is a case in point among right wing think tanks that routinely and abusively select measurements that best support their positions.) Conclusion: The mantra is wrong; you cannot prove anything with statistics. You can only prove what you want to prove by skewing the result through tampering with the tool or tools to be employed. The dishonest result is worthless, should be ignored, and its proponents publicly castigated (as was Heritage).

All the forgoing is background commentary for what here follows. We are today involved in a Beltway argument between those who would apply Keynesian economic policies and those who wish (for their own purposes) to follow the catastrophic austerity economics of Merkel and her euro zone members. Which one (or some variant thereof) we select will have enormous implications far into our future. (See Japan, which adopted austerity economics over two decades ago and has been in an economic funk of negative growth every year since, but which just recently adopted Keynesian economic policies and announced this week that their negative growth of the last two decades is over and that they are looking forward to an annualized growth of 3.5% in their economy.) Those are honest, un-skewed statistics, as were the statistics for the two decades previous, and proof that Keynesianism works.

Take Social Security, for instance, which has become a battlefield of competing skew interests. The elite view which has morphed into conventional wisdom is that we must “reform” entitlements. “Reform” is, of course, code for reducing benefits and raising the retirement age – since we are all living longer anyway, (thus injecting the statistic of longer life into the formula) right? Wrong. Let’s look at how we are measuring the numbers.

Paul Krugman points out that “The people who really depend on Social Security, those in the bottom half of the distribution, AREN’T living much longer. So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever?” Krugman, one of my favorite and Nobel Prize winning economists, has applied the median test to the raw data of Social Security retirees, you will note, thus raising the issue (statistically speaking) of average vs. median as the appropriate tool for measurement.

The alignment on this issue is identical to the one set forth above in the austerity vs. Keynesian argument. The rich and corporate class wants austerity and “reform” of Social Security; the poor and middle class want Keynesianism and strengthening of Social Security rather than reducing it benefits and increasing the retirement age before benefits begin. So how shall we objectively choose between median and average as a measuring stick?

It’s an easy choice for me. The median yardstick is clearly the winner. Why should poor, worn out 70-year old prospective Social Security beneficiaries be lumped into the same raw statistical pool with those who have had excellent medical care all of their lives and have lived long lives as a result? That is what an “average” application would do to the pool, and hearkens back to the rationale discussed earlier here where you add Gates and Buffett and other superrich Americans to a thus highly skewed “average pool” of raw data and then pretend that such a derived “average income” number is an objective statistic. It is not, and following such a number in making policy is wrong for humane and moral reasons as well as for the pretended majesty of the “average” (which is skewed by the very nature of the pool supposedly sampled by this measuring tool). Krugman, in uncovering  and trashing the measuring tool selected by the elitist austerity aficionados, was and is right, and they are wrong.

So what are some of the implications of this developing battle between the rich and corporate class and the poor and middle class? There are many, but perhaps the most important one is whether as a matter of policy we decide to topple the elite austerity consensus and replace it with a movement for economic justice for all rather than the few. There are real crises that seem to elude notice both inside and outside the Beltway. For instance, more than 106 million people – one in three Americans – are facing material hardship (defined as living under 200 percent of the poverty line); 20 million are living in extreme poverty; 12.5 million are officially unemployed; and wages and working conditions are in decline for a majority of Americans (as of October, 2012). Isn’t that a “crisis” worthy of public note? It’s a giant crisis!

It is plain to me that we should be using our precious legislative time on something besides the latest scandal and “gotcha” politics. The biggest non-theoretical problem in our current economy is the jobs crisis (not whether Wall Street gets a bigger piece of the pie).

We need to invest in job creation, not Wall Street’s bottom lines. We need to work on our crumbling infrastructure, not more tax breaks for hedge fund operators. We need to stimulate more demand in our economy with a dose of Keynesian economics, not remove demand via austerity economics.

Is our attention so easily diverted by Wall street and right wing think tank propaganda (mercilessly delivered day and night) from the really deep issues that are holding our economy hostage to near-recession?  Can’t we see through their choices of measurements to suit their own devices and how their greed and not America’s future is the prime motivation for their support or non-support of proposed public policy initiatives?

Let’s pay attention, and let’s tell our elected representatives to pay attention – to America and its people – from this day forward. Let’s go to work on our real problems (one of which is apathy) today. Our problems, ranging from global warming to corporate control of America, can be overcome, but we have to work on them, so let’s go to work, starting with putting our fellow Americans to work with a large and bold dose of Keynesian economics, a demonstrably successful system. Today.  GERALD  E

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