Sunday, 25 September 2011

Lies, damned lies and averages

In the midst of recession, we are inundated with figures about how much we spend - more on this, less on that and we’re being played with deals to keep us spending. The thing about statistics is that they mean absolutely nothing without an understanding of distribution.  


Take two kiddies spending pocket money - for ease, let’s say ten pounds a week. Child A buys a chocolate bar for fifty pence every day and puts the remaining £6.50 in a piggy bank. Child B buys ten multi-packs of chocolate bars at four for a pound once a week and saves nothing. The total volume of chocolate bars bought is 47, the total value is £43.50 - simple enough.  

But supposing we use this information to work out what the average child spends, on what, how often, and then how much is saved? Easy: we divide the totals for volume, then value, frequency, then savings, by our nice little population of two. Every week, the average child buys 23½ bars of chocolate, spends £21.75 to do so, goes to the shop four times a week and puts £3.25 away in savings.  

By the end of one year, our kids will each have a nice little nest egg of £169. Twaddle. Child A will have money and Child B will get fat. Our kids are at opposite ends of the distribution. So, before you think of yourself as average, spare a thought for the excesses of rich and poor. You may find yourself more squeezed and less middle than you thought!


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