Genii Weblog

Pesky percentages

Tue 7 Apr 2009, 10:38 AM

by Ben Langhinrichs
If there is one thing which drives me nuts about business news, it is how often they use percentages as if they were quantities.  For example, a recent story on talked about how house prices in a particular city had gone up approximately 200% to a peak price, but had dropped significantly and were projected to drop a total of 69%.  Now, as a math person, I know that means the price after the drop will be lower than the price when the surge started, but is that really obvious to the average reader.  The impression left is that houses are worth 131% more than they were originally, and there is virtually no effort made to correct that assumption.  

In case this isn't obvious to you, a $100,000 house in 2000 that went up by 200% would be a $300,000 house in 2007, and after a 66.6% drop, would be $100,000 house again, since the percentage is applied to the "current price", which keeps changing.  That is why percentages are confusing.

The same sort of thing happens in the stock market.  There is much news made about how the U.S. stock market has risen 20% in the past few weeks, but little is said about the fact that the smaller percentage drop in the few weeks before that was the same number of points.

Now, I feel a bit cynical and elitist complaining about news that assumes educated readers, but we would not be in the economic mess we are in today if more people were financially and mathematically educated.  I think the business media should make a more concerted effort to be sure their news is understood by their readers.

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What has been said:

810.1. Ben Langhinrichs
(04/07/2009 05:08 PM)

@Melissa - Thanks for the link. Interesting stuff.

@Richard - That was a great video (if you are a math geek like me). It was well explained and fun.

810.2. Richard Schwartz
(04/07/2009 05:11 PM)

I agree with you 131% ;-)

And BTW: as long as percentages are the topic of conversation, can we agree to boycott any store that advertises "Save up to 50% and more!"?

810.3. Richard Shergold
(04/07/2009 05:41 PM)

@Ben - I think there are 8 parts to that video. I think I have watched the first 4. Glad you enjoyed it - it was ages ago I watched it but remember the bit about the grains of rice on a chess board!

810.4. Rodney Scott
(04/07/2009 07:15 PM)

I'm not a math person, but I do remember confusion in terminology bothering me when I was in law school after studying psychology. "The defendant is functioning emotionally on the level of a 3-year-old" means the defendant is extremely immature, not developmentally delayed.

"You honor, my client is pleading insanity on the basis that she suffers from an anti-social personality disorder, lacking a conscience since early childhood" means "can she get off on the basis that, for as long as we've known her, her behavior has been appallingly selfish?"

It is funny in law school, but less so when attempted in real life.