Which is more accurate? (The answer may surprise you.)
9.2 Million or 9.27 Million or 9.271 Million or 9,271,675?
The answer is… it depends.
The perception is that the more numerals data has, the more accurate. This perception is in GDP, unemployment rates, economic and other data. Yet it’s not strictly true.
Any of the figures could be less or more accurate, but additional digits imply certainty. When collating economic or aggregate data, such as GDP, the chances are in any case the underlying data is an estimate, or a sum of sources based on estimates.
So if a country has a GDP per capita of $33,000 or $31,987 it may in fact be absolutely no different in real terms. Yet it looks and sounds different. This is the problem with a presumption of perfection or accuracy in statistics.
Do a mental experiment, next time you hear a figure, round it up or down.
Chances are 5.1% or 5.7% unemployment may not be accurate, in any case. Australia has 2 million people not ’employed’ yet has unemployment of around 5% on a population of 22 Million. The quoted figure may be technically accurate, but is it the ‘actual’ real world figure?
To know the accuracy of a data figure, you have to read all the assumptions and notes accompanying the calculation.
It’s worth ignoring all media reports on television or radio on economic data without reading the actual data. Newspaper reports tend to have more time to give background. Although data can be tainted by the source, so you really need to evaluate that.
(I always look for independent non-political data for benchmarking, or at least, a multitude of views.)
Without reading the basis and source… you may as well round the figure mentally before taking it at face value. This trick can get you out of the habit of making differences between small movements in any number.
Connect with me via twitter: @christopherhire