April 9, 2019

“In earlier times, they had no statistics, and so they had to fall back on lies…giants or miracles or wonders! They did it with lies and we do it with statistics, but it is all the same.” – Stephen Leacock

In high school, I read this delightful little book, “How to Lie with Statistics,” by Darrell Huff (1954). It was adorned with cartoons and humorous examples. I was always good with numbers, so I made up ways to bend the truth with warped numbers. In college, I studied statistics more seriously with some books which I still consider the standard for critical thinking: “The Nature of Statistics” by W. Allen Wallis and Harry V. Roberts (1962), and “Preface to Critical Reading” by Richard Altick (1956) – a real gem.

Here’s a sample of How to Lie with Statistics, turning a small rise into a steep rise by changing the axis:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In my early career, I kept critiquing the misuse of statistics by other writers so much my editor named me the “Elder Statsman” (at age 25) and assigned me the job of vetting all statistical usage, but now that I am truly elder, I think I’ve seen it all. Journalists routinely say “statistics prove…” as if numbers have logical content. The use of numbers lends authority, even though the most carefully-tended statistic in the world – the U.S. Census – is off by about 15 million. Next April Fool’s Day (April 1, 2020), your friendly Census Bureau will ask 330 million Americans hundreds of questions (on the long form) about our utility bills, health, race, job, income, phone, computer type, and endless trivia. Our billions of estimates, wild guesses, and misinformation will forever and henceforth be treated as Gospel Truth by statisticians.

Meanwhile, 10 million or more illegal aliens and five million or more ornery or homeless folk will never get a form or will throw it away, despite every attempt by sincere poll takers to tally every American.

Don’t get me wrong. Some statistics are invariably honest and true – baseball averages, the S&P 500, the day’s temperature highs and lows – objective numbers that can be measured by numerous observers. I’m talking about numbers that ultimately depend on some people asking other people what they are up to.

People lie. In a province of China, one census taken for military and taxation purposes showed a total population of 28 million, but a few years later a census of the same province for purposes of famine relief showed 105 million. People evade military service or taxes, but they seek out any benefits or handouts.

The same thing happens when census takers or pollsters ask about your income. Do you really want them cross-checking with the IRS? No, you low-ball your income, just a bit. This difference makes its way onto our tax forms. The “tax gap”—the difference between what we owe the IRS and what the IRS collects—is about $450 billion a year. The IRS collects only about 81.7% of the money we legally owe.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The same goes for employment stats: Are you looking for a job? “Sure, I am!” (I’d sound lazy if I said no. Besides the definition is so loose that if I make one call a month to a potential employer, I’m “looking.”)

Polls “Push” the Answers They Want

Last Friday, I received an official-looking poll in the mail, “Voter Registration Confirmation,” with 14 questions. Once I got to the third or fourth question, I knew they were “pushing” me into their desired answers: “Rate President Trump’s performance on getting the economy going, creating millions of jobs,” or “Rate President Trump’s performance on crushing ISIS.” You know the answer they want, so when you see a press release that 83% believe Trump is doing a great job crushing ISIS, you know the source.

These are called “push polls,” since they push you into their preferred answer. The same kinds of skewed results can happen in sincere polls that are badly designed, such as those seeking an answer from “the man on the street.” Which street? Park Avenue or Skid Row? Main Street, or Martin Luther King Blvd?

Pollsters also impact the answer. That’s why so few polls predicted a Trump victory. It was considered gauche to like Trump, so when asked by a pollster, many favoring Trump would say “undecided.”

There was a famous political poll by The Literary Digest in 1936. They sent out 10 million ballots, of which 2.4 million were returned, showing that Republican Alf Landon would handily defeat incumbent Franklin Delano Roosevelt. As it turned out, FDR won the greatest landslide ever, 523-to-8 in electoral college votes and 61%-36% in popular votes. What went wrong? The Literary Digest had successfully conducted election polls in five previous contests, 1916-1932, but they hadn’t contended with the wealth gap of 1936. Their mailing list was composed entirely of magazine subscribers, automobile owners, and telephone users – the affluent half of America – and responses favored those who could afford a stamp.

This polling failure led directly to the demise of the Digest in 1938 and the ascent of George Gallup, who had designed a far more accurate polling technique during that same 1936 election. (To be continued…)  

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*


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