A book
Some things never fall

Don't mess with the scale

My friend Patrick pointed out the single biggest issue with the chart below -- that the designer chose a scale that precisely undermines the message of the chart.  Undermine may be too mild a word to use here; annihilate may be more apt.

Dow2


The lines in this chart are anchored at the zero point on the time line (horizontal axis) used to indicate the bottoms of various bear markets in the Dow from 1929 to 2007.  From that anchor, time runs to the left showing the amount of time for the Dow to go from peak to bottom (the decline); time runs to the right showing the amount of time for the Dow to climb back to the prior peak (the recovery).  As the caption said, the point of the chart is "if the decline was fast, the recovery took a considerable time".

Funny thing then that the distances from the zero point are roughly comparable on the left as on the right.

This illusion resulted from some very convoluted and perplexing messing around with the horizontal scale.  First, the left-of-center scale is in months while the right-of-center is in years.  Second, the left-of-center scale has normal spacing while the right-of-center seemingly was suffering from spasms.  Take a closer look:

Dow2_right The first five years (0-5) took up about half the scale while the next five (5-10) took maybe one-eighth.  The first year (0-1) took about as much space as the next two years (1-3).

I am not quite sure what is the logic behind this but since the message of the chart has everything to do with the time duration, it is most unfortunate to introduce such distortions.

There is yet another "innovation" in this chart.  Notice that on the right side, the axis labels are irregular (more spasms)... 0,1,3,4,5,10,15,20, 25...  This is as if the designer is posing one of those IQ questions requiring readers to figure out the next number in the sequence.  The specific time intervals selected may have meaning: note that all the lines are straightened out in between these tick marks.  Given that each line represents a different historical sequence, it is difficult to comprehend the regularity of these intervals across history.  Perhaps this will prove to be the key to unlocking the secret of this chart.  Please comment below if you are able to unravel this mystery.

Besides, the same type of "innovation" was not applied to the left side of the chart.  Here, the designer opted to throw out all the data between the peak and the bottom and straightened out all the intermediate fluctuations.

Below are two different versions of this chart, basically restoring the time scale to the normal, equally spaced, symmetric appearance.  The top one used monthly Dow returns where the volatility obstructed our understanding of the trends, requiring the use of color to differentiate the lines.  In the next version, I used R to generate the loess estimates (a type of smoothing) and the trends became clearer.  (There was a prior discussion of loess on Junk Charts here.)


Redo_dow2
 

Now, these pictures are very different from the original graph!

I'd be very cautious about reading into these charts anyway.  This question is not one suitable for statistical analysis.  The sample size of six is far too small.  Each recession is different in terms of causes, remedies and context.  The fact that we call them recessions do not make them comparable.  Further, it is also impossible to know at this stage if the 2007 decline has reached bottom.  The chart designer essentially assumed this to be the case but who knows?


PS. Nick Rapp, one of the designers of the chart, responds in the comments.  He has started a blog to feature the work of his graphics team at AP.  His colleague has created an interactive version.  More than anything, this post highlights an aspect of the chart that Nick and his team clearly spent a lot of time doodling over.  The concept of the chart itself is wonderful actually, if I didn't say so already; it is essentially the same chart as the oft-printed chart where the anchor point is the start of each recession, only here the anchor is the bottom of each recession.

Comments

James Pearce

Ironically, your visualisations seem to suggest that only the 1929 line follows the hypothesis. (Sharp drop, long recovery).

There's a light blue line* that has two clear minima - if you choose the first as the bottom, that would also show a slower U-shaped recovery. But still, the others are clearly 'V-shaped'.

Maybe the original chart gave the right impression all along!


(* since 5 of your 6 lines use a limited palette of cyans and magentas it's rather difficult to tell from the legend which year that actually is ;-) )

Corrected link to loess discussion: http://junkcharts.typepad.com/junk_charts/2008/05/turning-in-his.html

Nick

There has been a discussion about this issue in this blog: http://nicolasrapp.com/?p=417
Basically, choices have been done to settle readability issues. It is known that this visualization is not perfect, but simplification can help a newspaper reader to get a quick comparative idea of the current market meltdown.

John S.

The conclusion we're supposed to draw is that the time to recovery is somehow related to the slope of the drop. The steep drop over the past 18 months resembles the Great Depression, so the conclusion is that it may take just as long to recover. But is there any economic theory behind that idea, or is this just something a graphic artist pulled out of the air?

We got into the current mess by trusting bogus statistical models. Why should we pay attention to an equally simplistic model? Because it looks scary? During the housing boom, similar graphs were produced to show that the sky was the limit. Look how well that turned out.

I for one am getting tired of all the disaster porn.

Owe Jessen

Funny... Nick Rapp claims that readers react disturbed when confronted with log scales, but uses a rather irregular scale on the time-scale? Doesn't make sense to me.

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