In case you are not subscribed to my dataviz feed, I put up a post yesterday that is highly relevant to readers here interested in statistical topics. The post discusses a graphic of a New York Times article that interprets the official inflation rate (known as the CPI). I devoted an entire chapter of Numbersense (link)to the question of why the official inflation rate diverges from our everyday experience.
In a larger context, inflation rate is an invented metric, invented to measure some quantity that has no objective reality. This is true of a lot of statistics. Revenues and profits are also invented concepts, for example, and only attain meaning through generally accepted accounting rules. Obesity, which is discussed in Chapter 2 of Numbersense (link) is another example of a quantity that has meaning only because of a convention of measuring.
The article in NYT brings up one of the points I raised in the book, which is that price increases are magnified in our imagination while price decreases are taken for granted.
The other larger point of the chapter on inflation is that anyone wishing to comment on whether CPI reflects real experience ought to understand how CPI is constructed. A superficial understanding such as that it is the average price of a basket of goods is useless because there are so many little details that affect the statistic. Because inflation has no objective basis, it is pointless to argue if it reflects reality: all we are left with is discussing the rules and you can't discuss the rules without knowing them well.
Details matter a lot in statistics. This is one of the reasons why I keep asking my Big Data colleagues to talk specifics. A statistician who only talks in generality is like the Manhattan realtor who can't tell you the size of the listed apartment.
Comments