ECONOMIC FALLACY #1 : THE FALLACY OF MEASUREMENT Fallacy Of Measurement The firs

ECONOMIC FALLACY #1 : THE FALLACY OF MEASUREMENT

Fallacy Of Measurement

The first fact to understand about statistics surrounding economics is the different ways people can skew the results. People use whatever twisted statistics they think make their political point. If you want the economy to look bad then use household income rather than personal income. This is a convenient way to lie about the economy.

This is a point Thomas Sowell makes: “household or family income can remain virtually unchanged for decades while per capita income is going up by very large amounts. The number of people per household and per family is declining.”

Another tool for someone trying to make the situation look bad is to talk about the income gap. Saying that the gap between the rich and the poor is increasing makes it seem like the rich are getting richer, while the poor are getting poorer, or that the rich are taking from the poor. While that gap is increasing, it is mainly because it is so much easier for the wealthy to increase their incomes by large amounts. Yes, the rich are getting richer, but the poor are getting richer as well.

This point is made brilliantly by Michael Medved in his book “The 5 Big Lies About American Business.” To paraphrase Medved, if one citizen who makes $200,000 per year shows an increase of 10 percent, he now makes $220,000. If another citizen who makes $20,000 per year has an increase of 20 percent he now makes $24,000 per year. The second person saw an increase twice as large as the first person yet the gap increased from $180,000 to $196,000. “The gap” is how you make a situation which was good for everyone look bad. There are more accurate ways to illustrate how the poor are doing.