A reminder that the "median" is a wildly misleading value to use.
A median offers no information about range, variability, etc. It ignores bi-modality of data inherently. A technically higher median tells you nothing about the actual distribution of income, or the health/wealth of the economy (or of the human beings who have to live within said economy.)
The first set has a median of $20; the second set has a median of $21. The median increased by 5%! Incredible, right?! Surely the second set represents a better distribution of wealth? ...right?
No, of course not.
In the second set, 54.5% of the individuals involved lost HALF their wealth; the richest person increased their own already massive wealth by 25%; AND the total amount of wealth in the entire system went down, with $25 (8% of the total wealth) being wholly unaccounted for.
Yet the median wealth still went up by 5%. If you assume that a higher median means a better situation overall, you're in for a nasty surprise.
A reminder that the "median" is a wildly misleading value to use.
ReplyDeleteA median offers no information about range, variability, etc. It ignores bi-modality of data inherently. A technically higher median tells you nothing about the actual distribution of income, or the health/wealth of the economy (or of the human beings who have to live within said economy.)
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$10, $10, $10, $10, $10, $20, $20, $20, $20, $50, $100
$5, $5, $5, $5, $5, $21, $21, $21, $21, $25, $125
The first set has a median of $20; the second set has a median of $21. The median increased by 5%! Incredible, right?! Surely the second set represents a better distribution of wealth? ...right?
No, of course not.
In the second set, 54.5% of the individuals involved lost HALF their wealth; the richest person increased their own already massive wealth by 25%; AND the total amount of wealth in the entire system went down, with $25 (8% of the total wealth) being wholly unaccounted for.
Yet the median wealth still went up by 5%. If you assume that a higher median means a better situation overall, you're in for a nasty surprise.
Correction: the amount missing is $21 (7.5% of the total wealth). My mistake.
DeleteThe income of the bottom 20% has gone up even MORE than the median.
ReplyDelete