Lesson preview · Feelings vs figures
Feelings vs figures: checking a story against the data
~8 min · Free to read
“Petrol has never cost more.” “House prices only go up.” “Inflation has never been this bad.” Each one feels true. Each one is also a claim about a number, so you can check it.
Your feelings about the economy come from what you see and hear: your family’s bills, the news, what your friends say. That is a small sample, and often not a typical one.
To check a feeling, compare it with data: figures counted the same way, year after year, by an organisation whose job is to measure. A national statistics agency is one. A central bank (the public bank in charge of a currency) is another.
Key Term
Nominal and real prices
Suppose prices in general have doubled since 1995. Then a 10-dollar pizza in 1995 cost 20 dollars in today’s money.
The 10 dollars is the nominal price: the price tag in the money of its day. The 20 dollars is its real price in today’s money. It adjusts for inflation (prices in general rising), so you can compare years fairly.
Comparing price tags across years and forgetting inflation is called money illusion.
Each feeling went further than the figures support, and each gap had a likely cause. Gaps like these are a robust finding: between 2014 and 2020, Ipsos, a polling company, found them in surveys of up to 40 countries. In 2017, only 7 percent of people across 38 countries thought their country’s murder rate had fallen since 2000. Across those countries overall, it had fallen by 29 percent.
Key Term
Thinking traps to look for
- Vivid examples: judging how common something is by how easily examples come to mind.
- Herding (herd behaviour): copying what everyone else is doing.
- Framing: reacting differently to the same facts because of how they are worded.
- Anchoring: letting the first number you hear drag your guess towards it.
- Present bias: planning to wait, then grabbing what is on offer now when the moment comes.
- Money illusion: comparing price tags across years and forgetting inflation.
Trap · Common Misconception
"They rise together, so one causes the other"
Say a survey finds that students who own more books get higher marks. Do books cause good marks? Maybe. But families with more money may buy more books and also pay for tutors, so money could drive both.
Two things moving together is a correlation. One thing making the other happen is causation. A correlation on its own doesn’t prove causation.
Tip
Investigate a belief in five steps
- Topic: write the belief as a claim you can check, with a place and a date.
- Behavioural forces: which thinking trap might have produced it?
- Trustworthy data: find figures from a national statistics agency, a central bank or an international body such as the World Bank. Note the date. Use real figures when you compare prices across years.
- The economics: explain what drove the numbers. Was it inflation, or a jump in demand (how much people are willing and able to buy at each price)?
- Balanced comparison: say what the belief gets right, what it gets wrong, and how sure you can be.
Worked Example
In early 2020, as COVID-19 spread, shoppers in many countries found empty supermarket shelves. Use the five steps to test this belief: “The shelves were empty because there wasn’t enough food.”
Practice · 1 / 5
Three of Maya’s relatives lost their jobs this year, so she decides unemployment in her country must be very high. Her country’s statistics agency says the unemployment rate is 5 percent: of every 100 people working or looking for work, 5 have no job. That is about the same as last year. What is the best judgement?
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