Numerical Context: Hamsters in Lithuania?

Oct 18, 2013

I recently downloaded a Wall Street Journal article about the congressional food fight over spending and the debt ceiling. I learned that “on Oct. 17 [the Treasury] would be left with only about $30 billion.” I went on to learn that this amount was approximately equal to the Harvard University endowment in 2011, and the cost of Hurricane Ike in 2008.

Just for the record, this added information came not from the WSJ, but from an application that I inadvertently installed in my web browser. This kind of “helpful” addition reflects an emerging trend to “make numbers meaningful” or “put numbers on a human scale” by comparing them to some other piece of information that happens to be numerically equivalent.

But I ask you: Do you find this added context information useful? Personally, I don’t consider it the least bit useful to compare the amount the U.S. Treasury has remaining on Oct. 17 to one wealthy college’s endowment or the damage caused by a single hurricane. Moreover, I consider it an annoying interruption in my reading flow, in a news article of great importance. I would have learned as much, and enjoyed the learning more, if I had been told that the $30 billion in question was approximately equal to the total weight (in milligrams) of all the hamsters believed to be living in Lithuania.

Context is helpful, but it needs to be provided thoughtfully. Is $30 billion a lot of money? Well, judging by the use of the word “only,” the reporter doesn’t think so. What would be more useful would be to learn that the funds left in the Treasury approximated (I believe these are roughly accurate):
  • 0.8% (i.e., less than one percent) of federal outlays in fiscal year 2013
  • 3% of the projected federal deficit for FY 2013
  • The amount the federal government must borrow every 12 days, given the projected deficit

We can make a number meaningful by comparing it to another number, but only if there is a valid, meaningful context for the comparison.

“Painting with Numbers” is my effort to get people talking about financial statements and other numbers in ways that we can all understand. I welcome your interest and your feedback.

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