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OPINION - Lies, statistics, and averages

by Chris Conley

NEWS BLOG (WSAU) Do you know the difference between average and median? It's important, especially when discussing news stories that deal with numbers. Coverage of Obamacare and tax policy are two types of these stories.

An average is pretty simple. Add up a series of numbers, divide the sum by the total number of entries, and you have an average. Example: What's the average of 20, 17, 16 and 7? The answer: 15.

The median for a series of numbers is the line where half the numbers are above it and half are below it. Example: what's the median of 40, 22, 10, and 9? Its 16. It's the middle point.

So let's use average and median to show how news stories can be manipulated. Here's a hypothetical Obamacare example. One woman who is a very ill smoker used to pay a small fortune for her health insurance. Under Obamacare, she can't be refused for preexisting conditions. She used to pay $22,000 a year for an individual insurance policy today she pays $7,000. She's a big winner under Obamacare. Her savings: $15,000. But I've seen my premiums increase; these days I pay $100 more per month, for an annual increase of $1,200. My next door neighbor also saw an increase, and pays about $2,400 more. But across the street, the nice old lady with the three cats saw a small savings -- $10 a month less -- for a modest decrease of $120 a year.

So the White House puts out a news release bragging "the average household savings under Obamacare is $2,880." The figure is factual, just misleading. In this example, one person with huge savings has made it appear that everyone is saving money. In fact, half the people are seeing an increase . A much more accurate picture is this: the median household increase under Obamacare is $540.

And thats exactly whats happening in health care. Some people -- the very sick, the very old -- are seeing very big insurance savings. But the more common scenario is an even greater number are paying more just not enough more to swing the average negative.

This happens with other news stories, too. Housing prices are rising. Your home is worth $5,000 more my home is worth $2,000 more the millionaires mansion on the hill is worth $750,000 more. You wouldnt claim that the average increase in housing values is $232,000, right? Consider tax cuts. I get a tax cut of $50. You get a tax cut of $200. A corporate CEO gets a $50,000 tax cut. It paints a warped picture to claim that the average tax break is $17,000.

So heres a rule of thumb in stories where there are big numbers on the very high or very low end the median gives a better picture of whats happening than the average.

Chris Conley
8.1.14

Image: Aurora Electronic Calculator via WikiCommons.com