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Monday, January 31, 2005

Why percentages are essentially worthless information

This little ditty showed up in the email box this morning:
Germans spend a larger percentage of their collective income on alcohol than any other country.

Okay, but this doesn't tell us much. The price of alcohol might be very low or high, German income might be low or high. The problem with percentages is that they don't convey much information while sounding like they convey a lot of information.

As a thought experiment, let's say the price of a pint of beer was $5 in Germany and only $1 in the Ukraine (I'm making these numbers up). The average income in Germany is $30,000 and in the Ukraine it is $15,000. The Germans spend 20% of their income on beer, and therefore purchase $6,000 worth of beer or buy 1200 beers per year. In the Ukraine, they only spend 15% of their income on beer or $2250. At the price of $1 per beer, the average Ukrainian buys 2,250 beers per year.

If you are worried about alcohol consumption, which country has the bigger problem?

This is the problem with percentages. They are essentially worthless information masquerading as insight.

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