Thursday, November 4, 2010

On big numbers

I have a real issue with the way numbers associated with macroeconomics are reported in the news. Ezra Klein writes that the American Federal Reserve is planning to perform quantitative easing to the tune of $600 billion.

The reason this sort of thing bugs me is that the number is essentially meaningless, because it is beyond comprehension. Your average person (or even your average above average person) is going to look at that number, and their brain is going to gloss it as "a metric Jesusload of money."

What I would much rather see is values like this in per-capita terms, and broken down over time: $600 billion is roughly $1,900 per American citizen. Spread out over seven months (the Fed plans to inject the money into the economy by purchasing treasuries between now and June), that's $271 a month per person in additional money entering the economy.

Isn't it a bit easier to comprehend the Fed's action and its possible impact when it's put like that?

By the way: I am hopefully going to be posting around here occasionally again. The birth of the Loaf massively reduced the time I could invest in the Umlaut, and my massive fondness for Starcraft 2 has basically eaten what free time I have left, but when the muse strikes I shall scurry over here to share my thoughts with whatever readers I may still have.

1 comment:

  1. I actually disagree. Well, while i agree that it is hard to comprehend what $600 billion looks like, i do not think that your method is any easier (and may actually be harder for me to understand).

    The reason is simple - if a lump sum is listed then i at least can see the total amount, even if it's confusingly huge. However, When it's broken down into the amount per person per month i feel like i have no idea how much is actually being spent. I have to estimate or look up how many people there are, then multiply stuff like 271*310,638,029*7.

    Basically, i think that the broken down version is even more nebulous that the single number.


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