Price Index

Numbers game

PUBLISHED : Friday, 26 October, 2007, 12:00am
UPDATED : Friday, 26 October, 2007, 12:00am

In a world where statistics drive so much of what is around us, it is ironic that the best-selling book, ever, on the subject was written by someone with no formal statistical training. Next time you cast your eyes over the latest consumer price index (CPI) figures or hear government officials saying an infrastructure project will create 'X' number of new jobs, keep in mind the title of this tome: How To Lie With Statistics.

More than 1.5 million copies of the book, by the late magazine editor and writer Darrell Huff, have been snapped up since it was published in 1954. A Chinese-language edition joined the dozens of other translations in 2003. A conspiracy theorist at heart, I naturally like to conclude that the deluge of figures that mainland authorities have been throwing at us in recent years are related to the appearance of that version of the book. While I recognise that statistics are vital in a globalised world, I cannot help but wonder how they have been compiled and calculated.

This is the crux of the problem of statistics: too many people take them at face value without question. That a single figure can cause stock markets to slump or a run on bank savings makes the need for greater openness important.

The director of the University of Hong Kong's Social Sciences Research Centre, John Bacon-Shone, emphasised this to me on Wednesday, saying it was 'important to be a critical reader of all statistics'. Nonetheless, collecting and reporting such figures also has great value because the alternative - relying on qualitative assessments - 'solves nothing and is usually much worse'.

His views were backed by British economist and broadcaster Andrew Dilnot, principal of Oxford University's St Hugh's College and co-author of The Tiger That Isn't. The book's title relates statistics to the flash of orange that a visitor to the jungle may see in the distance, mistake for a tiger, and flee at speed. It may or may not have been a tiger. Statistics are 'enormously important and we should try and consume as many of them as we can', he told me. We do, however, need to respond to them in a more adult way, and the media must take the lead. Most statistics that a government or organisation released were generally correct, he said. But 'almost always' questionable was how their disseminators interpreted and described them.

For example, when the Group of Eight leading industrialised nations announced in 2005 that they were forgiving US$50 billion in debt to African nations, the world was impressed. They explained was that there are 750 million people in wealthy countries and that this figure - with the US$1.2 billion in annual interest payments stripped away - translated into the miserly sum of less than US$2 per person.

But being sceptical and accompanying numbers with words of explanation, as Mr Dilnot advised, is not always as easy as it sounds. One such figure is the CPI.

Issuing the September figure, a Hong Kong government spokesman said on Monday that inflation was 1.6 per cent and slowly rising, due to the strength of the economy. Excluding the effect of recent tax cuts, the number was actually 2.7 per cent.

The CPI is taken seriously by many people, but it does not apply to the poor, wealthy or me. And, now that I know how it is calculated, I suggest that none of us take it personally.

There are 25 Census and Statistics Department field officers who check the prices of a basket of 981 items in nine categories, the main ones being housing and food. With consumer goods, for example, the price of the perceived most popular brand or item is chosen. If it is not available, the next closest one is selected.

This is fine for average consumers, but none of us is exactly average. I do not eat Golden Elephant Thai rice, am not fashion-conscious, don't have children in international rather than local schools, and my rent is inflated by 10 or so per cent since my landlord knows I have no choice but to put up with discrimination.

Statistics should never be taken for granted. We should approach them with eyes open and a healthy dose of scepticism.

There is no need to be cynical, though - just wary.

Peter Kammerer is the Post's foreign editor