The concept of “the average” is a curious relic in public policy, yet appears to persist in almost every field, even though the “average” does not exist.
Thanks to Anna Diofasi and Nancy Birdsall from the Centre for Global Development for their recent article on the availability of Median Income data from the World Bank.
Global Median Income
Nothing is Average
A small rant, based on a discussion I had earlier this year, with a senior government official [from interstate] when I asked their team to “point to the average”. Needless to say, the “crickets” in the room were obvious. Simplistic, I know, but consider public-policy development based on “average” incomes for a region, or youth unemployment or investment incentives.
So does clear and unambiguous understandings or “ground-truth”. Sadly lacking in many centralised policy frameworks.
One earns a dollar [$1] a year, let’s call him “Joe”. The second earns one-thousand dollars [$1,000], lets call her Julia, the third earns ten-thousand dollars [$10,000], lets call him Malcolm, the fourth, earns one million dollars a year [$1,000,000]. Let’s call her “Gina”.
The TOTAL income for these four is $1,011,001 Dollars. The AVERAGE [mean] income is $252,750.25 This is the basis of many “policy” decisions and public discussions.
Consider the relevance of this “average income”. Who are we actually talking about? Why would we use THIS measure?
We know [as is pointed out by the team at CDG ] that these data are often/always “skewed right”.
Now consider the MEDIAN.
The Median is $5,500 dollars.
Two very different views of the world. Same “data”. Same people, same incomes. Which “policy response” would be better targeted? An “average” view of the world or the “median” view of the world?