David Rodeback's Blog

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Thursday, November 15, 2007
Bad Statistics: Denial and de Fanning of de Flames

Here I pick on the local and national media -- again -- for not getting their statistics right in the matters of violence in Iraq and local Boy Scouts of America executive salaries.

My two tales today include an example of someone trying mightily to evade statistics about Iraq, and an example of someone misusing statistics to help inflame readers about salaries among Boy Scouts of America executives. (Whether the abuse in the latter case is accidental or deliberate, I cannot say). In between, there's a little economics lesson.

Violence in Iraq

The other day I was listening to a major, BMA-affiliated Utah radio station, as I often do. A news anchor was asking a high-profile network reporter if we're actually winning the war in Iraq now, if the "surge" is working.

The reporter hemmed and hawed, and hemmed and hawed some more, and finally said, sounding very reluctant, that violence in the most dangerous parts of Iraq was down "slightly." He must not have heard the news reports on his own network, to the effect that violence is radically diminished in Iraq lately. Explosions in Baghdad, I heard, were down 90-something percent, and shootings were down 80-something percent. Meanwhile, peace, or something very like it, seems to have broken out in the important and notoriously deadly Anbar Province. (Victor Davis Hanson has a piece worth reading on this.)

I'm not saying the war is won. Tides can turn. I am saying this: If you're "fully invested" (to use a term we hear about football lately) in the idea that the US is losing the Iraq War -- an idea you care about very much if you're running for office as a Democrat or support those who do -- you might be inclined to misrepresent radical changes as merely slight. After all, it's only statistics.

We Interrupt This Discussion for a Tiny Bit of Basic Economics

Let us look back for a moment on the recent fate of my (fictional) multi-billion-dollar widget manufacturing business. Three years ago, we were on the verge of slipping from profitability into unprofitability -- from black to red, you might say. So we spent $30 million in a single year, some of it borrowed, to retool our widget factories in the hope of increasing productivity and quality, and thereby also our profits. Over the last two years, we have repaid every borrowed penny. Last year, profits were about $85 million. This year it's looking more like $140 million.

Question 1: Was the $30 million retooling wise and justified, in retrospect?

Admittedly, improvements were a lot greater than we anticipated three years ago. We projected $60 million in profits against that $30 million expense. We decided even that was more or less a no-brainer.

Question 2: Not in retrospect, this time, but thinking in terms of what we forecast three years ago, were we right and reasonable when we chose to invest the $30 million?

The answer to both questions is somewhere between "yes" and "duh!" on the positive end of the spectrum.

Let's now shift gears. Let's say it wasn't a $30 million retooling we bought. It was a new CEO, whom we have paid $10 million per year for three years. This new CEO came with valuable experience returning other similar companies to profitability, and with a very high public profile and a positive reputation to go with it. We lured him away from another company, where he was making about $8 million per year.

So why don't we want to say immediately that the new CEO has been (in retrospect) or will be (in foresight) worth the high price? Why do we want to protest that it is wrong for one human being to make so much money? Isn't the calculus the same as it was when we considered the $30 million retooling?

Whether it is new widget-making equipment or a new CEO -- or a star game designer or a superstar athlete -- if I can make $225 million dollars by investing $30 million, wouldn't I want to do that as quickly as I can -- and as many times as I can, for that matter?

By the way, we were able to give our widget factory workers raises. They still don't make anything like the CEO's salary, even though they work hard. But they got to keep their jobs, and they're getting paid more to do them.

If you'd like to read a little more about this, here's a good Thomas Sowell piece from earlier this year. But on to our second tale.

BSA Executive Salaries

As an LDS bishop and a parent of a Scout and a Cub Scout, I have a few points of discontent with the local Boy Scouts of America district and council. They involve a handful of administrative and operational matters. I have communicated them to the proper individuals and will not list them here.

Notably, BSA executive salaries are not on my gripes list, even after an article about them appeared in Sunday's Deseret Morning News. More than a few volunteer Scout leaders and Friends of Scouting contributors are up in arms about the salaries, after reading the article. I'm just not one of them.

One of my reasons for excluding executive salaries from my list of little issues is in the preceding economics mini-lesson. Even in the nonprofit world, high executive salaries are not inherently excessive or unfair -- if "unfair" actually has any objective meaning in this context. My other reason -- the one I intend to discuss here -- is that the Deseret Morning News reporter badly misused some statistics -- either deliberately or carelessly -- and in doing so fanned the flames. And his editor let him get away with it.

Lee Davidson's first statistical offense is comparing the salary and benefits of a BSA council executive ($214K combined) to the salary without benefits of Vice President Dick "The Dark Lord" Cheney ($215.7K) -- yes, I saw the nickname at Doonesbury, but that doesn't mean I believe it -- and to the salaries of the Chief Justice of the US Supreme Court and the Speaker of the US House of Representatives (both $212.1K). Apples and oranges, to say the least.

A little later, he repeats the same offense, comparing the total 2005 compensation of a national BSA executive ($988K) to President Bush's salary alone ($400K) that year.

Later in the article, he misuses an average. According to the Utah Department of Workforce Services, he notes, the occupation in Utah with the highest average salary is obstetrician/gynecologist. (Altogether now, can you say, "malpractice insurance"?) That's about $194K. To that Davidson compares the salary of a top Utah BSA executive with 36 years of experience. This is more like apples-and-swiss-chard, or possibly apples-and-garden-hoses. If he were to compare the executive's salary to that of the state's highest-paid ob/gyn, or perhaps to the average compensation of all Utah ob/gyns with 36 years' experience, the comparison would make a lot more sense, but would be somewhat less useful to his article.

Then Davidson flirts with complete irrelevance by noting -- still in the context of other professions' average salaries -- the entry-level salary for a BSA executive ($36.7K), and comparing that to the average wage in Utah for all jobs, not specifically for all entry-level jobs ($37.7K).

Apples-and-the-whole-auto-parts-store, perhaps?

Sometimes statistics tell us more about the people who use them than they do about the reality they purport to describe.

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