Wednesday, October 31, 2012

Numeracy Illiteracy - the headline edition

I suppose I should be grateful that my local paper, The State, gives me such timely material for teaching.

But even though we were discussing numeracy in editing class, the paper didn't have to be this accommodating with this headline today:

Here's the first part of the story:

South Carolina’s $25 billion retirement fund earned a 4 percent return on its investments from July to September, the fund’s chief investment officer told the State Budget and Control Board on Tuesday.

But Hershel Harper said the fund will struggle to make its goal of a 7.5 percent annual return over the next five years. State officials say the fund needs to average that return to stay solvent .... The retirement fund made a 0.37 percent return on its investments last fiscal year, which ended June 30. After paying its expenses , including benefits to retirees and fees, the fund lost $1 billion in value. 

So , no, earnings weren't up 4 percent. The percentage here is not being used as a relative comparison but as an absolute - it's a rate of return.

Had the earnings been "up" 4 percent, that would be 0.37*1.04, or 0.385 percent.

Because the rate of return is an absolute number, the "up" or increase in it would actually be 13,233 percent! ((4/0.37)-1)*100

Think of a thermometer - with the rates of return sot of like the "degrees." If the temperature went from 20 to 50, you wouldn't say "temperature up" 50 degrees. You'd say "temperature reaches 50" or maybe that it rises 30 (or, if you were into headlinese, "temperature up 30".
 So this headline really should be:

Earnings reach 4 percent in quarter
or a little less elegantly
Earnings rise to 4 percent in quarter
This kind of innumeracy isn't good in any case, but in 36-point type it really disappoints.

(The online version avoided the problem.)

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