Damned Lies, Statistics, and the Great Recession

Free Money Finance last week pointed me to an AP article from the end of September headlined “Income gap widens as poor take hit in recession”. (Your local news outlet may have used a different title.)

The piece recounts how the recession has lowered incomes across the board but hit the deserving poor and ever-wholesome middle class harder than the fat cats on the top. Kinda ho-hum as mainstream media reports on the Great Recession go. The AP story was run in a few places (see link above and here and here too) but hardly made a splash. Why would it? It just confirms what everybody knows to be true.

But it isn’t true. Or, at least, the conclusions in the article are completely unsupported by the data it pretends to be based on.

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Post 200

This is the 200th post at Bad Money Advice. As it is also a cold and rainy Friday morning here in Boston, this seems like as good a time as any to reflect and take stock.

I started Bad Money Advice on a much colder morning this past January. My primary goal was, and still is, my own amusement and satisfaction. Unemployment saddled me with a lot of free time and extra energy and I wanted something to do more substantive than on-line poker.

So far so good. BMA amuses me. I’ve got something to say and, apparently, have found an audience of people willing to listen.

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The Money Culture War

Yesterday’s New York Times carried a column worth reading by David Brooks. It is a little confused, even by the standards of Times columns, but the gist of it is a call to arms for a brand new culture war, this one over money.

I’m all for that.

Brooks starts out by recalling a centuries old idea.

The theory was that great nations start out tough-minded and energetic. Toughness and energy lead to wealth and power. Wealth and power lead to affluence and luxury. Affluence and luxury lead to decadence, corruption and decline.

This was a theory invented for, and more or less exclusively applied to, the fall of the Roman Empire. But don’t let the fact that it’s long since been cast aside by historians distract you. Brooks thinks we’ve gone soft.

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Five Lessons of the Great Recession We Probably Won’t Learn

As I wrote on Friday, lists of lessons we have learned from the current economic troubles have been enjoying a vogue lately. A dim view of my fellow humans prevents me from being so optimistic as to believe that we are going to emerge from this fiasco meaningfully wiser. But I do have a list of lessons that we could learn from recent experience. But probably won’t.

In the best case scenario, regulators are just as smart and capable as the people they regulate. And, just to be clear, best case scenarios are rare. Many of the complaints about how the Fed, SEC, et al. blew it by not foreseeing and preventing the Wall Street meltdown are unfair. If the thousands of people making seven figures at meltdown ground zero didn’t see it coming, why would we expect the hundreds of government employees watching them from the outside to pick up on it?

25 years is not forever. Amongst my many brilliant theories is this: especially in the realm of culturally significant business phenomena, if something has been going on for more than 25 years people will mistake it for a permanent always-has-been-always-will-be thing.

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The Difference Between Food and Money

From some spam I got yesterday:

Dear Amazon.com Customer,

As someone who has shown interest in books and magazines on cooking, you might like to know that you can get a $5.00 instant discount on SmartMoney this month.

I’m not entirely sure what is going on here. It’s possible that it’s just a mail-merge typo, that the text "cooking" was accidentally put in where Amazon meant to write "finance and investing." I like eating as much as the next guy, but describing me as somebody "who has shown interest in books and magazines on cooking" is quite a reach. On the other hand, I do keep buying books about finance, so flogging SmartMoney to me makes some sense.

But there is another, less likely, explanation that I would rather was true. I would rather that the algorithms at Amazon that tell them that people who bought A might like to buy B have found that personal finance and cooking/nutrition/dieting are similar topics with similar audiences.

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