Sunday, April 14, 2013

Review of Naked Statistics

A quick review of “Naked Statistics” by Charles Whelan

I just got back from the bookstore.  I made a spontaneous purchase “Naked Statistics” by Charles Whelan.  This is a rare book on statistics because it is readable, insightful, and at times funny.

First, it shows how statistics can be used to deceive.

  • ·      True that average Bush tax cut was over $1,000.  The median was near $100.

  • ·       Avatar was the highest grossing film of all times when gross sales are measured in nominal dollars.    It drops to 14th place after adjusting for inflation.  The highest grossing film in real dollars remains Gone with the Wind.

  • ·      Globalization did not result in reductions in poverty in many countries but the number of people in developing countries that are in poverty fell drastically because globalization greatly benefited two very large countries China and India.  Arguably, the number of people leaving poverty is a more relevant statistic than the number of countries with lower poverty rates.

Whelan gives the most coherent explanation of the Monty Hall (Let’s make a deal) problem that I have ever seen.  Monty Hall offered contestants three doors.  Two doors had a goat and one door had a car.  Monty would open up one door and ask the contestant if he or she wants to trade.   The person who trades wins two-thirds of the time while the person who stays put wins one third of the time.

He looks at a wide range of problems including:

How does Netflix know what movie you want to watch?   Why does it not make sense to give an extremely accurate medical test to a wide range of the population even if the test is for a serious condition like HIV?   How the mutual fund industry benefits from survivorship bias. 

This is a very pleasant and informative book.  I strongly recommend it.

It can be purchased at the link below.

I hope you like DailyMathProblem.  Over the next week I will have new posts on mortgage math and the proposed adjustment to the Social Security COLA.

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