Wednesday, December 15, 2010

Kids Prefer Cheese: Hans Rosling's Chart is SERIOUSLY MISLEADING

I noticed this too Angus ...

But I didn't post about it ... and there's a decent reason (actually two - perhaps not good, but merely decent).

1) Income inequality really wasn't the point of the chart. Health outcomes equality is. I see this chart like a comparison of per capita income to per capita consumption: we really shouldn't be worried as much about inequality in the former as in the latter.

2) I think the vertical axis is far more likely to have an upper bound, and therefore a declining growth rate, than the horizontal axis. In our lingo, longevity is unlikely to be I(1), while per capital income is likely to be I(1). And, if it's I(1) in a log-linear form, then we'd probably do a log transform first. The base 10 log isn't what we'd normally use in macro, but it still works. Now, it would also be pretty standard to difference the logged I(1) variable when plotting two series like that: it's why we plot inflation - instead of the price level - against interest rates. In this case, Rosling might have done per capita real income growth rates against longevity, and I don't think he would have ended up with just-so story that he did. If he did though, I think many people would have walked away with the impression that low growth rates are a good thing. Too many people make that assumption casually for me to advocate encouraging it.

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