{"id":6534,"date":"2010-08-09T17:06:34","date_gmt":"2010-08-09T06:06:34","guid":{"rendered":"https:\/\/calltoreason.org\/?p=6534"},"modified":"2010-08-09T17:06:34","modified_gmt":"2010-08-09T06:06:34","slug":"be-careful-when-using-percentages","status":"publish","type":"post","link":"https:\/\/calltoreason.org\/?p=6534","title":{"rendered":"Be careful when using percentages"},"content":{"rendered":"

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The above chart caught my eye while I was reading through an issue of The Economist<\/em>. The article is available online here<\/a>. It basically shows how much gold a US dollar can buy from 1973 to 2010 and uses this as a measure of the dollar’s devaluation. In 1973, we can see that one US dollar could buy slightly less than 2 troy ounces of gold while in 2010, a US dollar can buy less than 0.10 troy ounces of the stuff.<\/p>\n

What’s interesting is that the chart is that it also divides the period of time under study into three separate phases and gives a percentage for the change of value in each period. So it notes that the US dollar was devalued by 90% from 1973 to 1980, that it was revalued by 236% from 1980 to 2000, and devalued again by 80% from 2000 to 2010.<\/p>\n

The chart is impeccably correct of course, but intuitively if someone told you that something went down in value by 90%, then shot up 236% and then went down 80% again, would you understand that its current value is now about one twentieth of the original? Unless you took the trouble to actually work the maths out, I think most people would be surprised by the actual results.<\/p>\n

Anyway, this isn’t really apropos of anything, but since investment returns tend to be stated in percentage terms, I thought it would be a good idea to demonstrate how important it is to actually chart out the real values instead of relying on percentages and using guesstimates. This also demonstrates how valuable a good chart is to help people understand what’s really going on.<\/p>\n","protected":false},"excerpt":{"rendered":"

The above chart caught my eye while I was reading through an issue of The Economist. The article is available online here. It basically shows how much gold a US dollar can buy from 1973 to 2010 and uses this as a measure of the dollar’s devaluation. In 1973, we can see that one US … Continue reading Be careful when using percentages<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[442],"class_list":["post-6534","post","type-post","status-publish","format-standard","hentry","category-news","tag-mathematics"],"_links":{"self":[{"href":"https:\/\/calltoreason.org\/index.php?rest_route=\/wp\/v2\/posts\/6534","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/calltoreason.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/calltoreason.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/calltoreason.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/calltoreason.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6534"}],"version-history":[{"count":12,"href":"https:\/\/calltoreason.org\/index.php?rest_route=\/wp\/v2\/posts\/6534\/revisions"}],"predecessor-version":[{"id":6547,"href":"https:\/\/calltoreason.org\/index.php?rest_route=\/wp\/v2\/posts\/6534\/revisions\/6547"}],"wp:attachment":[{"href":"https:\/\/calltoreason.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6534"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/calltoreason.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6534"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/calltoreason.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6534"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}