The Median vs. the Mean in the Age of Average
ALEX CHADWICK, host:
The U.S. economy has experienced 18 straight quarters of growth and unemployment's very low, so the question a lot of politicians are asking the average American is why aren't you happier? NPR's Mike Pesca reports the problem with discussing that kind of economic data might be with the whole concept of average American.
MIKE PESCA reporting:
A few months ago, I was reporting a story which asked why aren't the president and Republicans in Congress getting credit for a roaring economy? I put it to Princeton economist and former Federal Reserve Vice-chairman Alan Blinder.
Mr. ALAN BLINDER (Princeton Economist and Former Federal Reserve Vice-chairman): The relative prosperity that we've been experiencing for the last couple of years has been very unequally shared. So the average American - the typical American - is not matching the statistical average is the right way to put it.
PESCA: The median is different from the mean.
Mr. BLINDER: Oh yes, I didn't think we were allowed to say that on NPR, yes.
(Soundbite of laughter)
PESCA: Well, you're allowed to say it, but the risk is that a lot of people will think mean, median, uh-oh, you're about to get into the deep economic mumbo-jumbo.
So here's what the median means. It's the number in the middle. The mean is the fancier word for the average. If 11 chickens lay a total of 220 eggs, that's all you need to know. The mean is 20 eggs per chicken.
The median, however, is the middle chicken, chicken number 6 in this case. Five chickens are more prodigious egg-layers, five less. When you talk to an economist, one example frequently comes up to explain why average or per capita income can be a misleading statistic.
Charles Whelan is a University of Chicago professor of economics and author of The Naked Economist.
Professor CHARLES WHELAN (Economics, University of Chicago; Author): If you're in a bar and everybody in that bar has an income of $18,000 a year, and Bill Gates walks in to ask for directions, what happens to the average income in the bar? Well, it goes from $18,000 to, you know, $35 billion or something like that. And then you ask, all right, well why don't the people in the bar feel richer? Well, because none of their incomes has changed at all.
PESCA: But the median in the bar remains the same. The guy in the middle circumstances don't change unless the next round of kamikazes are subsidized by the Bill and Melinda Gates Foundation.
The average income persists as the economic statistic de jour because it's easy to calculate, but also because it used to track more closely with the median than it does today according to Dan Gross, who writes Slate.com's Moneybox.
Mr. DAN GROSS (Writer, Slate.com): In the ‘90s, you had the means going up in terms of income and net worth, and you had the medians going up at the same time, especially in the latter half of the decade. Everybody was getting rich in the stock market, and the top were doing extraordinarily well, incredibly well. But the people in the middle and toward the bottom were also seeing their median incomes rise.
PESCA: But today, median incomes are flat. In the 21st century, the rising tide which JFK referred to has helped yachts much more than dinghies. Corporate profits are increasing, but corporations are also keeping more of their profits, and politicians still talk about the overall economy and average incomes.
Now it may be that they're citing the most self-serving statistics, or it may be that incumbent politicians assume they should automatically get credit for a rising overall economy like they always have.
But Charles Whelan of the University of Chicago points to another phenomenon. He says it's easier to talk about an increasing overall economy because it's easier for policies to increase the economy than it is to increase the middle guy's share.
Prof. WHELAN: Whether it's the Michael Jordans of athletics, whether it's the Steve Jobs of electronics - those folks are going to take care of themselves, then they're going to pull the mean up with them, the mean being the average.
If you want to say, all right, now what can I do about folks who have a high school degree? Well, that's a lot tougher. You're going to have to start dealing with school reform, perhaps modify the welfare programs to create different kinds of incentives.
PESCA: And messing with social programs in the tax code is probably a lot less palatable to your average politician than asking Bill Gates to conduct a transcontinental bar crawl. Mike Pesca, NPR News, New York.
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CHADWICK: DAY TO DAY is a production of NPR News with contributions from Slate.com. I'm Alex Chadwick.
NOAH ADAMS, host:
And I'm Noah Adams.
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