I enjoyed immensely the $1,000,000,000,000 headline in the Guardian yesterday, being ‘an estimate’ of the negative impact of a Greek exit from the Euro leading to a collapse of the single currency. What made it so attractive was the delight with which the Guardian decided to throw around a really really really big number like a trillion. Yes, a trillion dollars is a lot of money and don’t we know it.
But do we. Although this makes a brilliant headline, what is a trillion dollars and what does it mean anyway? It is often difficult to know. Sometimes politicians and the media seem to get upset when somebody spends £10,000 too much, contrasting with the times that they believe that £10 million is not very much at all. Not to mention the times when even billions of pounds can be ‘minor adjustments’, or at least it seems that way when it comes to defence procurement!
I personally believe that explaining economic news is a key failing of the media, whose role to inform seems to suddenly disappear when a large number comes in sight, to be replaced by general awe of the largeness of the number and the repetion of poorly understood economic jargon. That it is not to say that it can’t be difficult at times in terms of the complexities of real life, and sometimes it may be appropriate to just give us the numbers and let us, as readers, work it out for ourselves – for example in science stories, where numbers often are extremely big or vanishingly small and should stay that way. However, I do think the media could do a better job in explaining large numbers and putting them in context in stories that directly affect our lives, such as with economic news.
For example – take our $1 trillion story above – a very big number indeed and extremely worrying to us about to be poorer Europeans. But what does that mean? In the article it explains that is the potential impact to European Union GDP*, but for many people GDP is a technical economic term that removes this whole debate from our real lives, just as if this was a story about the number of grains of sand on Mars.
But I believe most of us would benefit from this being put into some context. In this instance, we could scale this extremely large number down to something more understandable, by converting it into a per month per capita number. So, with an estimated population of 500 million in the EU, the $1 trillion can be converted into a something easier to grasp – in this case £105 per person per month. Combine that with informing us that average economic activity per person in the EU is in the order of £1,875 per month and I believe we are now in a position to assess the import of this news story in terms that we can relate to.
Clearly, averaging numbers shouldn’t be a substitute for the actual number being discussed – in the case $1 trillion is a big number and so we shouldn’t replace it completely with a contextualised average. After all, the impact of £105 on one individual on one occasion is very different to the impact of the same amount on economic activity for every man, women and child each and every month, and so the total impact is important to our understanding. In addition, averages are just that – some people will be impacted by much more and some people by much less.
However, having stressed that it is right to be cautious with using averages to help us understand the impact of very big numbers, I still think it is helpful to understand in understanding what a news story is saying. $1 trillion is a meaningless amount to most of us and so this news just adds to the tale of woe narrative that currently surrounds the Euro at the moment. But when you explain that it means that the overall economic pie is potentially going to reduce by £105 per person per month across Europe, people can understand that this is important (£105 more or less per month would have an impact on most people), but also have some context for whether this is as really catastrophic as the headline makes it sound, or merely just ‘really bad’.
So this is not a call to get rid of scarily big numbers – we definitely need to be told about the billions or trillions. But what I am calling for is some help in putting such numbers into context – so that we can hopefully make some sense out of it all
So, you ‘media’ folks – how about it?
* The Guardian article as published referred to Eurozone GDP, however, this appears to be a mistake and I believe that they meant to refer to European Union GDP. I have therefore used European Union GDP for the purposes of this post.