Dealing with Big Numbers

People have difficulty comprehending what large numbers mean (and percentages, as we know from behavioral economics). Over at The Big Picture Barry Ritholtz presents a good method for explaining the meaning of numbers to people by putting them in relative terms. This is similar to what we do when we say (2 out of every 5 people instead of 40% of people). I’ll probably expand my use of this technique.

For obvious reasons, many people have difficulty relating to astronomical numbers. A trillion is beyond comprehension for most folks, even a billion does not compute. But a million dollars is something that is comprehensible.

Hence, someone can easily grok a $20 million expenditure as “large”, but a $14 trillion economy is simply beyond their ability to comprehend.

Clark Taylor put it even more simply on Twitter: Let’s compare the $4Tril to a person’s $50k annual income. $4Tril is to $20Mil as $50,000 is to $1.

That puts it in terms easily understood by anyone.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s