## Friday, October 17, 2008

### A Modest Proposal Concerning Percentages

Cherry-Pie Maths

First a confession: my mathematical ability is legendarily non-existent. An example: since I distinctly remember being taught that addition and multiplication are similar processes and subtraction is akin to division: it has never made sense to me that (according to one set of mathematical principles) one half divided by one half equals one quarter.

This is an example of what I fondly refer to as Cherry Pie Maths. If, in the above, you think of a half of something real, like a cherry pie, and multiply that by another half of something real, say another cherry pie, it is obvious that some of the pie has disappeared – with complete disregard for the Law of Conservation of Mass and Energy.

In my mathematical model one half times one half equals one. The cherry pie remains intact. Simple.

Mathematicians rant on about how, in this case, it is really one half of one half which equals one quarter. Interesting point – but I remain unconvinced. Perhaps this is why my conventional mathematical understanding is so legendarily suspect.

Which bring s me neatly to percentages. In the moment when the stock market is plunging like a herd of hippopotamuses , the credit crisis is biting like a cloud of ravenous mosquitoes and the inflation rate has assumed the stance of an early Chinese firework, each of the above being expressed as a percentage has become both misleading and in many cases downright unhelpful.

Why?

Consider this hypothetical situation: the rate of inflation in Zimbabwe suddenly comes under control. The price of a Zimbabwean loaf of bread at that moment is 1 million zimbabs (or whatever the currency in Harare is called). The new rate of inflation as measured as a percentage drops from 1000% to just one percent. Hooray!! Except that one percent of one million is 10 thousand. So the loaf of bread now costs one million ten thousand zimbabs. Sound like a bargain to you?

This fairly farcical example shows why percentages can be so misleading. So it is in the real work – discounting imaginary Zimbabwean currencies.

When you read that inflation has risen to 5% but is expected to fall back to 3% you may rejoice. You are being mislead. 5% of a large number is still a large number. That's my simple mathematical knowledge in action. When you read that the police have accepted a 2.5% pay rise it sounds small, but if the police are making 50,000 pounds a year, that 2.5% equals 1250 pounds or more than 100 pounds a month. If the dustmen, by contrast, manage to negotiate a 5% rise but only make 25,000 a year their actual cash benefit is exactly the same. The media would present the above as: Police Accept Moderate Pay-Rise and Bonanza on the Dustcarts – respectfully.

My first modest proposal. All pay rises are to be expressed in real terms, i.e. how much actual money is being earned.

My second modest proposal. Percentages will be banned from inflation figures. Inflation is only allowed to be expressed in real terms, I.e. last year the price of petrol was X and this year it is Y – the percentage increase is both misleading and irrelevant, so just leave it out.

My third modest proposal. Having achieved the above, we work diligently to eliminate percentages from the rest of society. No more 50% Off sales. If your TV used to be 1000 pounds (allegedly) and is now 500 just rejoice you bought it and ask yourself, “Should I pity the oick who actually paid 1000 for it?”

No more Reduced by 30% signs – 30% of what?

The possibilities are almost endless and actually rather satisfying!

Think about it. You know it makes sense. I'm sure Del Boy would approve.

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