Yet this same measure, this average (mean) is often used to analyze economic policy and wealth, to see what effect it's having on the ordinary person, the so-called "average" person. Unfortunately, this is usually done by using the mean average, rather than the median average.
To use an extreme example, if ten people have exactly the same income, say $30,000 annually, but a change in economic policy results in just one person whose income zooms to $330,000 annually, but the rest remains the same, then policy-makers can claim that their policy was successful, as the average income doubled! Sure, great for the one guy, but the lot of the nine others hasn't changed at all. Successful policy? Or not?
A mean average can hide a multitude of sins. As Wikipedia says about a mean average ...
"It is used for many purposes and may be abused by using it to describe skewed distributions, with highly misleading results."A much better but under-used measure for these sorts of things is, in my opinion, the median average. The median measures what change occurred for the very middle value of any array. In this case, it would show that a $30,000 annual income was still the normal value here. It definitely shows how the policy hasn't really changed the lot of the ordinary person.
So the next time you hear a news report claiming that the average (mean) has moved this way or that, ask the question - "But, what has happened to the median?" And maybe even fire them off an email. And make sure you ask the same of your politicians, and public bureaucrats. It can even be useful in your personal investing. It'll lead to better answers everywhere!
Jay Walker - Raising the Median!
The Confused Capitalist