Art of Data Interpretation

Mark Tuminello CanadaWhat happens when a single government has two federal departments using the same economic numbers and come up with completely different analysis?

This is what happened in Canada this weekend. In October, specialists at Employment and Social Development Canada interpreted financial numbers and concluded that the middle class in Canada are in serious trouble. They even called the idea of the ‘Canadian Dream’ a myth.

It wasn’t good news for the country, who is dealing with similar economic woes as their friends to their south. Opposition parties looking to cash in on some new government seats jumped on the analysis, pointing out that some real change is needed if the middle class hopes to ever come out of the recession in one piece.

But along the way, many cabinet ministers dismissed the reports, calling them misleading.

Nearly a year later, Finance Canada has come up with their own analysis of the same numbers, which actually paints a very positive picture of the state of the middle class in Canada. They even go so far as to say that once they control for the changing composition of Canadian families, income has actually grown significantly since the seventies.

From the outside, it’s hard not to see this as anything more than political parties trying to score points before a federal election, which is coming up in a year in Canada.

But when it comes to finance and economics, there’s often more than one way to skin a cat. Getting raw data requires technical skill and precision. What is done with that data is another story. Interpreting data is an art, and a flawed one at that. How does one separate their strongly held political or social beliefs when interpreting the national economy.

In the world of finance, it’s considerably easier to avoid being 100% incorrect about assumptions or theories…but the art of the work is still fragile.

Consider the complexity of the findings of the Canadian data. One report notes that wages haven’t risen much in the past few decades, and that means families are struggling to keep up with inflation. The other report notes that the major influx of women in the labor force, continually rising since the seventies, more than made up for the stagnant wages, with more families earning more on the household level.

While there are often two ways to look at data, there is sometimes a an incentive to skew analysis toward your own benefit. That accusation is being thrown around in Canada at the moment. The incentives are there to cherry-pick data – the question is whether the reports were truly filed in good faith.

It seems the thing to do now would be to send the data to third-party organizations in the hopes of getting an unbiased perspective. Or maybe they’ll choose another federal department…

from Mark Tuminello – latest post by Mark Tuminello

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