The risks of imprecision

When being half-right can be worse than being wrong.

Chris Dillow has a nice post up, "in praise of imprecision". He argues that, in far too many situations, we argue over tiny differences in estimates when the overall answer is basically known. What's GDP growth for last year? It's basically flat. Yet for all the arguments, you would think that the difference between -0.3 and -0.1 per cent – or even between -0.1 and 0.1 – was the difference between life and death.

He illustrates this with a few neat little guesstimates. For instance:

How much does welfare scrounging cost the economy? Guesstimate the number of scroungers. Guesstimate the value-added they'd contribute if they were working. Express as a proportion of GDP. For plausible values, it's a small number.

Or:

What impact will the small uprating in the minimum wage have on jobs? The adult rate will rise by 1.9%. Economists forecast inflation this year of 2.5%, so this is roughly a 0.6% real fall. Let's call the price-elasticity of demand for labour 1.5. The Low Pay Commission estimates (pdf) that 5.3% of jobs are around minimum wage ones. Multiply these three numbers together and we get 0.048%. Multiply by the number of jobs in the economy (29.73m) and we have roughly 14,000.That's roughly one-eleventh of the sampling variability of employment figures.

It's worth pointing out that the same idea has been applied pretty consistently to the claim that families with three generations of worklessness are a public policy problem. We don't know how many there are – and nor does the government, we now know – but study after study has suggested that the number is tiny.

There are only 15,000 households with two generations which have never worked, and a third of them are because the younger generation left full time education within the last year. On top of that, less than 1 per cent of young people have never worked by the age of 29, so the younger generation is normally the one most likely to pull a family out of worklessness. Whatever the number is, in other words, it's really, really small.

But it's important to note the downside to imprecision. The way common knowledge is disproved is rarely through wholesale upheaval. Instead, it's a gradual process of refinement: new estimates are put out, slightly lower than the old ones; then lower estimates still; and they get steadily lower, until suddenly you realise that the conventional wisdom was wrong.

It's a lot harder to turn an estimate of "recession" into an estimate of "growth" through gradual refinement than it is to turn an estimate of "-0.3 per cent" into one of "0.5 per cent". So there's more of a danger that we'll be stuck with half-truths.

But with that danger in mind, the absence of accepted imprecision is still keenly felt in Whitehall. Too frequently, "no statistics" is used to imply "we have no idea of the magnitude of this problem" – but that's not true. We actually know quite a lot, albeit imprecisely. The trick is acting on it.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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