Anyone who cannot cope with mathematics is not fully human. At best he is a tolerable subhuman who has learned to wear shoes, bathe, and not make messes in the house.
-- Robert Heinlein, Time Enough for Love
Twenty years ago, the all-around scientific genius Douglas Hofstadter coined the term "innumeracy" to describe an ignorance of mathematics. To emphasize the personal and social consequences of innumeracy, he labeled it "the mathematical counterpart of illiteracy."
A failure to understand simple statistics may cause us to draw crazy conclusions from firm facts. For example: In the 1927 season, Babe Ruth hit an astonishing 60 home runs -- far outstripping any other Major League Baseball player in history. The next year, he hit a merely spectacular 54 round-trippers -- a 10 percent decline. Compare the Babe's performance with that of Washington Senator (the team, not the elected rep from the Evergreen State) Samuel Filmore West (the outfielder, not the famous Frisco concert hall). In 1931, West hit six four-baggers, 100 percent more than the three he'd managed the year before.
It would be absurd to claim that West's 100 percent increase made him a better home run hitter than Ruth with his 10 percent decrease. Yet this sort of irrational thinking can wreak havoc in our everyday lives.
Take the stock market, which lost around 50 percent of its value between October, 2007 and March, 2009. It has since posted a 50 percent gain, which is a fine thing. But if you think that evens things up -- and are ready to buy or sell on that basis -- check your 401K first. You're probably still 25 percent down.
A lack of a modicum of math savvy can be dangerous at all levels of financial decision-making. Too many consumers don't calculate the huge late fees on top of usurious interest penalties for credit card payments that are even one day late. Business owners leveraged to the hilt often pay little attention to their long term debt until revenues crumble and they can't make their interest payments, let alone operating expenses. And as for the immensity of our budget deficit -- a surplus when "W" took office but currently weighing in at over a trillion dollars -- and national debt -- now around twelve trillion -- how many are more than dimly aware of the meaning of these numbers, let alone the potential consequences of letting them get so out of hand?
Innumeracy also threatens to distort the way we perceive this phase of our economic crisis, with observers trumpeting statistics that, at best, indicate slight improvement from last year's debacle.
A recent Newsweek cover blared, "The Recession Is Over." But all that would mean -- even if it were true -- is that the economy has stopped contracting. According to the New York Times, "The Commerce Department reported that home sales rose 11 percent in June, an increase that dwarfed economists' expectations." But, the story went on, "it's also true that despite this monthly increase, sales of new homes were still down 21 percent from June 2008." And June 2008 sucked!
A bit more economic optimism is constructive, but you needn't be a math whiz to see that this is no time for celebration. Those less-horrendous stats are slippery little devils subject to revision. In the sobering blog entry "Deeper Than We Thought," New York Times chief financial correspondent Floyd Norris concluded on Friday -- on the basis of recently revised government reports -- that, "In general, the things we thought were bad turn out to have been worse."
Compulsive gamblers will tell you -- and neuroscience has shown -- that no matter how low their fortunes sink, the slightest uptick gets those endorphins flowing and sends rationality packing. A couple of tiny wins and it's time to double down because -- even though they're still almost broke -- they're "on a roll" and can win back what's been lost, and more. The inexorable mathematical truth, though, is that there's only one gambling guarantee: do it long enough and you'll lose every dime.
Most people don't care about probabilities and statistics, or feel intimidated by percentages. Some even wear their innumeracy as a badge of pride, contrasting their own language skills or artistic talent with a dismissive, "I don't do math."
If your math gene is recessive, check out http://www.wolframalpha.com/ a new search engine that provides computational help on everything from mortgage rates to molecular weights.
If the idea of looking at a mortgage statement or credit card bill still makes you want to gag, don't despair. Albert Einstein had this advice for troubled innumerates: "Do not worry about your difficulties in mathematics; I assure you that mine are greater."