Monday, March 18, 2013
The Second Heat Wave
It was quite a few summers ago. I remember the headlines about a terrible heat wave in a major city, possibly Chicago. The reporters were going on and on about the number of elderly people who died due to the heat. What a tragedy it was! They made a point to call out the mayor and his team, decrying how irresponsible it was that they were not prepared for the heat wave and how they should be held accountable for those deaths. The mayor made public announcements and apologies declaring how personally upset he was at the tragedy and how he and his department heads would be taking immediate steps to ensure nothing similar happened in the future. The weather cooled. The press had gotten the desired response, both in terms of promised action and attention from the public. Things went back to normal.
Several weeks later a second heat wave struck the same city. This time the press was happy to report that the number of deaths among the elderly was much lower. The mayor and his staff took bows and patted each other on the backs over how effective their quick response was in allaying the problem, avoiding a second tragedy of the same proportions. The weather cooled, and things went back to normal.
No one asked the important question. No one pointed out that it was probably the most fragile of the elderly that died in the first heat wave. The only elderly left when the second heat wave struck were the ones who had survived the first. What actions did the mayor take? Were those actions really effective (and proper use of taxpayer money) or was the difference driven primarily by the fact that the first heat wave had already reduced the population of vulnerable elderly?
Keeping in mind the case of the second heat wave, I tend to question such headlines as: “Sharp Drop in US Homes Lost to Foreclosure in Feb.” It sounds like good news, but I need more information. Foreclosures may be 11% lower than January, but one data point does not constitute a trend. They may be 29% lower than February of last year, but is that the sign of real economic progress or is it just the same situation as the second heat wave? Isn't it reasonable to expect foreclosures to be lower after so many earlier foreclosures during the years of the housing crisis?
The same applies to new job numbers, auto sales, housing starts and many other economic statistics reported to us every day where numbers are compared to last month or last year, but reference to what is considered normal or strong performance is omitted. Read headlines such as these carefully. It is easy to be misled when we don’t really understand the baseline from which we are measuring. The numbers may represent real progress, or it may be like the second heat wave, perceived improvement due to a changed environment.