Open thread June 12, 2012 Dan Crawford | June 12, 2012 6:40 am Tags: open thread Comments (2) | Digg Facebook Twitter |
let me explain my latest cognitive failure…
last week i reported on the 1st quarter “Flow of Funds” report from the Fed; it’s a 134pp PDF and its pretty much all statistics; more than i wanted to get into so i just summarized media reports…most of the media coverage focused on the big jump of $2.8 trillion in household net worth in the quarter, the most in over seven years, which was mostly due to the increase in stock prices over the quarter; & everyone quoted the total household net worth as $62.9 trillion…i did a quick calc and commented that was about $200,000 per capita, & that most of us didnt get our share…
then this week there’s been another widely reported Fed release; Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances; and a commonly cited figure from that report was the near 40% decline in median family net wealth to $77,300…but in my normal stupor, i wondered why so different than the $200K i had figured; so i wrote the Fed staff responsible for that report & pointed out what i thought was a discrepancy; what follows is the response i received:
Dear SCF User,
Okay, I think I see the issue.
So, when you divided $62.9 trillion by the population of the US (I assume you used about 300 million people), and got your roughly $200,000 net worth per person, you are actually calculating a mean or average value. But the $77300 value you compared this to is a median, so we’re comparing two different things. The mean net worth from the survey is actually $498,800 in 2010.
Now, this value is much greater than the $200,000 value you calculated, but this can be accounted for by the fact that the $200,000 value is per person, while the $498,800 value is per household. The average household size in the SCF for 2010 is 2.63, which would indicate that these values are about equivalent.
Here’s another way to look at it: The number of families represented by the SCF is 117.6 million, and the mean net worth is $498,800. Multiplying these together, the aggregate would be $58,658,880,000,000, which is close to the $62.9 trillion from flow of funds.
For more information, please consult the Bulletin Article: http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf
be not ashamed. life is complex and we often miss the critical detail. it is good that you were able to find someone to explain it to you, and that you understand the error.
most people never get that far.