Tuesday, January 10, 2012

Extracting the Correct Mean(ing) From the Data

We've all taken, and/or taught, an introductory course in descriptive statistics where we encounter measures of "central tendency", variability, summarizing grouped data, and so on. In such courses students are usually told about three ways of calculating the mean, or average, of a sample. These are the Arithmetic Mean, Geometric Mean, and Harmonic Mean. In my experience, economists often fail to use the most appropriate of these three measures. I think this is because often we don't provide enough motivation and explanation in those introductory courses.