Rounding Errors

Just a quick note on language, but I noticed a number of deal critics throughout the day refer to the bailout package as involving “nearly $1 trillion.” I’m outraged, too, but you need to be careful when rounding very large numbers. If somebody was trying to sell you a $7 hamburger, you might get upset and complain that it cost “nearly $10” but you certainly wouldn’t complain that it cost “nearly $300 billion.” And yet, $7 is closer to $300 billion than $700 billion is to $1 trillion.

Now obviously rounding $700 billion up to $1 trillion isn’t as bad as rounding $7 up to $300 billion — orders of magnitude count for something. But actual quantities actually count for something, too. It’s not a good idea to wave hundreds of billions of dollars away as a shorthand.