Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Via Alex Tabarrok, a pair of researchers asked people how big the economy would be if it grew 5% a year for 25 years:

Only around 10–15% of the participants gave estimations between 50% less and 100% more than the true value…furthermore, the majority of the false estimations were systematically below the true value …which was underestimated by 88.9–92.1% of the participants.

Of course, this is actually a fairly tough calculation even if you’re mathematically inclined and understand the whole compound interest thing.  I guessed vaguely that 5% growth would produce a doubling in about 12 years, so the economy would quadruple in 25 years.  Wrong!  Turns out that doubling takes 14 years, so the answer isn’t 300%, it’s 238%.  But Alex made this worth my time by teaching me a new rule of thumb I hadn’t heard of before:

A good way of approximating is to use the rule of 70.  If x is the growth rate then the doubling time is approximately 70/x.  Thus, with a growth rate of 5% we expect a doubling (100% increase) in 14 years and a quadrupling in 28 years so a bit more than a tripling in 25 years (200% increase) is a good guess.

I love good rules of thumb, and this one makes me slightly more knowledgable than I was five minutes ago.  Thanks, blogosphere!

Fact:

Mother Jones was founded as a nonprofit in 1976 because we knew corporations and billionaires wouldn't fund the type of hard-hitting journalism we set out to do.

Today, reader support makes up about two-thirds of our budget, allows us to dig deep on stories that matter, and lets us keep our reporting free for everyone. If you value what you get from Mother Jones, please join us with a tax-deductible donation today so we can keep on doing the type of journalism 2024 demands.

payment methods

Fact:

Today, reader support makes up about two-thirds of our budget, allows us to dig deep on stories that matter, and lets us keep our reporting free for everyone. If you value what you get from Mother Jones, please join us with a tax-deductible donation today so we can keep on doing the type of journalism 2024 demands.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate