Rule of Thumb of the Day


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!

DOES IT FEEL LIKE POLITICS IS AT A BREAKING POINT?

Headshot of Editor in Chief of Mother Jones, Clara Jeffery

It sure feels that way to me, and here at Mother Jones, we’ve been thinking a lot about what journalism needs to do differently, and how we can have the biggest impact.

We kept coming back to one word: corruption. Democracy and the rule of law being undermined by those with wealth and power for their own gain. So we're launching an ambitious Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption, and asking the MoJo community to help crowdfund it.

We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We want to dig into the forces and decisions that have allowed massive conflicts of interest, influence peddling, and win-at-all-costs politics to flourish.

It's unlike anything we've done, and we have seed funding to get started, but we're looking to raise $500,000 from readers by July when we'll be making key budgeting decisions—and the more resources we have by then, the deeper we can dig. If our plan sounds good to you, please help kickstart it with a tax-deductible donation today.

Thanks for reading—whether or not you can pitch in today, or ever, I'm glad you're with us.

Signed by Clara Jeffery

Clara Jeffery, Editor-in-Chief

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight 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

Share your feedback: We’re planning to launch a new version of the comments section. Help us test it.