The Idiocy in Standard and Poor’s Method of Quantifying the Quality of the American Economy

From “AAA” to “AA+” for the Average Citizen: Who Was Their Audience?

Let the Scales Fall from Their Eyes. The Emotional Content in Standard and Poor’s Ratings Outweighs Its Utility for Trade

Colbert: “Freakout Mode!

“AAA” That’s where our credit-worthiness used to stand.

Now it is “AA+” Is there an “AA-“?

What is that little flourish on the end, that “+” ? It’s like a Momma’s afterthought to mitigate in some small way her harsh treatment of her misbehaving son. Or is there really a meaningful and significant difference between the “+” and the missing “A”?

The raters seem to be examining in an extremely minute way, sort of microscopic analysis. They concluded with the slap of a ruler on the upturned palm of, oh, let’s say—— the President!

This is the truth I derive. There is no quantitative definition of the meaning in the symbolism of trading an “A” for a “+”. The import of the rating system is wholly nondescriptive and emotional. What is the verbal equivalent (operational definition!) of “AAAA, of “AAA”, etc.? How is any citizen to take the measure of that rating? Feel bad about your country’s economic system? “Better yet,” they will imply, “feel bad about Pres. Obama’s presidency because we raters do not think he is the President for us (I’ve heard that charge) and he has caused the nation to droop economically; therefore, to that extent, spank him by taking away an “A” and substitute a “+”, and let those symbols speak for themselves. We are confident that that symbolic SPANKING will receive no explanation about what lies behind it in the mass media. There will be emotion, which will redound to the President’s stewardship of the economy.”

Nearly everyone is intimately familiar with this scale: A = Excellent; B = Good; C = Average; D = Poor; F = Failure, having earned an overall average grade to be stuck on their foreheads and been thus branded for life with that rating. Deportment was also graded, at times. Some are familiar with the conversion of the grades to percentages. Kids then thought of themselves in the terms of their grades. “I’m a ‘B’ student.” Or, “I am only 80% good.” It is a form of cattle-branding. Pres. Obama himself branded the U.S.: “We are a triple ‘A’ nation!” Or words to that effect.

(DIGRESSION: Actually, most grades are paper-pencil-test, short-answer grades. Some element in them is not a teacher’s estimation. Seldom do teachers trot out a list of behavioral objectives, the true touchstones by which learners ought to be judged, a more difficult but substantialy more valid and reliable assessment system.

(Ask a teacher to be accountable for a grade assigned; you will get their ultimate bases for a grade given. You will have asked a very interesting question, but expect some curious answers.)

Ask the raters of the credit-worthiness of a national economy the same question. Ask them to explain the grade to the nation, to OUR satisfaction, not THEIRS, without any journalist go-between. I watch the news as much as anybody, or perhaps more than the norm. I am not satisfied that I have heard that disquisition.

I am no math whiz. I have a basic understanding of statistics of probability, self- and on-the-job taught. However, there does not seem to be any aspect of “PROBABILITY” in the grade given by the S&P people, with a stated margin of error, and a more tentative judgment implied. No, the S&P statement and its grading-form was an ABSOLUTE, SUMMARY judgment, with the certainty of a judge’s verdict of “GUILTY!” with no scale possible. There are scales of judgment. There are several types of scales, for measuring different things. There are more exacting measurements and there are more subjective measurements.

However, I can appreciate good explanations of rating scales. There are these four basic scales:

  • nominal scale (categorical values);
  • ordinal scale (rank ordering values);
  • interval scales(units of measurement, like the temperature as a referant to absolute zero) anchored on some absolute foundation;
  • and ratio scales, the distinguishing feature of a ratio scale being the possession of a non-arbitrary zero value. (I always thought of the piano keys and the tones played as being something of a ratio scale in the vibrations that made the sound. Please correct me if I am wrong. On that and on any of the others, too.)

What rating scale did Standard & Poor use?

“Rate how you feel right now on a scale of one to ten, ‘one’ being ‘dead’ and ‘ten’ being ‘top of the world infallible and unconquerable'”. That is a rather subjective, ordinal scale, ordering your feelings about yourself, from “dead” to “most lively”. That scale is good for you but it needs to be researched for validity: are you measuring what you think you are measuring? Then it must be standardized if you want to use the same scale to take the measure of everyone in your extended family, in order to get the conclusion that “we are a sickly bunch”; compared to what? So ask the family next door. Turns out “they are a robust bunch” if they were to be submitted to the same measure.

Talking about scales, in general, is a good exercise in checking yourself for reliable and unreliable ways of thinking in everyday life. About all sorts of measures in all sorts of contexts. I believe. They make you think about what you know and how you know it.

Art is long, and that is the art of science. In fact, a philosopher once said that the final tuft and essence of science is art. (Alfred North Whitehead?) I am sure when Einstein played the violin, he heard the mathmatics of the harmonic scales over the octaves in the notes he played. Or something like that.

In something so important as a nation’s economic status, we get a rating slapped on us collectively.

In such a way as to achieve Colbert’s epithet. Not through cool understanding.

Part of the idiocy in Standard and Poor’s method of quantifying the quality of the American economy is their lack of follow-up for the average citizen; they did not communicate their decision. Who was the real audience? I believe that they had a responsibility to the public at large. They might have flooded the popular media with guest commentary and should not have missed any of the multitude of outlets with explanations in laymen’s terms.

This essay was tough for me to write. I simply have questions, but I do not know how to ask them.

Concise explications welcome.


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2 CommentsLeave a comment

  1. Why is it I at all times feel like you do?
    [JFD: It’s the genius of insight which is absolute. More people could find that wavelength if they worked hard at mental challenges, studied hard, and long, and…well it’s a whole syndrome of…stuff.]

  2. There is noticeably a bundle to know about this. I assume you made certain nice points in features also.

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