Math Skills and Public Policy

Math Skills and Public Policy

Math skills lie at the heart of understanding investments. If there is one thing I tell investment enthusiasists, it is to learn the mathematical models necessary to analyze an investment. Unfortunately, that advice is rarely followed. The aversion to “doing the numbers” is not confined to investing. It is a symptom of a more general problem that the media compounds by presenting public policy issues in terms of graphic images and flowery language while and leaving out the numbers. Such reporting may draw attention, just as splashy investment advice does, but as in the investment world it leads to muddled thinking.

Consider, for instance, the Black Lives Matter movement. I doubt that anyone would quarrel with the basic sentiment. What is odd is tying the sentiment to police shootings. Whether or not police shootings are a problem with the police or a problem with a violent society is a complex issue and one in which I have no expertise. But I do know numbers. As Heater MacDonald noted in her Wall Street Journal editorial, “Through July 9, 2,090 people have been shot this year in Chicago, including a 3-year-old boy shot on Father’s Day who will be paralyzed for life, an 11-year-old boy wounded on the Fourth of July, and a 4-year-old boy wounded last week.” A hugely disproportionate number of those victims and shooters were black. By comparison, there were 9 police shootings in the same time span. So if Black Lives Matter people are apparently protesting the wrong thing. But without the numbers who is to know. So when considering public policy, as when considering investments, start with the math. It may not give you the answer, but it will at least help you ask the right question.

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Bradford Cornell is an emeritus Professor of Financial Economics at the Anderson School of Management at UCLA. Prof. Cornell has taught courses on Applied Corporate Finance, Investment Banking, and Corporate Valuation. He is currently developing a new course on Climate Change, Energy and Finance. Professor Cornell has published more than 125 articles and four books on a wide variety of topics in applied finance. Professor Cornell is also a managing director at BRG where he heads the practice on Climate Change, Energy and Finance. In addition, he is a senior advisor to the Cornell Capital Group and to Rayliant Global Advisors. In both capacities, he provides advice on fundamental investment valuation.

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