Why this is chapter one
Almost every quantity in economics is a ratio: elasticity, marginal cost, growth, productivity. But most of us learned ratios through one narrow example — a proportion, some part of a whole, a slice of pie. That picture quietly installs a rule that isn't true: that the number has to sit between 0 and 1.
So the chapter breaks that rule on purpose. Compare the sugar in a banana to the sugar in an apple
and the banana comes out at 1.17. Above one. If "1" meant the whole thing, that
number would be nonsense. It isn't nonsense — it just means a ratio was never a share of
anything. It's a comparison index.
The payoff arrives quietly, and it's the reason this chapter has to come first: once you have a comparison index, you no longer need the absolute sizes. We never learn how many grams of sugar are in either fruit. We never need to. That habit is exactly what makes the next chapter possible, where the two things being compared are too small to see at all.
Chapters in the video
- 0:00What a ratio actually says
- —Percentages are the same idea, scaled to 100
- —Why a ratio needn't be part of a whole
- —Reading a road sign: 40% is rise over run
Read it instead
The written version of this chapter: a ratio isn't a slice of a whole — why a percentage is allowed to pass 100%, and what separates a ratio from a proportion.
The road-sign corner has its own page too: slope and angle aren't the same number.