Thursday, 12 March 2009

The US$500 million maths error!

You’ve got to be careful when doing maths. One little mistake and the answer ain’t right. This is because maths isn’t like some other disciplines where you can get away with making some mistakes; you are either right or wrong. There is no such thing as “nearly right” or “mostly right”. It’s everything, or nothing.

And if you don’t believe me, just ask the guys at the US Energy Department (DOE) who did the maths for the FutureGen clean coal project – their estimate was out by an incredible US$500 million!!!

The DOE mistakenly said the plant had doubled in price to $1.8 billion, prompting the Bush administration to dump the project after investing $170 million in it, according to a report from the U.S. Government Accountability Office.

And what was the reason for their error?

Inflation!

In dismissing the project, former Secretary of Energy Sam Bodman inaccurately compared 2005 constant dollars, or dollars that reflect the purchasing power of money in 2005, with inflated dollars that would have been spent over the following years, according to the report.

And when you think that even the man on the street understands the time concept of money, it’s almost unbelievable that the DOE could make such an incredible mistake.

And the error also goes to show that education is not everything. After all, most of the people at the DOE doing the calculations had probably graduated from “reputable” universities with “good” degrees. Educated they may be. Educated idiots.

….now a coffee costs one buck today and inflation is expected to run at 5 percent.

So how much will the coffee cost next year?

Yep, that’s right: US$1.05.

So, is it more expensive?

Not in real terms stupid!

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