Normalizing Data – aka. comparing things
Once we have an idea of what we’re talking about, let’s figure out how we compare things.
Let’s say we want to compare two countries that are quite different in several aspects. If we want to compare their GDPs, for example, we can do so, but it will not tell us anything useful. If, for example, one country is very big and another is very small, the bigger will have the higher GDP. Does that mean it’s more productive? No. We’ll have to compare them on equal footing. Usually this is done using something that tells us how big a country is; in countries, that’s often population.
To compare productivity, we can divide the GDP by the population. This is called normalization. Now we can compare the GDP per capita. This is so commonly done that you will probably have heard of this indicator.
Another way of normalizing values is to use percentages. For example, if you want to compare what countries spend on health, it is great to normalize this by the GDP (e.g. to say this country spends a relatively great amount on health, whereas this other country doesn’t). Or think of elections: we commonly encounter percentages there (e.g. we calculate how many people voted for party A and divide this by the number of valid votes).
