On September 14th, 1752, the British Empire adopted the Gregorian calendar, skipping 11 days from September 2 to September 14 to align with most of Europe.
The Gregorian calendar was introduced by Pope Gregory XIII in 1582 to reform the Julian calendar, which had been in use since 45 BCE. Established by Julius Caesar, it set the year at 365.25 days, with a leap year every four years. However, the actual solar year is approximately 365.2422 days, causing the calendar to drift by about 11 minutes per year. Over centuries, this slight difference accumulated, leading to a discrepancy of about ten days by the 16th century. That calendar drift was causing issues with calculating important dates, particularly Easter, which was based on the vernal equinox. The Council of Trent (1545–1563) recognized the need for calendar reform to bring Easter back in line with the original date set by the First Council of Nicaea in 325. Pope Gregory XIII, with the help of astronomers and mathematicians, including Aloysius Lilius and Christopher Clavius, introduced a more accurate leap year system. A year is a leap year if divisible by 4, but century years (e.g., 1700, 1800) are only leap years if divisible by 400. This adjustment reduced the error to 1 day in about 3,300 years. The Gregorian calendar was initially adopted by Catholic countries such as Spain, Portugal, and Italy in 1582. Protestant and Orthodox countries were slower to adopt the change due to religious and political reasons. Russia did not switch until after the Russian Revolution of 1918, and Greece only adopted it in 1923. Over time, the Gregorian calendar became the international standard for civil use. However, some religious communities still follow other calendars for liturgical purposes (e.g., the Hebrew, Islamic, and Orthodox Julian calendars). Today, the Gregorian calendar is widely used worldwide for secular purposes, and it remains the most accurate long-term calendar system in use.
Last week, we had a significant adjustment to the annual employment data in the United States, and those who didn’t follow the data collection methodology closely decried the discrepancy. Using the Gregorian calendar as an example, here are several lessons for the Modern Investor regarding statistical sampling in government data:
Reports are a representation of reality, but they are not reality. Just as the Gregorian calendar was introduced to more accurately represent the true length of the solar year (365.2422 days), statistical sampling in government data aims to accurately reflect and predict the population or phenomenon being studied. Inaccurate data collection methods, similar to the inaccuracies of the Julian calendar, can lead to long-term drift or bias in results. It happens all the time. The details matter. Yet many economic statistics are published based on the presumption that one-third of the data is enough to predict all of it. For instance, Gross Domestic Product (GDP), the market value of goods and services produced within the country, is used to measure our overall all economic growth or contraction. Three estimates are provided each quarter for GDP; the advance estimate only contains data for the first month, while the other two are inferred using statistical means. Likewise, after two months, the third month is extrapolated, and the first estimate is struck from the record. Even after the quarter concludes, there are revisions years later due to data that is deduced at first and replaced later with real figures. So GDP, like the employment figures, is both closely watched and subject to significant revisions, which is not a great combination.
Statisticians attempt to balance simplicity with precision, never achieving either. The Gregorian calendar's leap year rule balances simplicity (a leap year every four years) and precision (skipping specific century years), making it more accurate and more usable but still slightly flawed. Government statisticians have limited resources, so their efforts will never be perfect either. Don’t give too much weight to initial impressions.
The delays can be dangerous. The Gregorian calendar took centuries to be adopted globally, leading to misalignments in international schedules. Similarly, when agencies inevitably delay updating their statistical data, it can lead to real-world discrepancies and confusion for investors. Remember, the initial picture is only the initial picture, and you need to make sure the ensuing revisions are on your calendar.
The biases build up over time. The Gregorian reform corrected a long-standing bias in the Julian calendar, which accumulated over centuries. Similarly, in government data, improper or outdated sampling methods can lead to biases in the data that may accumulate over time. Initial biases in recent employment reports seem to be initially on the upside, and then to moderate as data accrues. Understanding these biases can help you properly weigh the impact of imperfect data.
You must adjust for rare events. The Gregorian calendar introduced adjustments for leap years (and century years) to handle the complexity of the Earth's orbit. In statistical sampling, rare events or outliers may need special consideration, as these can skew results if not accounted for. Statisticians develop sampling methods that can appropriately account for rare but impactful occurrences in the data. But it can take some time. So, it is good practice for those evaluating data to know about things like colder-than-normal winter months, striking workers, or supply chain disruptions.
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🎯Patrick Huey is a small business owner and the author of two books on history and finance as well as the highly-rated recently-released fictional work Hell: A Novel. As owner of Victory Independent Planning, LLC, Patrick works with families and non-profit organizations. He is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Advisor in Philanthropy® and an Accredited Tax Preparer. He earned a Bachelor’s degree in History from the University of Pittsburgh, and a Master of Business Administration from Arizona State University. Patrick previously served as a Naval Flight Officer from 1996-2005, earning the Strike Fighter Air Medal during combat operations and two Navy Achievement Medals.
👉🏻 Reach him at 877-234-8957 or schedule a time to talk using this link: https://live.vcita.com/site/VictoryIndependentPlanning/online-scheduling?service=qqnvdgx7ri5j5czq
