Benford’s Law – or how to falsify data
I caught this last night on Digg.com and it absolutely amazed me. Apparently the frequency of the number ’1′ can be used with great reliability to detect fraud, embezzlers, tax evaders, sloppy accountants, and much more.
It’s all based around the fact that many things really aren’t random. The late Dr. Frank Benford noticed that books full of logarithms were a lot more worn on the pages that started with 1. According to Dr. Benford’s research:
In a huge assortment of number sequences — random samples from a day’s stock quotations, a tournament’s tennis scores, the numbers on the front page of The New York Times, the populations of towns, electricity bills in the Solomon Islands, the molecular weights of compounds the half-lives of radioactive atoms and much more — this is not so.
Given a string of at least four numbers sampled from one or more of these sets of data, the chance that the first digit will be 1 is not one in nine, as many people would imagine; according to Benford’s Law, it is 30.1 percent, or nearly one in three. The chance that the first number in the string will be 2 is only 17.6 percent, and the probabilities that successive numbers will be the first digit decline smoothly up to 9, which has only a 4.6 percent chance.
It’s a good read.. and with tax season coming up, it might be very useful information.
