
In this week's More or Less: a Euro debt odyssey, the placebo effect and 70 years of...
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Tim Harford
Thanks for downloading the More or less podcast from BBC Radio 4. Here's Tim Harford.
Hello and welcome to More or Less, an island of numeracy in a world flooded with arts graduates. Later, we'll look back over 70 years of government social surveys.
Charlotte MacDonald
In 1941, the wartime social Survey Unit undertook a major study of women's undergarments. The reason? Steel. Britain needed to know how much metal was being used to support the country's women rather than the war effort, and
Tim Harford
will be investigating the placebo effect.
Professor Edzard Ernst
It was amazing. There were some patients who had been in wheelchairs for months or years and who started walking again. And we were seeing this with our own eyes and we just couldn't believe it.
Tim Harford
But first, you won't be surprised to hear that over the past few weeks, we've received a number of emails asking us to explain the problems in Greece and the European debt crisis and how, or perhaps if the Euro can survive. And, well, on More or Less, we're always looking for the perfect analogy to help clarify complicated things. And the European debt crisis is pretty complicated. The good news is that we think we've come up with exactly the right way to describe the whole sorry business as Homer's Odyssey. And the even better news is that Charlotte MacDonald is here to.
Charlotte MacDonald
Yes.
Tim Harford
So where should we start?
Well, let's start with the Trojan horse.
Sure.
Yep. So the original horse, great big hollow wooden statue, and inside the Trojan horse there's this Greek attack squad. And they are smuggled into the city of Troy.
And what has that got to do with the debt crisis?
Okay, bear with me. So this goes back to the late 1990s and the creation of the Eurozone. And the Greeks, they wanted to get into Troy. Now they want to get into the Eurozone. And to get into the walls of the Eurozone, the Greeks need to convince the European Union that. That they've met various troublesome rules about inflation and their deficit and government debt and so on.
These are rules about how much a country can borrow in any given year? That kind of thing?
That kind of thing, yeah. And the trouble is they're pretty hard to satisfy if you're an economy like Greece.
You're not suggesting that the Greeks managed to smuggle themselves into the Eurozone in a giant wooden horse?
Well, metaphorically, yeah, they kind of did. Instead of calling Odysseus, they called Goldman Sachs and they asked Goldman Sachs to structure this clever financial deal that put a lot of Greek borrowing off the books.
Was that illegal?
No, I think it was legal. It was Just cunning like Odysseus. And in any case it wasn't just Goldman Sachs. It's been reported there were all kinds of tricks that the Greek government were using to make their macroeconomic statistics look nice and trim and healthy.
And when was this discovered?
Well quite recently in late 2009, George Papandreou came to power in Greece and he announced this bad news. The Greek deficit wasn't 3.7% of GDP, which was pretty manageable as his predecessors had claimed. It was almost four times bigger. And that made Greece's debt look completely unsustainable too.
Didn't anybody notice?
Well, not many people it seems, which I guess is a bit like the Trojans. It always struck me the Trojans deserved a bit of the blame for the whole Trojan horse thing. I mean this wasn't actually the most subtle plan in history. And some people would say when it comes to the modern Trojan horse, the European statistics agency Eurostat could have been a bit sharper about finding out what was going on. And so perhaps should the banks who were lending all this money to Greece.
So I've got it. I think over a decade ago the Greeks smuggled themselves into the Eurozone inside a Trojan horse of off balance sheet accounting. And the crisis broke when people finally found out.
Exactly. So let's introduce our next character to the story. The Cyclops, the one eyed giant who trapped Odysseus men in a cave, planning to eat them for breakfast. Odysseus then stabbed the Cyclops in the eye with a red hot sharpened steak. Which has got to hurt.
But what have you got in mind for the modern day equivalent of a blind enraged colossus?
You have to ask. That's easy. The international bond market obviously. So think about how Odysseus escaped the Cyclops, unable to see, stood by the entrance to his cave and touched each of his giant sheep as they trotted out to graze. Now Odysseus cunningly again told his men to cling to the underside of the sheep and the Cyclops was unable to tell that the Greeks were sheltering under his livestock.
So is this analogy about countries sheltering under one currency by any chance?
You are absolutely right. It's a pretty good way to think about it. When different European countries had different currencies, investors charged much.
You mean the international bond markets?
Exactly. They charge much higher rates to the likes of Greece than they did to Germany simply because of the risk they were taking in lending money to the Greeks instead of the Germans.
That makes sense. So given the same interest Rates you'd lend to the Germans.
They're a safer bet.
Yeah, sure. So Greece had to pay more in interest if it wanted to attract lenders.
Exactly. And then comes the euro. And the euro acts like the giant sheep. So, clinging on beneath it, all these national governments, some of which were credit worthy and some of which were not, and yet the bond markets acted as though they were all pretty much the same.
And obviously they weren't all the same. All those reasons why you might have preferred to lend to Germany than to Greece were still there, weren't they?
Well, not all of them, but the big one was. And the big one was the risk that the Greeks wouldn't or couldn't pay back what they'd borrowed.
Professor George Freeman
And.
Tim Harford
But like the blind Cyclops casually touching the backs of his sheep, bondholders didn't seem to pay close enough attention to the fact that the risks of default hadn't gone away. They treated all these Eurozone countries very similarly, at least until a couple of years ago. And they lent money to Greece almost as cheaply as they'd done to Germany.
That seems incredibly stupid to treat different national governments the same just because they were all borrowing in euros. But fine, I get it. They were sheltering under the euro sheep and being only casually inspected by investors. But what happens next in the story?
Well, remember Circe?
I wouldn't go as far as saying I remember her, but I've certainly looked her up for this exercise.
Thank you. And you will then have found out that Circe invited Odysseus and the Greek sailors to a banquet on her island. And as the sailors gorged themselves on the food and drink, Circe transformed them into pigs. I think it's a metaphor. It's certainly evocative of what a lot of people think happened to Portugal, Ireland, Greece and Spain, often rather impertinently called the. Well, the pigs. The pigs.
Are you trying to say that these countries gorged themselves on cheap money?
Well, a lot of people think that certainly they had access to cheap money courtesy of the blind bond markets, and they used the money to get on with whatever they fancied getting on with. In the case of Ireland, it was a property boom. In the case of Greece, it was the Greek state running this large unacknowledged deficit.
So basically, the pig shorthand isn't very flattering.
Well, it isn't. And it's not altogether clear that it's helpful. Different things have happened to different countries. In Ireland, the national debt has suddenly ballooned because Irish banks lost an incredible amount of Money. In Spain, the problem was that growth collapsed, that national debt was low, and in fact it's still not that high. But with low growth, investors are getting nervous. And then in Greece there was this long run off the books accumulation of debt. So each case was different.
Still, it suits the narrative to suggest a certain gluttony on the part of the pig. P I G S, that is.
Well, the Deputy Prime Minister of Greece said we ate the money together, but actually that line didn't go down too well in Greece. And anyway, we Brits probably shouldn't be too smug. Last year our budget deficit was higher than that of the Greeks.
What about the others, though? Ireland, Portugal, Spain, our deficit was higher
than any of theirs. We out pigged the lot of them, but like Odysseus, we escaped unscathed.
And that's because Odysseus was using a holy herb to protect him from the evil pig. Magic.
Holy moly.
Calm down, Tim.
No, no, it was a holy herb and it's called Moly. Holy moly. It was like a charm.
Ok, but what's the charm that's protecting the UK from this fiscal storm? Why are bond markets panicky about Ireland, Spain, Greece and the others, but relaxed about the uk?
Well, one reason is, and like him or loathe him, nobody doubts that George Osborne plans to get the deficit down quickly, and that reassures investors. But before Mr. Osborne pats himself on the back, there are actually quite a lot of other reasons.
Okay, and.
And perhaps the biggest one is one where you have to give the credit to George Osborne's arch enemies, Gordon Brown and Ed Balls. They kept the UK out of the Eurozone. And I don't want to open a great big can of macroeconomics at this stage, but what that means is austerity measures in the UK don't hurt growth as much as they do inside the Eurozone. We've got this flexible currency and that allows us to export some of the pain. And I don't want to go into exactly why, trust me. I think the holy herb in this case has been the pound.
Okay, so Portugal, Ireland, Greece and Spain all got into trouble, some people say through financial gluttony. But the uk, which had the biggest deficit of all, escaped being turned into a pig. But now I'm confused, Tim. A few minutes ago you were telling me that investors were happy to lend money to Greece because it was part of the Eurozone. Now you're telling me that investors are happy to lend money to the UK because it isn't part of The Eurozone.
Well, in fairness, I did say the investors were as smart as a blind sheep fondling giant, didn't I? But I agree it is a mystery. But I think I know how to explain. It's time for another tale from the Odyssey, that of Odysseus and the Sirens.
Well, we all know this one. The Sirens had beautiful, tempting songs, but would rip sailors to pieces. Odysseus told his sailors to block their ears with wax, but had himself tied to the mast so that he could hear the siren song and yet couldn't leap overboard to his death, no matter how hard he tried.
Now, get the strongest rope on board and lash me tightly to the mast. Bind me in coils of rope. Sir, we wouldn't dream of roping you like a wild horse. And then row and row and row. Dig into the waves as if you were drunk and digging for gold. And whatever I say, however much I scream or threaten or plead, ignore every word. It turns out that the story of the Sirens is a classic in economic theory. It represents the idea that sometimes you can gain an advantage from tying your own hands. It's called a commitment strategy, and this is one of the things that investors liked about the euro being a part of it means. Greece, for example, can't devalue its debt by printing money, no matter how tempting that option becomes.
But now there's a downside.
There is indeed a downside. These commitment strategies are all great until you reach a situation where you really, really need to break your commitment. At that point, you're stuffed. You remember later in the Odyssey when Odysseus is sucked into the gigantic whirlpool of Charybdis.
I do indeed
keep this stomach. We're being sucked. I can spell her breath. He saved himself by leaping off a raft and grabbing onto a fig tree. And all I'm saying is, well, it's a good job he wasn't tied to any masts at the time.
So the Greeks tied themselves to the euro. It helped them for quite a few years, but now it's causing them terrible problems. Tell me, how does the Odyssey end?
Well, after 10 years of aimless wandering around and random horrors, the story ends with a bloody massacre of a greedy bunch of ne' er do wells.
Ok, well, let's hope that this story ends better.
Yeah, let's hope so, Charlotte. Thank you. You're listening to More or Less A Statistical Odyssey in association with the Open University. That was Charlotte MacDonald and I'm Tim Harford. Earlier in the summer, a study was published which seemed to suggest that acupuncture might help some patients with unexplained symptoms. Interesting. We asked Margaret McCartney, an excellent blogger on medical evidence, to investigate. But Dr. McCartney thinks the study tells us about more than just acupuncture. It tells us something about the whole way in which treatments are administered on the nhs.
Dr. Margaret McCartney
A couple of months ago, a Daily Telegraph headline read, acupuncture has a significant impact on mystery illnesses. Patients had a significant and sustained benefit, they said, which were also the exact words used in an editorial in the British Journal of General Practice, where the trial generating the headlines was published. The trial contained 80 patients who had unexplained symptoms such as headaches, backache or muscle pains. Half were given 12 sessions of acupuncture immediately. The other half had to wait 26 weeks before starting the same acupuncture sessions. Patients were asked to fill in questionnaires about how they were feeling. So the MYMOP questionnaire, which stands for Measure Yourself Medical Outcome Profile, has a score of six for the worst symptoms. The group receiving acupuncture started with an average score of 4.3. That number fell to 3.3 after their acupuncture sessions and stayed at 3.26 months after their acupuncture had finished. The group that had received acupuncture after a 26 week delay started with a score of 4.6, which had fallen to 4.0 by the time their treatment started and then fell further to 2.8 by the end of their treatment. The scores all seemed to be getting better, no matter what. Another score, the EQ5D index, where 1.0 is the best health, rose from 0.47 to 0.53 while acupuncture was taking place, but then rose even more to 0.736 months after the acupuncture was stopped. Acupuncture is available on the NHS via physiotherapists and some GPs, but many think it doesn't work and shouldn't be funded by the taxpayer. So did this study prove the doubters wrong? Well, there was a fundamental problem with this trial. There was no placebo or sham acupuncture group. Sham acupuncture means using something that looks and feels like acupuncture to the patient. But crucially, I asked Professor Edzard Ernst, Emeritus professor of Complementary Medicine at Exo University, why trials of acupuncture without a sham group might cause a problem.
Professor Edzard Ernst
You would generate a result and typically the result would show that acupuncture is of benefit, but you wouldn't know whether this is the acupuncture itself or the ritual of giving a treatment. We developed a little needle that looks like a stage dagger. It shortens instead of penetrating the skin. And it's a proper sham in the sense that the patient doesn't know and that it doesn't have own physiological effects. Virtually all the trials in acupuncture using some form of sham control, show that acupuncture is associated with very large placebo effects.
Dr. Margaret McCartney
Professor Ernst has carried out other research demonstrating the power of the placebo effect. In one study, he took 110 patients with chronic pain. Half the patients were given eight sessions with people who claimed to be real spiritual healers. The other half were given fake spiritual healing by actors.
Professor Edzard Ernst
We found that, if anything, the actors were slightly better in conveying a placebo effect. It was amazing. There were some patients who had been in wheelchairs for months or years and who started walking again, and we were seeing this with our own eyes and we just couldn't believe it. But it turned out that it was the expectation, the belief of the patient, the persuasion of the healer and the actor, that real treatment was being given and not a specific effect in the true sense of the meaning.
Dr. Margaret McCartney
So the placebo effect is real. It can cause measurable improvements for patients. And sometimes the placebo effect is used routinely in orthodox healthcare. For example, a recent meta analysis suggested that up to 80% of the effect of the SSRI class of antidepressants used for mild and moderate depression was actually down to the placebo effect. But do you always have to use a placebo pill to get the placebo effect? Sham acupuncture gives good placebo effects. So do actors dispensing fake spiritual healing. What is it about these treatments that help some patients? Damian Finnis, a clinical lecturer who works in a pain clinic in Sydney, has been researching the components of the placebo effect.
Damian Finnis
It's really not the sugar in the tablet or the salt water in the syringe that elicits an effect in the patient. It's actually the psychosocial context around them. And this is a context which is in every clinical treatment that we do.
Dr. Margaret McCartney
So the way that a treatment is given is what creates the placebo effect, something Damian Finnis demonstrated in trials using sham acupuncture.
Damian Finnis
In that study, both groups of patients were given sham acupuncture, but in one group, there was a very minimal therapeutic context. So there wasn't a lot of information given between the doctor and the patient, and there wasn't a lot of interaction between the two of them. And in the second group there was a lot of warmth and empathy and interaction. In fact, it was a very, very detailed procedure protocol aimed at mimicking very, very good clinical practice. And both groups received placebo acupuncture. And in the group where the clinical interaction was maximised, they had much larger placebo effects than those who simply had sham acupuncture. So it suggests that there's somewhat of a dose response, even in the way placebo effects work.
Dr. Margaret McCartney
Professor George Freeman is Emeritus professor of General Practice at Imperial College London. He has researched the psychology and nature of the patient doctor relationship, the quality of GP consultations and in particular, continuity of care. He argues that patients respond better to a doctor they know and trust.
Professor George Freeman
We ask patients after consultations whether they're better able to cope, whether they feel more in control of themselves and their illness and whether they're actually feeling better. And the answer is that if they know and trust a doctor, then those things are better. Another thing is better problem recognition by the doctors, then there's better security and trust in the relationship. This means that doctor and patient are more likely to agree a good policy, and that means that patients can accept treatments which might be long term treatments and lifestyle changes.
Dr. Margaret McCartney
The problem, says Professor Freeman, is that in the nhs, such continuity of care is difficult to provide.
Professor George Freeman
Well, there are many other priorities in life. Particularly, there are priorities like access targets within a practice with several doctors. Some are more experienced and more popular than others. If there's a problem about having to see the person you want to see within a certain time, and the government's access targets since 2001 have specified less than 48 hours, then it may not be possible to see the person you want to see in that time. And very often patients are encouraged to see somebody they don't know within the time target, rather than wait just a little and see the person they do know and trust.
Dr. Margaret McCartney
George Freeman. So how do we get the best placebo responses out of the healthcare system we have, but ethically without deceiving patients? Currently, under the nationally held GP contract, GPs are told to fill in symptom questionnaires for patients with depression. But if I really wanted to maximise the positive effects which can come from the best kind of patient doctor relationships, I would put down my pen and let my patients talk. I think it's unfair that currently the people most likely to benefit from the placebo effect are people who are willing to believe in alternative medicine. It would be far better for patients, doctors and the NHS if We could look for and use placebo effects with honesty, simply in the way we work with patients. I should be able to turn away from the computer and listen. And that's not a sham. That's good clinical practice.
Tim Harford
Dr. Margaret McCartney. This summer, the Office for National Statistics celebrates 70 years of its social surveys. We've been looking back at the kind of questions they've been asking.
Charlotte MacDonald
In 1941, the wartime social Survey unit undertook a major study of women's undergarments. The reason? Steel. Britain needed to know how much metal was being used to support the country's women rather than the war effort. It was quickly established that the average British woman owned just 1.2 supporting undergarments. Some 65.7% of women, it was noted, never wore slacks or trousers. Colonial immigration preoccupied the social surveyors. In 1951, only 52% of the sample had ever met a colored person and 41% said they would dislike letting a room to one. Although 74% of informants thought Britain would be worse off without its colonies, Most adults, some 59%, couldn't name one. By 1961, aircraft noise and nuisance had become a serious issue, perhaps because 78% of people living within 10 miles of Heathrow said overflying aircraft made their TVs flicker. In 1971, the General Household Survey was launched, Britain's first continuous household survey. It found that 92% of families with dependent children were married or cohabiting. By 2009, that number had fallen to 77%. In 1981, 2000 women were asked about their drinking habits. 8% of them never drank. That number had risen to 18% by 2009. A rather depressing number emerged from a 1991 survey that 16% of 11 to 15 year olds smoked. By 2010, however, that number had dropped to 5%. A 2001 survey studied sexual health and found that 60% of men and women said their behaviour had not been affected by the threat of HIV AIDS. And in 2011, 70 years after those intrepid early surveyors went looking for steel in surprising places, the ons surveyed for the first time national well being. But for those results, you'll have to wait till the autumn.
Tim Harford
Of course, there'd be no surveys without surveyors. I spoke to one of them, Sandra Landy. Sandra, you've been doing this for 40 years. Has it changed over the years, the experience of trying to get that interview?
Sandra Landy
Yes, he has. When I first started and knocked on the door and said who I was, but I didn't even have to say who I was. They just said, come in, love, tea's on the table. And I walked straight in. It isn't like that anymore. People are a lot more suspicious.
Tim Harford
I mean, I know if someone knocks on my door, I'm thinking, you know, they're trying to sell me something. They want to have a long chat about some religious text. I mean, I just.
Sandra Landy
They do get a letter beforehand. Most of the surveys we do, they get a letter beforehand to say that we will be calling. So sometimes people misunderstand that and think we're going to telephone. But apart from that, they at least have got that.
Tim Harford
Have you ever done any interviews where when you turned up at the property, you just thought, oh, I don't like the look of this. This looks a bit odd.
Professor Edzard Ernst
Or.
Sandra Landy
Well, because we include everybody in our surveys. Yes, to be honest. But then what I'll do is I'll phone the office and say, do us some accompaniment on this particular call, please, and they'll send somebody else out with us. They do look after us, I have to say.
Tim Harford
Are there any interviews you've done over the years that have really stuck in your memory?
Sandra Landy
Many. But I think the funniest was, you know, people say when they call it a house, that they're terrified of dogs, guard dogs, particularly infant. Well, I give you my word, geese are far, far worse. I called at a house in rural North Yorkshire and I came around the back. And as I came around the back, out of the corner of my eye, I saw a field. And at the top of the field, there must have been probably about 20 or 30 geese. They came down that field, I can't tell you, with wings outstretched and beaks held high. And I thought, do I run? Do I stay? What do I do? As it happens, the lady opened the door and she just said very quietly to them, it's all right, guys, she's okay. And they all went back to the top of the field. But if anybody ever says to you what is the best defense you can have, I recommend geese.
Tim Harford
Do you ever do interviews where the interview itself is particularly difficult to conduct?
Sandra Landy
There was a long term sickness survey and the guy had actually had his voice box removed. And it was a survey looking at how these people who needed help got help. And he was determined to do it. He really was determined. And he literally, every 10 minutes he had to stop to clear out the little tube that was in his throat. It took us, I think, two days with him doing this every 10 minutes and having to take 10 minutes off. And we did about two or three hours one day and we did about three or four hours the following day. But he was determined he wanted to be included in the survey. He wanted to tell people what wonderful help he'd had. And he was remarkable.
Tim Harford
You seem to really believe that this is a very important job.
Sandra Landy
I do, because I think it's one of the few ways in which the general population are actually asked their opinions and asked how things are going for them. It's their chance for the silent majority to actually have their say and say what's actually happening.
Tim Harford
If somebody approached you now, sort of somebody who's just left school or just left college and said, you know, I'm interested in doing what you do, what are the pros and cons of the job? What would you say to them?
Sandra Landy
I think the two things you must do is you must have a sense of humour and you must generally like people. The cons would be that sometimes when you're out, it's dark or it's cold or it's icy. I mean, I was working up a Tanely top, which is on the M62 in that snow and ice this year, and I must confess, there was one night I was coming home and thinking to myself, oh, I'm glad I'm on my way home. And then I thought I'd just got an interview where the gentleman hadn't wanted to do it and he'd done it in the end and he'd said to me, if you're brave enough to come out in this kind of weather, how can I say no? And I thought, well, I got that interview and that was important.
Tim Harford
Sandra Landy, an interviewer for the Office for National Statistics, reminding us that data don't just make themselves. That's all we have time for this week, I'm afraid. But do please keep your suggestions coming in via Twitter or more or less bc.co.uk. our website is BBC co uk./more or Less and we'll be back next week. Until then, goodbye.
More or Less was presented by Tim Harford, the Financial Times undercover economist. The producer was Richard Knight. The program was made in association with the Open University.
BBC Radio 4 | Host: Tim Harford | Date: September 2, 2011
This episode of More or Less takes on the challenge of explaining the tangled complexity of the 2011 European debt crisis—especially Greece—by using the structure and characters of Homer's Odyssey as a guiding analogy. Tim Harford and Charlotte MacDonald break down how the Eurozone’s rules, market reactions, and national economies led to financial turmoil, providing clarity on how statistics and economic perceptions shape real-world outcomes. Other segments look at the placebo effect in medicine, and 70 years of social surveys in Britain.
"Bondholders didn't seem to pay close enough attention to the fact that the risks of default hadn't gone away. They treated all these Eurozone countries very similarly..."
(05:42, Tim Harford)
Segment begins ~12:25
"Virtually all the trials in acupuncture using some form of sham control show that acupuncture is associated with very large placebo effects."
(15:28)
Professor Ernst: Even actors pretending to be healers had significant success due purely to patients' expectations.
Damian Finnis, Sydney pain clinic:
"It's really not the sugar in the tablet or the salt water in the syringe... It's actually the psychosocial context around them."
(17:11)
Study shows empathetic, interactive care enhances placebo effect. Quality of doctor-patient relationships matters.
"If they know and trust a doctor, then those things are better..."
(18:37)
Segment begins ~21:06
Segment begins ~23:15
"It's one of the few ways in which the general population are actually asked their opinions... it's their chance for the silent majority to have their say."
(26:09, Sandra Landy)
"The Greeks smuggled themselves into the Eurozone inside a Trojan horse of off balance sheet accounting."
Tim Harford, 03:36
"Bondholders didn't seem to pay close enough attention to the fact that the risks of default hadn't gone away. They treated all these Eurozone countries very similarly, at least until a couple of years ago."
Tim Harford, 05:42
"Well, the Deputy Prime Minister of Greece said, 'we ate the money together.' But actually that line didn't go down too well in Greece."
Tim Harford, 07:45
"Sometimes you can gain an advantage from tying your own hands. It's called a commitment strategy, and this is one of the things that investors liked about the euro..."
Tim Harford, 10:09
Professor Edzard Ernst on Placebo:
"We found that, if anything, the actors were slightly better in conveying a placebo effect. It was amazing." (15:47)
"Virtually all the trials in acupuncture using some form of sham control, show that acupuncture is associated with very large placebo effects." (15:28)
Sandra Landy, on what makes a good surveyor:
"You must have a sense of humour and you must generally like people." (26:37)
This episode uses vivid analogies and clear statistical thinking to make sense of the Eurozone debt crisis, demonstrating how a mixture of financial engineering, market misperceptions, and political promises led to disaster—captured memorably with Homeric storytelling. The episode also delves into the science and ethics of the placebo effect in medicine, and features a reflective segment on the changes uncovered by seven decades of government surveys, all brought to life with real voices and statistics.