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2.5K views9 pagesIB Exploration on Benford's Law

May 21, 2014

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IB Exploration on Benford's Law

© All Rights Reserved

2.5K views

IB Exploration on Benford's Law

© All Rights Reserved

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Internal Assessment

Math Exploration

Benfords Law

Student: Caterina Rende Dominis

Class: 4N

Teacher: Jelena Gusi

Examination session: May 2014

Candidate number: fdt217 (000618-0027)

If we were to assume that the distribution of 1

st

digit numbers was divided

proportionally between each number (for example if there were the same

number of 5s as there are 9s), than the next few pages will illuminate the reader

with a mathematical law that is still nowadays an unexplainable mystery to

mankind. If we believe the frequency, or better yet, the probability of numbers

starting from 1 to 9 to be on average divided into equal portions of 1/9

th

we are

far from the truth.

Over the years it has been observed that all numbers that grow naturally

(meaning are not tampered with or made up by humans) most often start with a

1 and the least often with a 9. By the end of this exploration we may be able to

observe how this law can be used for fraud detection in accounting or similar

disciplines.

To get an idea of numbers distribution the table below may be taken as

reference in order to understand Benfords Law further.

P.. probability

d.. number in question

Figure 1: Relative probability of d (with bar chart)

This rule has been quite controversial and surprising in the world of

mathematics, as it cant be fully explained. Some mathematicians claim it may

not be used to detect fraud as they believe that its erroneous, and that one

should not be convicted on the premises that the accounting numbers or election

distributions do not coincide with Benfords Law. In order to prove its accuracy

experiments need to be made in order to prove either theory, depending on what

the results come to show.

The first ever encounter in history with this law was made by Simon Newcomb,

who never explained any of his findings, but just noticed them as something

probing.

The Laws re-discovery happened thanks to Frank Benford, a research physicist

at General Electric in 1930s from whom the law takes its name, who while

working needed to consult a book of logarithmic tables. He suddenly noticed

something rather odd: the first pages of the book were more worn out than the

last ones. By observing this he concluded that the first digit (1) was looked up

more often than any of the other digits.

After this discovery Benford started collecting further data from nature in order

to prove how widespread it actually was. His results were finally published in

1938. His published work showed more than 20000 values that were obtained

from data in lengths of rivers, magazine articles, sports statistics, etc.

Explanation

Figure 2: Linear logarithmic scale

Source: http://www.thisisthegreenroom.com/wordpress/wp-

content/uploads/2009/04/logs2.png

A logarithmic linear scale is determined by multiples of 10. In order to determine

the position of numbers from 1 to 10 or from 10 to 100, etc. we need to find the

logarithm of the number. An easier way to explain this is with an example: if we

find the logarithm of 2 (log 2) the result is 0.301, which equals to the distance

between 1 and 2. This is equivalent to the probability of the occurrence of

number 1 in accordance to Benfords Law.

With the help of what we may observe above we can deduce that, even if we

calculate the area between 1 and 2 it will be exactly 30.1 % of the area between 1

and 10, just like the area between 10 and 20 would be, or 100 and 200, and so

on.

What we can observe with this pattern is the following: that the subtraction

between the logarithm of 2 and the logarithm of 1 will have as a result the exact

occurrence of the number one like in Benfords law. In turn, so will the

subtraction between the logarithm of 3 and the logarithm of 2, and so forth,

which we may see more clearly in the first few examples shown below.

log(2) - log(1) = 0.301

log(3) - log(2) = 0.176

etc

With that in mind we can come up with a formula with which we may be able to

calculate the probability of a certain number, which would follow precisely

Benfords law.

If we consider that the leading digit d (d {1, 9}) is the leading digit in

question than we may come up with the following formula:

P(d) = log 1+

1

d

In conclusion what we can finally observe is that the probability above is equal to

the difference.

Applying Benfords Law to Real-life Examples

Taking what was concluded above into consideration one would probably

wonder what this rule undoubtedly applies to. The first experiment I did was

with the Mathematics book we use in our class daily, the Mathematics SL Course-

book. I counted the 1

st

digit numbers in exactly 10 pages (from page 18 to page

27), and the results were indeed very close to the exact values dictated by

Benfords Law, therefore, all things considered, it followed Benfords Law very

closely. I completed the experiment with no help from technology (as you may

see in the scanned pictures below), which may have caused a slight human error,

but after 3 trials this was the average with which the following results came up:

Figure 3: Benfords Law in math book notes.

Thankfully, with the help of the following source I was able to find a more

accurate and less time consuming way of applying Benfords to data sets using

Microsoft Excel: http://www.theiia.org/intAuditor/media/files/Step-bystep_

Instructions_for_ Using_Benford's_Law[1].pdf

Another experiment that I have done was look at the global lengths of rivers.

With the help of Microsoft Excel and the method that may be seen in the link

above I attempted to use lengths of rivers to further prove Benfords laws

efficiency. Even though this experiment has been done before, and it has been

majorly successful, in my case the results were not what I was expecting.

In the following graph you may see the comparison of the curve that coincides

with Benfords Law, and the result I got from the sample data:

Figure 4: Graph comparing the rate of global rivers and Benfords

Since the data set was unfortunately limited as it included the lengths of rivers of

the 1000 longest rivers on the planet, I assumed it might have been

inappropriate for this kind of experiment.

In light of that fact I chose to experiment with data sets that were not restricted

by length as in this case but rather by territory, so I repeated the same process

with lengths of rivers in Croatia. In the following graph you may observe the

utter similarity with the one above.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

1 2 3 4 5 6 7 8

Sample Rate

Benford Rate

Figure 5: Graph comparing the rate of Croatian rivers and Benfords

Despite the previous anomalies in the third trial with data sets concerning social

media following the pattern seems to be much more along the lines of Benfords

law. This data set in contrast to the previous ones is quite new to us, and has

been rarely applied to study Benfords law.

Figure 6: Graph comparing the rate of Twitter followers and Benfords

The Benford Rates curve is followed almost perfectly by the Samples curve,

which in turn proves Benfords Law to be valid. Unfortunately my first two trials

were not as successful, even though the same data sets have been in the past. My

0.0000%

5.0000%

10.0000%

15.0000%

20.0000%

25.0000%

30.0000%

35.0000%

1 2 3 4 5 6 7 8 9

Sample Rate

Benford law

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

1 2 3 4 5 6 7 8 9

Sample Rate

Benford Rate

guess is that there were some limitations is the data, or that the method of

procuring the data through Microsoft Excel was inefficient, even though it

worked perfectly in the last trial.

In contrast to the Twitter Census data sets case, there are some cases in which

this doesnt apply, like in the case of measuring human heights. The choice is too

restrictive due to people being no more than 2 m tall, so the only numbers used

to mark peoples height are 1 or 2.

Another case which does not follow the law is in case of pre-assigned numbers

such as postal codes or ID numbers, as those are numbers made up and pre-

assigned by the government (aka made up and distributed by people), and do

not actually occur naturally.

Conclusion

The limited amount of people that know of Benfords Law have come to

commonly know it as the fraud detecting law. And it is its anonymity and the

common lack of knowledge about it that actually allows it work in that field. As

people falsifying results most often do not know about Benfords Law they make

up numbers that they consider most plausible (usually trying not to use the same

numbers too often and trying to divide them equally). They do so thinking that

that will prevent other peoples suspicions, while they unknowingly prove

themselves guilty.

One of Benfords laws applications that is most famous nowadays is its usage to

prove that the Iranian elections of 2009 have been tampered with, where

Mahmoud Ahmadinejad won with 62.63%. The initial digit distribution was not

consistent with the law, thus many mathematicians believed the results had been

rigged. At the end these claims were not taken into consideration, as politics is in

fact not managed by rules and logic as math is, and Benfords law was finally

proclaimed to be inaccurate by Iranian mathematicians.

What we may observe in the overall of this mathematical exploration is that

there is proof of Benfords Law accuracy, as there is for its inaccuracy. Some data

sets showed that Benfords Law really does apply to all naturally occurring

numbers, but there were some that didnt. What makes me go more towards the

tendency to believe that Benfords Law is right are the experiments previously

made by mathematicians who found the same data sets that I used to prove the

Law to be successful. All in all, there is more proof of it being accurate, but we

still may not be 100% certain..

References:

http://www.kirix.com/blog/2008/07/22/fun-and-fraud-detection-with-

benfords-law/

http://ibmathsresources.com/2013/05/22/benfords-law-using-maths-to-catch-

fraudsters/

http://t1.physik.tu-

dortmund.de/kierfeld/teaching/CompPhys_09/benford_iran_0906.2789v1.pdf

http://en.wikipedia.org/wiki/Benford's_law

Digital Analysis using Benfords Law by Mark J. Nigrini

http://www.benfords-law.com/

http://www.thisisthegreenroom.com/wordpress/wp-

content/uploads/2009/04/logs2.png

http://www.khanacademy.org/math/trigonometry/exponential_and_logarithmi

c_func/logarithmic-scale-patterns/v/logarithmic-scale

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