Monday, May 31, 2010

Battle of the Sexes

I let the story speak for itself.

Did that question have gender bias?

Sunday, May 30, 2010

Is it rational to vote?

Does it make sense to vote?

The short answer is "probably, since you'll feel better about having done your civic duty." But when people ask this question I think what they mean is "the cost of voting is about 10 minutes of your time, the benefit is a tiny probability multiplied by something huge--is that tiny multiplied by huge a big or small?

Gelman et al. estimate the probability your vote would have mattered in the 2008 election. The probability varies by state so they plot by state in this graph:

These probabilities are tiny. (And I think they are vast overestimates.) But look at the historic average growth rates for different income groups when Democrats are in office vs Republicans. The fact that Democrats have higher growth rates for all groups probably has little to do with policy. Democrats just happened to get voted into office at the right times of the business cycle. The fact that the growth is relatively even (and somewhat convergent) is possibly also an artifact of the Democrats being in office when there was a lot of growth in college and high school education, while the Republicans have presided during a period of more rapid technological change (or some such narrative).

But it's definitely possible that Democratic and Republican policies have something to do with the fact that income growth lags for the poorest under Republicans and is greatest for the poorest under Democrats. Suppose that we adjust the growth rates so the means are the same; then, by eye-balling, it looks like growth would be around 1% greater per year for the poorest income deciles. Using the numbers in this graph that means about $144 billion in value over 4 years for the bottom two income quintiles.

Suppose your time is worth $20 an hour. It takes ~10 minutes to vote. The value from voting is $144 billion worth of aid to the poor and working class. What would the probability need to be (at least) for the expected benefit of voting to exceed its cost? If you weight income to yourself and to others equally then it's just 1 in 43 billion.

Which means it rational (in the sense of expected value), for Democrats at least, to vote in almost every state in the union. That's definitely not a result most philosophers intuit (and is probably an artifact of greater overestimated probabilities).

But what if these numbers are right? Shouldn't the possibility be widely noted in the literature? And shouldn't estimates of the probability of your vote mattering note that there is a big difference between a 1 in 1020 chance, which implies voting is irrational, and a 1 in 109 or 1 in 1012 chance, which may imply voting is rational?


I was using Google Analytics for this blog and I noticed one interesting service provider:

United Parcel Service

They must have read the post about the "Brown Bailout." But Google said they weren't referred to the blog (say, by searching on Google). I wonder if this was just someone at a UPS office reading through the blogosphere commentary or if UPS is doing a more systematic survey of the debate.

Anyway, the real story is that corporations spy on my blog when I write things about them. I'm like Ralph Nader, except I've never been the most hated man in America.

Friday, May 28, 2010

Apple vs. Microsoft

A few months ago I noticed Apple had a market capitalization on the order of $200 billion. So did Google. And of course so did Microsoft. Was it possible Microsoft would be dethroned as the Tech King in the coming year?

Well, it happened.

Ten years ago Apple was the little guy, and everyone loved their gusto. Macs he shit processors, but the software made Windows look like shit and Altivec made Motorola chips bearable. Five years ago the same was true with Google. Their motto was "Don't be evil." They offered a great product (note: singular) and free quality webmail e-mail if you were lucky enough to get a beta invite.

Today, though, its hard to tell Apple and Google from Microsoft. Apple made more headlines for bullying the media than building the iPad. Their control over apps for the iPhone OS is stifling innovation and their position on Flash might be reasonable, but its still reminiscent of Microsoft.

And I don't have to comment on Google. They won't be happy until the length of your dick is no longer private information.

A Batman quote is relevant here: "You either die a hero or live long enough to see yourself become the villain."

Student Loans

College education is a mess in this country. The institutions themselves are corrupt and the social norms (e.g. binge drinking) are like a cancer to getting an education. Those are probably the biggest problems, but a close third is student loan debt spiraling out of control

This "Your Money" article in the New York Times tackles the issue. It seemed like a good article at first, but by the end I was shaking my head. A relevant quote:
[NYU could] deputize a gang of M.B.A. candidates or alumni in the financial services industry to offer free financial planning to admitted students and their families. [An NYU official] also noted that the bigger problem here is one of financial literacy. Fine. He and N.Y.U. are in a great position to solve for that by making every financial aid recipient take a financial planning class. The students could even use their families as the case study.
The author seems to think NYU, in this case, and universities, in general, should step up to the plate and educate their students about personal finance. That sounds impractical to me--it would inevitably push many students toward community colleges and it would drive up administrative costs even more. I'm also confused about why universities should be teaching personal finance--shouldn't high schools do so? What about the large share of students who never go to college?

But my real question is this: if the problem is financial illiteracy, then shouldn't this personal finance column go through the trouble of explaining what options people have and what the trade-offs are?

I don't want to leave myself open to the same criticism so I'll list some key facts about student loans that everyone should know and would have been relevant to the girl in the article:

1. The average return to a college degree is in the hundreds of thousands (Barrow and Rouse and others)
2. Majoring in "women's and religious studies" (or similar) probably has a much lower return than a hard major (see PayScale data, but those differences are probably exaggerated by selection bias)
3. There is little evidence that going to a more prestigious college will get you a higher paying job (Krueger and Dale, with caveats)
4. It's almost impossible to default on student loans, as the article notes

Thursday, May 27, 2010

Gawker vs. Apple

I'm a little late to this story, but there are a couple important points that have been glossed over. This article makes the case for why Gawker is wrong.
I understand the moral calculus they used. We all feel intuitively that picking up something that someone else left behind is not as bad as seizing it by force, stealth or deception. But in the eyes of the law, it's still stealing. And buying stolen goods is a crime. In those rare cases where a journalist commits a crime and receives the benefit of prosecutorial discretion, it's usually because he can demonstrate there was a compelling public interest at stake. There is no such interest here. The only parties who benefited from Gizmodo's story are Gawker Media and Apple's competitors.
First, Bercovici commits the Cardinal Sin of Ethics: he equates legal with moral. As he says, he understands that they used a moral calculus with intuitive appeal, but "in the eyes of the law" what they did it wrong. QED.

Second, he's just wrong on the last point. Apple's main argument is that by publishing the story, sales of the remaining stock of iPhone 3GS will be depressed, costing them millions. That is probably true. But if people change their preferences when they get new information that means the consumers benefited, and--importantly--consumers gain more than Apple losses. Asymmetric information, like Apple knowing that the new phone is in development while consumers remain ignorant, causes markets the break down and become inefficient. Giving consumers more information shifts things closer to a perfect market and improves welfare. Pretending only Gawker benefited is silly, and the writer should know better--especially since he writes for a business news website.

Apple can argue that the story caused bad PR, but it would be a hard case to make. The story generated buzz about one of their products. The bad PR is a product of their aggression against Gawker, which is a choice they made.

I agree that Gawker "stole" the phone, in legalese. I agree they did it for personal gain--the stories were going to be a big hit and they did their due diligence writing good ones. They also hurt someone's career in the process of improving their own, not exactly, a heroic deed. But the world is probably better off for them having written the stories.


David Brooks writes a good column every couple weeks. He writes a lot more bad columns than good ones. But Tuesday we got treated to a great one.

Brooks is trying to defend his position on health care. For most of the past year he wrote a columns with the same thesis, but less articulate and directed solely at shaping views on health care reform. It's worth noting that on other topics, Brooks writes as an ally of the technocrats. He's, as far as I can tell, in favor of sweeping changes to teacher tenure, stomping out union power, and pushing technocratic value-added models to measure progress.

I am too. If I had to take sides, I'm more with Paine than Burke. But I've tempered a lot of on my sentiments over the years. I don't have strong views on foreign policy because foreign policy scholars are charlatans. Macroeconomists are much the same, aside from their black magic setting interest rates. I guess that is natural--anyone who has spent time reading econometric studies is going to walk away feeling social scientists know a lot less than everyone thinks. We don't understand the social organism--Brooks was right.

But there's a catch.

Neither did our predecessors. Some institutions evolved for reasons no one understood, but many were arbitrary, or based on the prejudices of the past. A lot of people use the argument "this is how it's always been" as an argument for intolerance and not having to think. People oppose gay marriage because it's different. They oppose legalizing some drugs (but not alcohol) because of tradition. Some want to teach everyone Latin or a liberal arts curriculum because thats what they did 50 years ago. Brooks is implicitly making a case for legitimizing the "this is how it's always been" argument in public discourse, when we really need to stomp it out. Lazy thinking is a bigger threat than the technocrat menace.

Whither Democracy?

I read this story in my local paper today.

People tend to have three responses. One group complains that these kids aren't focusing on poor American people. Those people are idiots. A second group says "that's nice" but thinks it's a lost cause. The writer expresses that side of the story at the end, noting that all they have to show for their efforts is a form letter. A third group believes in what they're doing. I'm in the third group.

These kids aren't working in isolation. They were inspired a few years back by a Invisible Children, a movie about the kids abducted by and living in fear of the LRA in Uganda. (It's a great documentary. Two of the directors went to USC for film school.) As the Invisible Children site notes, President Obama just signed a bill that allocates around $40 million to supporting reconciliation and rebuilding in the area and requires the bureaucracy to formulate a strategy for achieving peace. Will it work? I have no idea. I shy away from foreign policy issues like this because I don't think anyone knows. But it's worth a shot. (The benefits are hundreds or thousands of deaths prevented, thousands spared violence, and millions of lives returning to normal. Even is the probability of success are tiny the expected value is HUGE.)

But why did the President sign the bill? Did it have anything to do with the erasers? No. The erased were mailed too recently. But it did have something to do with the thousands of kids (including kids from Nature Coast) who turned out for Invisible Children's events over the years. Events like the Global Night Commute and Displace Me. President Obama invited the CEO and two of the founders of that non-profit to the signing ceremony--a good indication the White House and Congress were paying attention to their movement.

Still, there were thousands of people involved in that campaign. Did it make a difference that 50 kids from Nature Coast went to Displace Me? Probably not. Like any political action, the chances some individual was the difference between success and failure is microscopic. But if we use that criteria then we should never vote. What are the odds my vote is going to matter?

One of the comments on that article complained that these kids should being spending time learning American history. Don't they need to know the difference de jure and de facto segregation and who won the Battle of Bunker Hill? No. Not really. But someone really does have to learn about performing their civic duty, taking part in the public discourse, and making democracy work. Economists and political scientists have show how there is a natural tendency for important issues that no one has a vital interest in to fall by the wayside. It's not that these issues aren't important--they're often critical--its just that everyone else hopes someone else will take care of them. For us to keep our priorities straight--e.g. putting the lives of millions of people who might be exterminated by genocide toward the top--we need a lot of people to make some small sacrifices to keep these issues on the agenda.

Otherwise they'll disappear. And a lot of lives will be snuffed out too far to soon. No one will notice. But it'll be just as tragic all the same.

P.S. Watch the Displace Me video. It has RFK quotes. My mom shook his hand when he campaigned for a senate seat in 1964.

Tuesday, May 25, 2010

Grade inflation

I posted a while back about grade inflation. I was inspired by a short article on the Economix blog and offered a question in the comments.

Lo and behold, my question was answered (toward the bottom). I think it was a fair answer, but I wish he had more to say. I agree that its very difficult to compare apples and oranges (Harvard GPA to UMass GPA)--in this case because we don't have any good data for estimating the variance in GPAs at each college.

Also, this is funny. I found a treasure trove of law school admissions data that I'm going to mine for insights. One day they will appear on this blog (vis a vis medical school admissions).

Monday, May 24, 2010

Numbers out of Context

Journalists are always finding new ways to cite numbers out of context. This article from the St. Pete Times explains that:
At the University of Florida, a score of 3 out of 5 in art history could earn a student three college credits, while a score of 4 or 5 could bring six college credits. . . . But an incoming Harvard student must earn a score of 5 out of 5 to get any college credit at all. Even that only awards the student a half to one full credit, depending on the subject.
This conveys two main ideas: (1) Florida has low standards, at least relative to Harvard and (2) Florida hands out a ton of credit for AP tests. But is the 3-6 credits vs. 0.5-1 credit giving an accurate impression of the difference?

No. 3 credits is one class's worth, 6 credits is 2 classes. The average UF student probably earns 11-14 credits per semester. Harvard's credits on the other hand are, I believe, 1 per course. But, more importantly, I believe Harvard only uses AP classes for "Advanced Standing," in their horrible convoluted set of requirements. Those Harvard credits aren't the same kinds of credits the UF students get.

Sunday, May 23, 2010

Network Externalities

I knew the model of language learning I described in post below must have been formalized by someone. I finally found the paper that did.
We develop a model in which the benefit of language acquisition is increasing in the number of individuals who speak the language. This gives rise to a network externality, and if language acquisition is costly, the language acquisition decisions by individuals may be inefficient. If the available policy instruments affect all members of a language group homogeneously, then policies that effectively subsidize language acquisition are warranted only for the majority language.
There are a few things the model doesn't capture. Namely:

1. Some argue that learning multiple languages may have positive cognitive benefits in young children. I haven't found much credible evidence of these effects. Also, this is irrelevant in the U.S. since we teach teens languages, not kids.

2. Some think that learning languages (mostly just Spanish) will make people more culture and less racist. I don't know what to make of that. Why not just teach culture and the philosophy of tolerance? And most "cultured" people are bigots (see: Cambridge, MA).

3. This model applies to one country. Maybe someone could think of a reason international integration is only possible by unifying under like 5 languages, common to everyone. The model, at a world level, suggest that would be a wasteful strategy. But perhaps there are gains the make up for those costs from integration. (Europe seems to be doing fine with just English, though. And in the short run this seems irrelevant.)

Also, these results are for general equilibrium for teaching large numbers of people. Of course people who plan to move to Japan should learn Japanese. And Mexicans who plan to move to the U.S. should learn English (wait.... maybe that isn't so obvious?). Individuals can still gain from learning languages, but society as a whole will lose if lots of people do this. Gains to individuals are more than cancels by losses they cause for other people.

UPS Bailout?

The House is going to "bail out" UPS and the Tea Party, fed up will bailouts, is leading the charge against government malfeasance. (Watch the video. It's a great parody.)

Well, almost. The site I linked was paid for by FedEx, UPS's chief rival. It's astroturf, not grassroots. I don't know where the Tea Party stands on this issue (I'm sure I can guess), but I think they're too busy trying to destroy the Federal Reserve to care.

So what is the real issue here? This WSJ editorial lays it out pretty clear. FedEx is regulated by one bill that, to prevent strikes from disrupting the economy, requires unionization at the national level. This has allowed FedEx to keep from being unionized. UPS is regulated by another, which has allowed the Teamsters to unionize most (all?) of the UPS truck drivers.

A lot of people assume that the issue here is "what is the right classification for these companies?" but that misses the point by a mile. The two types of regulations are just mechanism for regulating unionization. The basic philosophical point is what "rights" do people have to unionize. But that question is as retarded as it sounds: the right amount of unionization is the one that makes society happiness (and healthiest).

So will expanding the Teamsters make society a better place?

I used to be pro-big labor. But I'm not so much anymore. Most of it probably has to do with the damage teachers unions are doing to our schools. But part of the switch has to do with my interest in institutional economics. Unions seem to drive up wages for the middle class. But they do so at the expense of the poorest and probably by driving up unemployment--esp. in recessions. Unemployment is crippling to people's happiness while higher incomes seems to do little. Higher inequality might be bad but we don't know how bad. And isn't it possible that unions are as much a cause as a by-product of the fact that people become so depressed when they get laid off?

People in this country are miserable when they lose their jobs not so much because they end up on skid row, trying to find their next meal, praying for brighter days. They don't end up poor most of the time. They become depressed because they feel a loss of identity and friends. The friends part seems natural, people need a social circle. But why do people feel so tied to their jobs? Wouldn't a more fluid (less unionized) labor market help promote a more healthy view of a job as just a job, not as your life's work and the center of your universe?

So I have mixed feelings about the Brown Bailout. I won't sign the petition because I'm "pro-labor." Yet I feel about as "pro-labor" as I do "pro-choice."

Saturday, May 15, 2010

Gay people are better justices?

Ruth Marcus informs us that gay people make better judges than straight people:
[A gay nominee would improve] the court because -- as with any additional perspective -- an openly gay justice would add to the richness of the court's understanding of cases, particularly gay rights cases, that come before it.
If that sounds like it made sense, then you've been victimized either by groupthink or a manipulative commentator.

After all, she surely doesn't mean what she says--that any additional perspective would be good. If a former member of the KKK got nominated for the court I'd hope that the "perspective" (read: anti-black bigotry) he'd add wouldn't be celebrated in a major paper of record. There are clearly good points of view and bad points of view, so how do you tell them apart?

It seems to me the only way is to know how they will influence a justice's votes. To the extent a perspective makes judge likely to vote for gay marriage, constraints on corporations and affirmative, a liberal will say it's a healthy, necessary perspective. Mutatis mutandis for conservatives. So, in translation, Ruth was saying "a gay person will make a good judge because gays tend to be liberal and liberals are good justices." Now suppose you were a conservative, do you find that argument convincing?

So my question is "how do smart people end up writing such tripe?" Was she a victim of groupthink in D.C. or did she know she was just jerking people around?

Friday, May 14, 2010


Christopher Nolan's new movie. More Prestige or more Dark Knight?

"I'd hate to see out of control."

Thursday, May 13, 2010

Should they move the all-star game from Phoenix?

The MLB is under pressure to move it's all-star game from Phoenix next year due to Arizona's new immigration law. But the commissioner isn't caving in to the pressure. (Note: The article from the link has a bizarre headline.)

I don't really know what the law does--there's a difference between "Police can harass anyone they feel like," which I don't think its quite the language in the bill, and that police do harass random people. Perhaps people should take a chill pill and see how many wrongful arrests there are and how many deportations occur and then trade off the costs and benefits.

I don't think there is much of a benefit to deporting illegal immigrants. The problem with immigration is that it isn't fair, and the bias brings more negative externalities (social fragmentation, two-language equilibrium). Toying at the margin, kicking a couple people out, won't help with either of those problems. Kicking out a Mexican doesn't mean an African can come.

And then there is this great point from the comments: "In fact, historically, the Mexicans being excoriated by them probably have a greater right to be there than any of the Caucasians, given that the territory was militarily annexed from the Mexicans by the whites. It was their territory first." I wonder how hard people think before they say things like that. Since only the Native Americans were there what rights should Spanish Mexicans or Black Mexicans have? Should your rights be weighted by how Native American you are--and what if you're Mayan, do you have a claim on North American territory? Also, shouldn't the Mexicans who got annexed have to pay the U.S. government for the benefits of being Americans? (If you doubt that there are benefits ask yourself "If I had a choice between being a random person born in California or in northern Mexico, which would I pick?")

Wednesday, May 12, 2010

Assorted Links

1. Thoughts from Malcolm Gladwell (HT: Marginal Revolution)

2. I'm tempted buy some of these (HT: Marginal Revolution)

3. Bill Easterly on Affirmative Action. I think he underestimates how much Kagan may have benefited from affirmative action. If 70% of qualified lawyers are men, but Obama wanted to nominate a woman, her chances tripled due to AA.

4. Chris Blattman has a surprisingly good experience dealing with the government

5. The Science of Marriage (HT: Chris Blattman)
I used a panel dataset to estimate the hedonic value of getting married or divorced and oddly both turned out to be negative. What is up with that?

Brady and Manning: Part 1

Some USA Today reader commented "There is no way Brady would ever throw an egregious interception like [Peyton Manning did in Super Bowl 43]."

Does Tom Brady really have ice water running through his veins? I'm not convinced. Consider these incidents that come immediately to mind:

1. Super Bowl 42 was his worst playoff game to date.
2. In the playoffs vs. the Ravens this year, he was even more spectacularly bad.
3. He threw a pick at the end of their away game vs. the Dolphins this year
4. He chocked on 4th and 2 against the Colts last season
5. He fumbled the ball to lose the Tuck-rule game; only a gift from the football Gods saved his season
and of course
6. Marlin Jackson picked him off to seal their loss vs. the Colts in the 2006 AFC Championship Game

It turns out that if you look at win probability and expected points added in the playoffs, Manning is better than Brady on both counts (since 2000 when data become available).

Manning: 3.59 WPA and 114.8 points
Brady: 3.26 WPA and 62.1 points

There are a few things worth pointing out. First, a year ago Brady did have better playoff numbers--but Peyton's whipping of the Jets and his strong performance in Super Bowl 43, along with Brady's collapse against the Ravens, flipped the script. Second, there biases here: (1) Peyton's first playoff game, which was not spectacular, is left off and (2) Brady played more of his games in the inhospitable climate of New England. Also, a lot of Peyton's number are from 4 strong performances in blowouts over the Jets, Broncos (twice), and Chiefs. Finally, the sample size here is 17 games (Manning) and 18 games (Brady).

Brady seems like he is a more clutch player. Peyton looks like he losses his cool under pressure. But in the data its very hard to find hard evidence for this hypothesis.

Sunday, May 9, 2010

Tim Tebow

I got swept up into the Tebow fervor when he reached 20-20. But since then I've poured over his numbers too many times to count--I even looked up the distance-to-goal for each of his 57 rushing TD. He seems a lot more mortal when you put the numbers in context. His yards per attempt (YPA) were phenomenal, comparable to Sam Bradford's, but put up in a more difficult conference. Yet when you take into account his rushing attempts, he looks upstaged by Vince Young on yards per play.

I think when people look back on Tebow's career they're going to remember plays like this more than anything else:

The aura that surrounds Tebow is more a product of heart than talent. The promise is Tebow's "Luckiest mean on the face of the earth"; 20/20 is his 184 RBIs. It's going to be etched in stone 100 years hence, when 20/20 is a distant memory.

Saturday, May 8, 2010

Political Economy of Development

Bill Easterly at his best:
Professor Auerswald (sorry for my teasing you in this post), you do seem to have a theory of social change in which promises about government intentions to someday change priorities are a major force. My experience of many years of observing such statements is that they are more like New Year’s resolutions that are repeated every year.
It's true policy change is slow--and at the margin people's votes and lobbying are probably not worth much. But I think people undervalue the average return to lobbying. If I had to guess, signing a ONE petition is worth at an order of magnitude more to human welfare than doing a "development project."

Thursday, May 6, 2010

Should we make everyone learn two languages?

This only applies to the U.S. It's obvious students in the EU should learn English since it's the de facto EU language. Students in developing countries have obvious financial interest in learning English too. But what about students in native English speaking countries?

Jay Matthews asks this question in a rather ambivalent discussion.

I've noticed four main arguments for everyone learning another language:

1. Kids need to learn a new language for exposure to other cultures. This will reduce the amount of racism in society.

This is a good point--though some people are probably uncomfortable with this kind of social engineering. What I don't understand is why the classes, then, are language-centric and not culture-centric. Why not have a class that survey's other cultures, focused on food, music, dance, and sports?

2. Learning a new language improves kid's ability to speak and write well in English.

This is particularly prevalent when people argue everyone should learn Latin or Greek. What I wonder is if there is credible evidence learning Latin helps with vocabulary and clarity more than studying vocabulary directly and reading Orwell?

3. Learning about new languages is interesting (to some people) so everyone should be forced to do it.

This is just insane. But you'll hear it in every debate. Perhaps sabermetrics should be a required part of the high school curriculum?

4. It's not that everyone should learn a language, it's that everyone should learn Spanish.

This makes some sense to the extent we want to be a bi-lingual country. But I can't see many benefits from that, and it's possible a two-language equilibrium hurts everyone's welfare in the long run.

Mac vs. PC

I was thinking about whether its good or bad for the world to have so many different operating systems and other incompatible systems. Consider a world with just two incompatible types of computers: Macs and PCs.

Suppose 90% of people use a PC, 5% use a Mac and 5% can use both. Because such a large minority can only use a Mac, every store and organization, especially schools and hospitals, have to run two support offices and publish instructions for every operation with both PC and Mac instructions. Everyone can see that if everyone used a PC society could save money, but no one knows how much.

So the question is, why not force everyone to use a PC?

1. Some people grew up using a Mac and it might be hard to learn to use a PC.
2. Maybe it's very expensive to teach people how to use a PC.
3. Some people might have good reason they prefer the Mac, enough to justify the negative externalities on society.

This is a bit of a stretch--it's not that hard to teach people to use a PC and Mac's and PC's have considerable interoperability. You can network them to each other, for instance.

But consider substituting "English" for PC and "Spanish" for Mac. Now how true is this story? Is the US stuck in a suboptimal two-language equilibrium? How large are the negative externalities to learning Spanish? I bet someone has written a paper on this with a wildly inaccurate estimate.

How much can we trust happiness surveys?

Not much when they disagree with your politics, writes Stephanie Coontz:
Wolf is rightly skeptical of the anti-feminist claim that women were happier in the past, pointing out that historical comparisons of reported happiness overlook the ways that women tamped down their expectations when they had few options for challenging unfair relationships at home or at work. A 1962 Gallup poll, for instance, reported that women were the happiest people on earth because, as one housewife reported "a woman needs a master-slave relationship whether it's husband and wife or boss-secretary." Buried in the article was the astonishing fact that almost 90 percent of these self-reported happy housewives hoped their daughters would not follow in their footprints.
There are a lot of problem's with happiness surveys. I'm working with data on life satisfaction for a paper and there are not a lot of conclusions you can draw. My work is largely in studying the biases and unreliability in the data.

But, as the old saying goes, the facts are the facts, so dismissing the evidence on sight isn't a productive strategy. Justin Wolfers, one of the leaders in subjective well-being research, wrote a great post on this topic a few months ago.

Assorted Links

1. Why did everyone jump on Saints bandwagon?

2. Human interest: Saving BlockBuster

3. Ezra Klein on fairness

4. Dept. of Bizarre: Development Edition

5. Testing the Broken Windows Theory

6. Advice for making good slide shows

7. Journalists Need to Learn Statistics: Move to New Jersey and you'll be happy Edition

8. Good commentary on development policy (HT: Aid Watch)

Estimating upper bounds

Slashdot reports that game piracy is not as big a problem as the industry says. What I'm wondering is why anyone would trust an estimate of "lost sales" from the industry?

It's a good analysis but they went too far when they said 10% is an upper bound for how much business is lost. If people who like games the most are the most likely to jailbreak a phone and pirate games, then they are losing a larger proportion of sales than the proportion of people stealing games.

Take this simple numerical example: there are 2 types of gamers. Regular games buy 1 game a year. Hard core gamers by 10 games a year. Say 95% of gamers are regular and 5% are hardcore. Assume 10% of gamers pirate games, 2% being hard core gamers and 8% being regular gamers.

The percentage of lost sales is 1*.08+10*.02 / (1*.95+10*.05) = 19.3%, almost double the 10% upper bound. (These numbers are only for illustrative purposes.)

Assorted Links

1. Charter Cities, because not everyone has heard

2. Insights from Robin Hanson

3. Best markets-in-everything of all time, of all time.

4. Taller buildings = cheaper rent

5. My UROP advisor's TED Talk

6. Sticking it to rich private colleges

7. Thoughts on Think Tanks - good but ignores the variation in the quality of think tank research

Grade inflation

I saw that the NYTimes is taking questions about grade inflation and it got me thinking about how to compare GPAs between schools. A 3.5 at Harvard is not the same as a 3.5 at Pasco-Hernando Community College can't be right, so how do you adjust the GPAs so they are measured on the same scale?

I think one natural thing to do is to decompose the grades into humanities, social sciences, and sciences. We know science and math classes are graded on a worse curve (in general) than humanities and we could gather data on the average difference and correct for it. We'd also like to correct for selection bias but I'll leave that for another post.

After fixing for the composition effect we'd want a way of comparing school Z to school Y. If we assume both schools have roughly normally distributed GPAs and normally distrbuted intelligence, and then use SAT as a proxy for intellect (just because its easy to get those data!) we could put the GPAs on a same scale. Specifically, we can find or estimate the mean and standard deviation for each college's GPA and SAT score. Then we calculate z-score for the GPA and convert that z-score to an SAT.

(GPA_i - mean_gpa,s)/SD_gpa,s = z then (z*SD_sat,s)+mean_sat,s = GPA_equiv,i

where s is an index for the school and i is an index for the individual.

I did this to compare an all-science GPA of 3.9 at the University of Florida to a 3.5 at Harvard, using some, admittedly rough, means and standard deviations. I found that in equivalence terms they are a 1478 and 1512 respectively. So you should probably prefer a 3.5 Harvard grad to a 3.9 Florida grad.

Price Gouging

Earlier this week some water pipe broke in Boston, leaving a few million metro area residents without water. Everyone responded, naturally, by buying bottled water, which created a shortage. In Econ 101 students learn that the natural way to resolve a shortage is to raise the price--then only the people who need the water badly enough to pay the higher price will still be willing to buy it. You continue to raise the price until there is no longer a shortage. This op-ed sums things up nicely. (HT: Greg Mankiw)

Of course, raising the price like that is price gouging which is unfair.

I like this story because it brings up a few important points about economic analysis.

1. Most people don't understand some basic reasoning in economics.

If you don't raise the price for water, then you can end up with people who desperately need it without and those who don't care so much with. That is what we call inefficient (technical term, not in the ordinary sense. Also, if you don't let the price rise, there is no incentive to find more bottled water, say by buying up the stock in New York, transporting it to Boston, and selling it at a mark-up to cover the transport cost.

2. Fairness is a cardinal value in distributing resources

Fairness is very important to people's conception of how we should divide up our resources. Akerlof and Shiller discuss fairness as one of the five Animal Spirits in their recent book.

3. Economists tend to use theories that are based on ranking preferences as if they were direct measures of happiness

This one is a not-quite-dead horse I'm flogging. But it's a fair complaint that doesn't get enough discussion. The fact that an allocation of water is inefficient doesn't mean it doesn't make net happiness greater than some efficient distributions.

Tuesday, May 4, 2010

Experiments in Development

Today I went to the MIT IDEAS award ceremony. The basic premise is that teams come up with innovative new ideas that solve humanitarian problems. It's closely tied to the appropriate technology movement.

There were a lot of good ideas, but one team caught my eye: Korema. They're working on a way to cut the cost of sanitary pads by about 75% by using local materials and an "integrated" manufacturing process. They hope to have local women buy their machines and start local businesses supplying the pads. I'm a bit skeptical that women would be willing to buy pads for 8 cents each, but it's probably worth a shot. One of the problems with development (and businesses) is that we don't experiment enough.

I like this project a lot. The goal of generating employment and satisfying a basic hygenic need are cause enough for this project--which is why I was surprised Komera felt obliged to argue "[w]omen in Rwanda miss up to 50 days of school . . . due to lack of access [to pads]." Development practitioners have been peddling this theory for years, but skeptics have questioned the presumption along the way:
Yet skeptics abound. Esther Duflo, an economics professor at the Massachusetts Institute of Technology, says that absentee rates are the same for boys and girls in much of Africa, and that programs like providing free uniforms and books seem to increase attendance. “What’s keeping children from school is the costs of attending,” she said.
Rebecca Thorton and Emily Oster recently did an experiment to settle the debate and found sanitary pads had no effect on improving school attendance. Komera should shift its marketing focus to the value of the pads themselves--the fact that people will buy them is evidence enough of their intrinsic worth.

Sunday, May 2, 2010

Correlation is not Causation

At The Gradebook, a Florida education blog, the authors publish some talking points about why teaching kids Algebra 2 is worthwhile.

One of them is "[students who take Algebra 2] are more likely to score well on standardized tests because students who score well on the math portion of these tests do score well overall."

I don't think the error here is obvious to the editors at the St. Pete Times, but it should be. The fact that it isn't suggests that, as I've long argued, we need to teach everyone statistics. It's too easy to lie with statistics, even to the relatively educated.

Saturday, May 1, 2010

Michael Wilbon's wishful thinking

Michael Wilbon has some nice commentary on the NBA playoffs thus far. But I think he got ahead of himself rewriting history when he claimed:
the suspension of Stoudemire and Boris Diaw . . . likely took an NBA title from the Suns and gave it to the Spurs in 2007
If the Suns were the better team they would have won Game 6 with Diaw and Stoudemire back. And while it may be true that Phoenix was a better team during the regular season in 2007, the Mavericks were the NBA's best team in 2007 and deserves the "should have won but didn't" title.

Best from the Web - March and April 2010

Runner-up: This is an excellent blog on the Sleeping Beauty Paradox.

I'm pretty sure that the correct answering is P(tails|awake) = 1/2. But you should bet on tails in the gamble they talk about.

Honorable Mention: Chris Blattman summarizes some big ideas from Lant Pritchett.

Best of the Best: "Hard Problems" in the social sciences. It will become known as the article that launched a thousand dissertations.

Philosopher's Grind My Gears

I usually think of my primary academic field as ethics. The questions I do research on and have interest in as questions I think have ethical significance. I've spent at least as much time thinking about ethical theory as economic theory.

But academic philosophers have a habit of ruining the fun in this enterprise. They tend to rehash the same arguments over and over with little intent to understand one another, and often write papers purposefully (it seems) misinterpreting what other people have to say. They also tend to comment on empirical issues without having a good background in psychology and economics. I summarized my opinion on applied ethics in this book review.

Richard Chappell of Philosophy, et cetera is among the more insightful philosophers I've read. He does dabble in abstruse topics of no consequence, but he's also made me stop and think a few times. He's also rather gracious in admitting when he makes mistakes.

Check out his post "In Defense of Free Riding." There is a subtle point that complicates things that I point out in the comments, but I generally agree. Another good one is Voting, Vegetarianism, and Other Chunky Impacts. I think this one simplifies the issues a lot. He's almost certainly wrong about voting (I'm working on a blog about this), and his argument about vegetarianism smooths over some technical (and questionable) assumptions about demand and derived demand decisions.

Assorted Links

I just caught up on a month's worth of RSS backlog. Here are some of the most interesting articles I found (in no particular order):

1. Why are sex prizes taboo

2. Change in Africa (pictures)

3. More Behavioral Economics

4. Bryan Caplanshowing off why he's a second tier thinker

5. Tim Harford calling it like it is

6. Sudanese Civil War, Act III?

7. Foreign aid works (we don't hear this enough)

8. Rodrik says industrial policy is back

9. Krugman calls out the fat cats

10. Landsburg on political listening problems

11. a Must Read: The Data-Driven Life

13. Roger Ebert's intellectual masturbation

14. The Asian Century that isn't

15. Paul Romer being insightful as per usual

16. One take on China in Africa

17. Sports economics Q&A.

Human Rights

Bill Easterly's writing normally rubs people the wrong way, but he occassionally makes some pithy remarks. Here is one that helps summarize my posts on immigration:
The domestic political constituency for caring about the rights of foreigners is so small that I could probably fit them all around my dining table.
Why is that constituency so small and the immigrant rights constituency so HUGE?