Saturday, December 29, 2012

Garbage in, garbage out

DonorChoose, a non-profit that match teachers who need supplies to those willing to donate, has hired a data scientist. I don't know what the fuck a data scientist is--I think these people specialize in data-mining, not hypothesis testing--but that is probably a good idea. Non-profits should self-evaluate.

The problem is that DonorsChoose evidently wants to draw policy conclusions from its terrible data. For instance, they might want to know if donors who get supplies add more "value" (read: points to test scores) than donors who do not get supplies.

I have no idea how they did this but my guess is that they compared teachers who went on DonorsChoose to request supplies to those who did not. Or they compared teachers who got funding to those who did not. In either case the selection problem jumps off the page. Teachers who select to request supplies are probably harder-working and better than teachers who don't. Similarly, donors probably select projects that tend to have more merit than those that don't. And, to make matters worse, teachers probably are better able to articulate what they need and why its valuable and, as a result, get funded more often.

So what will any of these comparisons show? That either DonorsChoose funds better teachers or its funding help. But that isn't what we read in the news.

Wednesday, December 26, 2012

What is social security?

I have no idea what social security is supposed to be. My dad thinks it is money that is going to be there when he retired because he put money into the fund when he was working. But he also tell a similar story about Medicare even though he knows Medicare is going to pay out many times what he paid in.

There was a good article at Bloomberg discusses the two main narratives about Social Security and how neither one is internally consistent. I'm too lazy to find the link.

Matt Yglesias at Slate discusses why Important People, which I think is code word for people who studied econ 101 but not econ 201, hate social security.

Matt's point is mostly right but it would help to distinguish the two parts of social security: the retirement component (what my dad think it does) from the welfare component (the part where money is redistributed to the poor). Important People probably only dislike the welfare component because the retirement savings component has very little efficiency cost.

Why does retirement savings not do the damage the welfare part does? The shortest answer is that it is a mandated benefit: if you work, you get some money but it can only be used to save for retirement. If the payroll tax costs $1 and workers value that $1 of extra social security benefits at 75 cents then the "real" tax is only the missing 25 cents. The easier way to see it is that the payroll tax does create an incentive not to work if you don't get social security benefits if you don't work.

The welfare part, though, is like any other tax. It's part of a tax system we setup that changes people's decisions from things like "should I work part-time at McDonalds for $7/hour?" to "should I work for $2/hour?" Sometimes people don't work because they're too dumb, but in a lot of cases people are too smart to work for next to nothing.

Monday, December 24, 2012

The Tebows of Harvard

Tim Tebow was a great college quarterback. He put up great numbers running the ball and pretty good numbers passing. But no one thought he would be any good in the NFL. The NFL plays by different rules. The option doesn't work in the NFL--defenses are too fast. And without the threat of the run to complement his mediocre ability to throw, Tebow was a well below average in the pros.

I wonder why something so obvious in sports--that "college football" and "NFL football" are not the same--is so hard to understand for Asian-Americans.

Asians do well on standardized tests. They make up an disproportionately percentage of the students admitted to top high schools when admissions are based on test scores alone. But they make up a smaller percentage of the student body at top colleges and an even smaller share of the elite in most professions (finance, academia, consulting) that they tend to enter.

A lot of people assume the obvious explanation is that Asians are discriminated against. Admissions offices set higher standards for Asians--they need higher SAT scores or they have to show more skill with their violin (or piano). Corporations impose a "bamboo ceiling" and refuse to promote them above middle management.

But isn't it obvious that, to some extent, the explanation is that Asians are the Tebows of academics? They have a great skill, studying hard to master things like the law of sines and the quadratic formula because their parents told them to, and it serves them well in dominating standardized tests and the classical music world. But there is no tight link between dominating the SAT and being a good CEO, pioneering researcher, or even being the kind of student Princeton should want to admit.

Working hard to do the things you parents tell you to makes you good at tasks where directed practice is easy: track (you just run . . . a lot), classical music (you practice each song), and the SAT (you do a lot of problems, internalize patterns) esp. the math part (memorize the algorithms). When its less obvious what to practice to master a subject (what do you do to become a good CEO? what do you do to become a creative song writer?), the skill Asians have in abundance, like Tebow's, becomes less of an advantage.

It isn't obvious that racism is the reason that Asians make up 41.3%* of the students scoring 700+ on the SAT math but just 15-20% of the students at top colleges. Maybe it's that there is more to being a good candidate than being good at standardized tests.

The Fiscal Cliff

The fiscal cliff gets its name from the fact that tax increases and spending cuts will reduce aggregate demand and harm the economy--IF YOU THINK AGGREGATE DEMAND IS NOT FIXED.

Didn't Republicans go on and on about how the Obama tax cuts and spending hikes didn't help the economy? Why do they care about the fiscal cliff?

Maybe it's because tax cuts don't help but tax hikes hurt and similarly for spiking hikes, but I'm guessing many of them went on record saying they would repeal the stimulus so that would be ruled out.

I can't figure it out. Maybe its because they only think tax rates on the rich matter because they have an enormous elasticity of labor supply.

Sunday, December 23, 2012

Misleading news of the day

When you made a deal with the government where it would buy a lot of your product at an inflated price most people call that "corporate welfare" or a "handout."

But CNN describes it like this:

It works like this: In order to keep dairy farmers in businesses, the government agrees to buy milk and other products if the price gets too low. . . . [But] if a new bill isn't passed or the current one extended, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that formula, the government would be forced to buy milk at twice today's price [. . .]
When did CNN become the arbiter of prices being "too low?" Is CNN going to start refer to taxes on the rich as "too high" and wages for teachers as "too low" too?

I bet everyone politician in America wants this guy to cover the legislation they sponsor. A hospital didn't oppose a new hospital opening in town to keep out the competition--it was, "in order to avoid duplication of services."

Saturday, December 22, 2012

Kill all the Lawyers

Criminal lawyers are expected to be experts in everything--biology (DNA), economics (motives for many crimes), psychology (for everything), probability ("beyond a reasonable doubt"), etc.

That is asking a lot, so I'm not going to say who wrote the following nonsense in his book on the "economic analysis of law." (The highlights are from Google books because I stumbled on it while search for those words.)

Correction: The guy who wrote this is an economist. Go figure.

Thursday, December 20, 2012

Bobby Jindal on why you shouldn't vote Republican

Bobby Jindal points out all the reasons why people want to vote for Republicans but don't. These are the two most important of his recommendations:

Stop being the stupid party. It's time for a new Republican party that talks like adults. It's time for us to articulate our plans and visions for America in real terms. . . . 
Quit "big." We are not the party of big business, big banks, big Wall Street bailouts, big corporate loopholes, or big anything. We must not be the party that simply protects the well off so they can keep their toys. 
Republicans are right on a lot of technical issues from health care to education to non-military spending. Health care sucks because there's no competition, education sucks because of unions and college's suck because of the subsidies, and no one really wants to pay your TV or radio bills (i.e. for PBS or NPR).

But because the Republican party is the party of the stupid and the corrupt, even if you agree with them on the economy and health care you probably don't want to vote for the whole package of Republican policies.


I've studied this legal paradox more than most lawyers, that is, I've spent a couple of hours thinking about it.

Here's the paradox: Lawyers say they judges are not supposed to "legislate from the bench" on a regular basis. People from all sorts of legal traditions say this on a regular basis. So that's strong evidence that most lawyers agree that the law is set down by the makers of the law (the legislature) and then the courts apply those laws.

Yet at the same time, the courts develop all sorts of policies. The most dramatic example is that, in an effort to keep police from stepping on civil rights the Supreme Court decided that throwing out evidence obtained from civil rights violations is "inadmissible." If the country, or a state, has a problem with cops over-stepping their bounds you would think that the legislature would handle it. The legislature can develop all sorts of incentives--from firing cops to suspensions to jail time--to punish cops of that violate protocol. But the court decided not to leave it up to the legislature how to punish these acts, because it was going to handle it.

Of course that is not an isolated incident. The courts develop all sorts of protocols on how laws are to be enforced and understood that regularly violate the intent of the legislature, with the justification that it is part of the function of the judiciary.

This strikes me as the central paradox of law. The law is meant to be written by the legislature because they make the laws, but at the same time because they can't be clear about everything judges are supposed to reinterpret the laws (often clearly in ways at odds with the intent) so as to improve them.

It closely parallels to the two central tenants of the microeconomics: (1) people are rational actors that make optimal decisions, and lots of economic papers rationalize all sorts of behavior in that framework and (2) economists know better than people because they have better data, so we can explain all sorts of irrational behavior people make and how to improve on it.

In both cases the obvious question is, how do you tell case 1 from case 2? How do I know when I'm supposed to insist the legislature (or people) were doing what is best and how do I know if they made a mistake and only I the lawyer (economist) with my superior reasoning ability can correct them? I know the answer in economics is "we don't have a fucking clue, this is a paradox" but you get the sense lawyers are supposed to have (very simple) rules for separating the two cases since they have (very simple) rules for everything else.

Sunday, December 2, 2012


I like unions but I when people ask about any particular union, I basically dislike them all. I don't like the AMA (doctor's union) becuase I can't see a doctor in a timely manner because of those bastards. I don't like the MBTA's union because the transit system sucks and they pay the bus drivers $25/hour. I don't like either of the two major teacher's unions because, politically, they are major roadblocks to improving education. I don't like firefighter unions because they're overpaid in almost every state.

So how can I like unions?

The thing is that too much of a good thing can be a bad thing. Unions are good because they help workers. Unions are bad because higher wages, shorter work days, better benefits, and lets not forget racketeering, defending racial discrimination, and stuff ballot boxes, have a cost to society. When unions are too weak in an industry, they can help workers a lot (SEIU might qualify here). When unions are too powerful consumers get it stuffed up their asses  (students, MBTA riders, etc.) in addition to the usual downsides of concentrated power (corruption, aforementioned labor rackets, etc.).

Naturally the best known unions are the big ones. And the big ones are the bad ones. So it's not surprising that I hate most of the unions you have ever heard of. But that doesn't mean I don't like unions.