You might think a personal finance story with the title “Boost your odds of winning the lottery”. couldn't be as bad as it sounds.

You'd be wrong.

How our inability to distinguish between independence and contrarianism encourages Steve Landsburg to be, let's just say, a less effective pundit

[I decided that the tone was getting a bit sharp in this debate so I'm dialing things down a bit. This entailed some very slight rewriting but none of these changes the substance of the post]

Before getting to the main thesis, let's confirm just how bad this incident was. A radio personality with millions of listeners grossly misrepresented the comments of a private citizen speaking out on an issue then used those distortions to make offensive and badly-reasoned attacks on the the woman. The situation at that point was bad enough but we don't really achieve horrible until Landsburg jumped in. Not only did Landsburg throw his reputation behind Limbaugh's illogical and factually challenged comments, he actually added additional [poor] arguments to the abuse this woman has had to put up with.

Noah Smith, Scott Lemieux, my co-blogger and others have done an excellent job addressing the lies and idiocy of this affair (check out how this blogger dismembers the I'm-mocking-the-postion-not-the-person defense) . The question for now is how this happened. How did a mid-level economist manage to reach such national prominence by writing a series painfully sophomoric books and articles?

Part of the answer, I'd argue, lies in the way journalists and editors now treat the counterintuitive. Publications like Slate give us a steady diet of pieces that take some claim that seems obviously true and argue the opposite. These publications would have us believe that this practice is a sign of intellectual independence and healthy diversity of opinion. It's not.

Contrarianism is closer to the opposite of independence, a point that's easiest to explain if we think in the idealized terms of a simplified fitness landscape. and draw an analogy between the defensibility of an argument associated with a certain position and the fitness of a phenotype associated with a certain genotype. (more on landscapes here)

Of course, it would take a lot of variables to realistically describe this landscape but the basic concepts still hold even if we simplify it to a bare-bones x, y and v(x,y). For every position (x,y) you can take, there's a resulting viability (v). Some positions are easy to defend (v is high). Some are difficult (v is low). Pundits and news analysts who try to find the best positions to argue are therefore performing an optimization algorithm (though most probably never thought about it in those terms).

For the most part, we can place this commentary and analyses in three general categories:

Neighborhood

Independent/semi-independent

Contrarian

The neighbor searcher tries to find the most defensible position within the neighborhood of a starting point. The best example I can think of here is the work David Frum specialized in until fairly recently. Frum was not being independent with his pieces in the Wall Street Journal or public radio (the terminal point of his searches was almost always within the neighborhood of the established conservative consensus) but he was arguably doing something as or more important, thoroughly exploring the landscape of the region and encouraging evolutionary shifts to sounder, more defensible positions.

The independent searcher, by contrast, goes where the search leads regardless of the starting position. The semi-independent searcher adds the condition that the terminal point has to be original (in other words, you can't end up on a point that someone else has already argued). Technically, originality and independence are in opposition here but in practice, they tend to complement each other.

And the two categories tend to complement each other as well. To grossly oversimplify, one group searches x+1 to x-1 and y+1 to y-1; the other group searches everywhere else. Given the fact the consensuses originally form around what seem at the time to be good ideas, it makes sense to explore their neighborhoods (if it helps, you could think of this in terms of Bayesian priors), but it also makes sense to keep exploring new territory. David Brooks and Frank Rich refine and improve their relative corners of the political landscape while writers like Jonathan Chait or William Safire range further and are more likely to reach unexpected conclusions.

The contrarian approach is to start with a position (x.y) that seems obviously true (often because it is true) then jump to either (-x,y) or (x,-y) and argue from there. It can, at first glance, look like the result of an independent search,but it is actually far more constrained than the neighborhood searches of Frum and Rich. Both of those writers would shift positions based on their reasoning and would insist on finding a defensible point before sitting down to the keyboard.

The typical contrarian piece hews so closely to its initial (-x,y) that there's no indication of a search at all. By all appearances, the writer simply jumps to the contrarian position and starts typing.

Contrarian writing crowds out good journalism and pumps misinformation and faulty arguments into the discourse. This would be bad at any time, but in the current state of journalism, it's disastrous. Here's a list of dangerous trends in journalism from an earlier post (with a link added from a different paragraph):

1. Reliable information sources like the CBO are undermined;

2. An increasing amount of our information comes from unreliable subsidized sources like Heritage;

3. Journalists suffer no penalty for publishing inaccurate information;

4. Journalists also fashion for themselves an incredibly self-serving ethical rule that lets them, in the name of balance, avoid the consequences that would have to be faced if they honestly assigned responsibility for screw-ups;

5. A growing tendency to converge on a narrative makes the media easier to manipulate.

All of these factors make it more difficult for our society to deal with bad data and contrarians are a rich source of some of the worst.

In a healthy journalistic system, counter-intuitive claims would be held to a higher standard (at least if we think like Bayesians) and if a logically or factually flawed argument made it through, both the authors and the editors would feel pressure to see that it didn't happen again.

In our current system, counter-intuitive claims are held to a lower standard (because they generate traffic) and serial offenders can actually build careers by badly arguing points that probably aren't true. Editors have lost all interest in fact-checking and outside efforts at debunking are usually treated as he said/she said.

It's easy to object to the positions Landsburg takes, but perhaps the truly offensive aspect here is the way Landsburg and the other contrarians reach those positions.

Andrew Gelman weighs in

Mark Palko asked me to post a link to Andrew Gelman's really interesting discussion about "economics exceptionalism". 

My own take-away is that I had not thought about the intellectual dominance of Freudian thinking for a long time and I had never made the link to economics.  But there were occasional forays of economics into areas like education and public health that I have spent some time talking about.  By now we all know the idea behind Freakonomics (even if it might be largely a marketing ploy, it has some intelelctual cachet).   The issue with Ray Fisman and teacher retention policy (should we fire 80% of new teachers) has seen a lot of discussion on this blog and I consider it a classic example of this type of economics reasoning exported to a more general subject matter.  (which is not a dig at Ray Fisman who appears to be a brilliant thinker on his own turf). 

So go, read, and enjoy the comments! 

Futurism

Something that Mark and I have been talking about is how much less audacious we have been (as a country) since the 1950's.  Back then there was a real sense of inevitable progress and an idea that there were great accomplishments lurking around the corner.  Noah Smith weighs in with an example of this:

If we had found better ways to unlock the vast stores of energy that we know are lurking inside the nuclei of atoms, we'd have those flying cars and Mars colonies and everything people thought we'd have back in the 50s (OK, the Economist doesn't say that, but it's true).

When did we lose this ambition and can we get it back?  

Presented without comment

From Paul Krugman:

From KCRW:

Faced with state funding cuts, Santa Monica College can’t keep up with student demand. The school’s governing board has approved a plan to provide extra classes after the regular ones are full. But while regular classes will cost $46 a unit the extras will be $180.

Addendum

Daniel Kuehn has posted a clarification of his position on his blog making it clear that his post was not intended as a defense of Steve Landsberg's position on the Sandra Fluke issue.

There is still an interesting argument about how modern readers seem to give more weight to counter-intuitive arguments than intuitive ones.  Landsberg's career seems to be based on this approach.  Bayesian thinking says that we should do the reverse -- and I think that it would be useful to the debate if we remembered such things.

Not thinking like an economist vs. not thinking, like an economist

Noah Smith has an excellent post on the strange tendency of some economists to treat offensiveness as a sign of clear-thinking. You should read the whole thing, but first I want to take a moment to focus on this quote by Daniel Kuehn:

A lot of people don't get "thinking like an economist" when they see it, [In this case, the people who don't get "thinking like an economist" include Brad DeLong and Noah Smith, but I digress -- Mark*] and what I think Landsburg is doing here is "thinking like an economist", not being a jerk...

Thinking like an economist simply means that you scientifically approach human social behavior - which means that you approach them like any other species of animal. Nobody judges animals when they behave in ways that we would consider horrendous in other humans. They're just... animals. And that's what you really need for good social science. You need to look at your fellow humans as "just animals". Astonishing, wondrous animals to be sure - but just animals...

It's absolutely critical for good economists to see the world in this way...I suspect [Landsburg] was "thinking like an economist". The problem is, of course, it flowed over from scientific analysis of human behavior to a commentary on a single individual human being[.]

[Landsburg] dotted all his i's and crossed all his t's on the analysis, because he's good at thinking like an economist.

We've been through this before. Steve Levitt used the thinking-like-an-economist line to dismiss critics. I found it lacking at the time and it hasn't grown on me since then but it should be noted that even at his worst, Levitt is making an effort to approach questions scientifically. I don't believe that a majority (or even a plurality) of Levitt's critics disagree with him because he's too logical, but at least it's a claim that can be made with a straight face.

Landsburg's defense of Limbaugh is an entirely different beast. There's no trace of a scientific process here or of any thoughtful process at all for arriving at a position. Landsburg simply reacted angrily when he saw people he didn't like say things he disagreed with. Unfortunately, he expressed that anger with a spectacularly shoddy attempt at an argument that misrepresented the original facts, mangled the reasoning and required the reader to make up new definitions for most of the operative words.

By applying it to Landsburg's Fluke post, Kuehn has stretched the thinking-like-an-economist defense to the point that if covers pretty much any statement, no matter how incoherent, as long as it includes something offensive to the general public.

(for more to this topic, check out this post by Andrew Gelman.)


UPDATE: Daniel Kuehn argues here that Smith misrepresented his original post. Read both and come to your own conclusion.

* And just to be clear, this bracketed statement was an editorial insert by me, not an aside by Kuehn.

How sure are you that your models are correct?

Karl Smith makes a really good point:

Now imagine that you withheld a payroll tax cut or food stamp relief or any other program on the basis of fear about long term budgets. Depending on your macro estimates somewhere between millions and hundreds of millions of people suffered for this. 

What did you get in return for their suffering? 

Absolutely nothing. Nothing. Nothing. 

Every time you ask a real living person to suffer for some future goal you have to know that you are betting their well-being on your being right about the future. 

How sure are you that you are right? 

Austerity costs with probability one. Attempting to effect long term growth is always a gamble.

I do think that this point is worth remembering in policy discussions.  Models of distant time periods (say 30t o 50 years in the future) are subject to dramatic changes in assumptions.  Could the people living in 1890 (who had never seen a plane) have imagined what 1940 (and the air war of the Battle of Britain) would be like?

This is not to say that we should be reckless.   But policies like austerity in a time of high unemployment have immediate and real costs.  To presume that one is really preparing for the future one should be really, really confident that one can predict it . . .

EDIT: As a clarification, this is much more salient for things like Health Care costs where things like technological progress could completely change the growth curve and less of an issue for Global Warming where we have an observable and deterministic physical process.

And things get worse . . .

Avik Roy part 2:

The VA system could be turned into a huge asset for our nation's health-care system if it were privatized. One of the big drivers of rising health spending is hospital monopolies: when one or two hospitals dominate a particular region, those hospitals have the power to charge whatever they want to insurers and patients. If civilians were allowed to use VA hospitals, and vice-versa for veterans, we could significantly improve this problem. In addition, if the VA hospitals have indeed come up with operational efficiencies, competing private-sector hospitals would be forced to adopt those efficiencies, or lose patients.

If liberals are right, and the VA is a model, competition will force private hospitals to improve on both quality and cost. If conservatives are right, and VA hospitals are terrible, privatization would allow veterans to gain access to superior private-sector health care, while increasing provider competition. Seems like a win-win.

So if I think that a single payer model creates efficiency then the way to test that would be to privatize the system so that we could see if it was equally good as a multi-payer system.  The things that make a single payer system efficient -- less adminsitrative overhead, rationing, ability to implement cost-effective standards of care, no need to run at a profit -- would all vanish in a competitive market place.  Because each insurance plan would have different rules and paperwork requirements which would rapidly undermine a lot of the single payer efficiency. 

So how is abandoning the model used by liberals (single payer) to privatize VA hospitals going to work out as a "win-win"? 

The best analogy I can come up with is comparing a privately held company to one that is publicly traded.  The idea that the private company should become publicly traded so that one can judge if it is more efficient than the publicaly traded company ignores the possibility that it is more efficient because it is privately held. 

So I think that this idea isn't going to show what Mr Roy claims it will show. 

Megan McArdle is on hiatus

But there are people carrying on her work.  The argument in Avik Roy's most recent piece (a guest blogger at the Atlantic) seems to be less than well thought out.  It tries to argue that MedicAid is suboptimal insurance and that, therefore, increasing access to MedicAid will reduce health care access overall.  This is the ultimate straw person argument.  Nobody will enroll in MedicAid if they have private health insurance available to them as an option.  So the real issue is whether the uninsured would be better off under MedicAid or under no insurance at all.  Note that you could always choose not to enroll in MedicAid and stay uninsured, if that was your preference.  Nor is it guarenteed that private insurance will always be available to people as costs rise and employers rebel.   

So the real questionm here is whether MedicAid is worse than no insurance at all.  The good folks at the Incidental Economist have a post with a dense series of links as to the complete lack of evidence for this hypothesis. 

Now one could argue that it would be nice if MedicAid were better insurance, but that doesn't seem to the concern of the author of the post.  Instead, it seems to be about reducing support for health care reform without really positing a superior solution.

UPDATE: It seems that the Incidental Economist addressed this twice, with another post pointing out that reimbursements under MedicAid are set to increase (and that this should increase the number of physicians willing to accept MedicAid).

UPDATE 2: Karl Smith has a rather clever point here on the same piece:

Is the suggestion here that the fixed costs associated with running an office are so high that the breakeven point is achieved from a maximum throughput of full insurance patients? And, further that there is simply no way of operating an office with lower overhead? I can see how its not profit maximizing to accept Medicaid patients. I can even see how in a perfectly competitive market providers would have bifurcate into Medicaid and non-Medicaid providers. However, I do not see why the market cannot find a way to provide paying customers with some level of service.

A randomized test of welfare

In the Economist, no less. Consider:

When the results were in, the team found that the unpaid women had suffered more than twice the HIV infection rate experienced by the paid women over the course of the 18 months of the experiment, and four times the infection rate of genital herpes. Intriguingly, there was no difference between the infection rate suffered by those required to go to school and those who received the money unconditionally. Whether the actual amount of money mattered was not clear. For that to emerge a larger sample would be needed. What is abundantly clear, however, was that the money did make women behave differently. They had younger boyfriends than those in the control group, and had sex less frequently.

What should be noted is that this was a randomized experiment so you can actually infer causality.  I am positive Mark will have a lot more to say about this experiment.

But let me note, for the record, that this is the opposite result of what conventional thinking would yield about giving young people cash subsidies.  It's also notable that requiring school did not change the good results so unconditional transfers are not inferior to conditional transfers.  Are we sure that a social safety net would result in worse outcomes?  What about giving grants to college students?  

Airports in the sky

2012 Skyscraper Design Competition



The idea of an airport suspended above a city was a plot point of the classic screwball comedy the Palm Beach Story. I find it remarkable that the wildly ambitious notions of seventy years ago are still the wildly ambitious ideas of today.

Remarkable and terribly depressing.

Back on the higher ed beat

Paul Krugman weighs in on recent comments from GOP candidates on the subject of higher education:

About that hostility: Mr. Santorum made headlines by declaring that President Obama wants to expand college enrollment because colleges are “indoctrination mills” that destroy religious faith. But Mr. Romney’s response to a high school senior worried about college costs is arguably even more significant, because what he said points the way to actual policy choices that will further undermine American education.

Here’s what the candidate told the student: “Don’t just go to one that has the highest price. Go to one that has a little lower price where you can get a good education. And, hopefully, you’ll find that. And don’t expect the government to forgive the debt that you take on.”

Wow. So much for America’s tradition of providing student aid. And Mr. Romney’s remarks were even more callous and destructive than you may be aware, given what’s been happening lately to American higher education.

For the past couple of generations, choosing a less expensive school has generally meant going to a public university rather than a private university. But these days, public higher education is very much under siege, facing even harsher budget cuts than the rest of the public sector. Adjusted for inflation, state support for higher education has fallen 12 percent over the past five years, even as the number of students has continued to rise; in California, support is down by 20 percent.

The choice of California is sadly apt. The state's three-tiered UC/CS/community college system is, even after these devastating cuts, a remarkable achievement. Residents have access to an impressive spectrum of educational options, ranging from inexpensive schools designed to be friendly to disadvantaged and non-traditional students to some of the world's best public universities (with surprisingly reasonable tuition).

In case you think I'm exaggerating, check out this post from Joseph:

From the Academic rankings of world universities:

1. Harvard University (private)

2. Stanford University (private)

3. Massachusetts Institute of Technology (MIT) (private)

4. University of California, Berkeley (public)

5. University of Cambridge (British)

6. California Institute of Technology (private)

7. Princeton University (private)

8. Columbia University (private)

9. University of Chicago (private)

10. University of Oxford (British)

11. Yale University (private)

12. University of California, Los Angeles (public)

13. Cornell University (private)

14. University of Pennsylvania (private)

15. University of California, San Diego (public)

16. University of Washington (public)

17. University of California, San Francisco (public)

18. The Johns Hopkins University (private)

19. University of Wisconsin - Madison (public)

20. University College London (British)

Some interesting patterns immediately jump out. Of the top 20 schools, 17 are American, which is pretty impressive given the share of the world population held by the United States. Of the 17 American schools, six of them are public (which is amazing given how many resources the private schools have). Of the public schools, 4 of them are in California.

If you check out the rest of the list you'll find all of the UC schools have respectable rankings. Given their caliber, they are also quite affordable. I took a grad course in Bayesian networks a couple of years ago at UC Riverside. It cost me eight hundred dollars and was an extraordinary bargain.

It should be noted that some pundits don't think much of California's commitment to great universities. Here's Kevin Carey:

If Berkeley’s star professors are lured away to Stanford, it’s bad for the university but not necessarily bad for America, particularly if (as is frequently the case) those professors teach few if any undergraduates. They’ll be the same people doing the same thing at another university an hour away.

Of course, Carey also believes Rick Perry Is a Higher-Education Visionary.

A perspective on Ayn Rand

This is worth reading.

The carried interest exemption

Carried interest as an exemption isn't easy to defend:

The other problem is that private equity partners are not actually like Dan the carpenter. If Dan and Ms. Moneybags are in a true 50-50 partnership, then Dan is on the hook for half of their losses, as well. The great thing about 2 and 20, for private equity partners, is that they get a cut of the profits but they don’t absorb a share of the losses. This means that the 20 is more like a performance bonus than like a partnership share. So if the 20 is in a gray area, as Mankiw argues, it is even closer to ordinary income than Dan’s partnership share—which, as Mankiw shows (although he doesn’t quite come out and say it, for obvious reasons), should be treated as ordinary income

I have begun to wonder if capital gains should be taxed at a different rate than income, especially if we have exemptions on gains resulting from housing (as transaction costs with housing can reduce mobility).  But the only argument for capital gains exemptions (that people have to risk losing their money) clearly isn't applying to hedge fund managers.

But no matter how one looks at this situation, the best that can be said is that some people may sneak labor wages in as capital gains.  But should we not be trying to limit the cases where this happens and not encourage them?