We treat economists as authorities on genetics and epidemiology but we aren't that interested in what they have to say about economics

From Media Matters:

Of the 1,258 guest appearances during segments that discussed the issue in the month leading up to the debt deal, only 52 -- or 4.1 percent -- were made by economists.

View a larger chart here.

The definition of "economist" used in this study is broad -- it includes any guest with an advanced degree in economics or who has served as an economics professor at the college or university level. It also includes guests who have worked as government economists (such as Ben Stein, who formerly "worked as an economist at The Department of Commerce").

When you have to count Ben Stein to get to 4.1%, you know there's a problem

When Greece is an appropriate example

I'd mentioned the problems with using Greece as the prime (and sometimes sole) example in the austerity debate. Now, via Krugman, Kash Mansori brings the point home with a great table that shows how heterogeneous the PIGS were in terms of profligacy and how homogeneous they were in other ways.

If the crisis is due primarily to local causes, then we would expect the best predictor of crisis to be government deficits and debt. On the other hand, if the systemic causes view is correct, then a better predictor of the crisis would be large current account deficits, which necessarily happen when there's a capital flow bonanza.

The following table shows both fiscal (i.e. national government) budget balances and current account balances during the period after the adoption of the euro and before the worldwide financial crisis and recession struck in 2008. All figures are from the OECD and expressed as a % of GDP.


The factor that crisis countries have in common is that, without exception, they ran the largest current account deficits in the EZ during the period 2000-2007. The relationship between budget deficits and crisis is much weaker; some of the crisis countries had significant average surpluses during the years leading up to the crisis, while some of the EZ countries with large fiscal deficits did not experience crisis. This is one piece of evidence that a surge in capital flows, not budget deficits, may have been what laid the groundwork for the crisis.

Joey Skaggs and Rick Perry

I remember an interview with the great prankster Joey Skaggs. Skaggs had a long history of getting major news outlets to report his over-the-top hoaxes as actual news, often scamming the same outlet multiple times. When asked how he managed to avoid running into the same reporters he explained that he would often see people who had covered previous hoaxes but they always had the same reaction: they would pause for a moment trying to place where they had seen him before then would shake it off and go on with the report. I don't have access to the interview, but if memory serves, Skaggs explained that they wanted to believe in the story and that was enough to make them put aside the first-hand experience that told them not to believe it.

I was thinking about Skaggs as I followed the press' eagerness to anoint Perry the GOP candidate for 2012. The press always gets worked up about these late entrants to weak fields. Pundits focus on strengths, downplay weaknesses and fill in the numerous blanks with the most positive possible outcomes. (You can also see this happening with Chris Christie). But I can't think of a case where a Republican entrant has actually jumped into the race (effectively) after the Ames Straw Poll and actually gotten the nomination.

I may be forgetting about an obvious example and even if I'm not it's possible that Perry will get the nomination and even the presidency, but given the recent turn in sentiment both with pundits and at least one (possibly unrepresentative) sample of GOP voters, it's clear that Perry was to a degree a Rorschach candidate.

Why did did so many reporters not anticipate the rough patch that new candidates always face when those initial unknowns are filled in? Why do journalists continue to consistently overrate the chances of entrants who jump in at the last minute? The same reason that the CNN crew didn't recognize Skaggs when he claimed to have written a program that would decide if O.J. Simpson was guilty, because they wanted to believe a good story.

Marginal utility

Frances Woolley asks a question:

In othe words, the reason we care about inequality is that it reduces the happiness achievable from a given amount of income. How much depends upon the happiness/income relationship. Does the marginal utility of income fall rapidly? Or is the happiness from the 100,000th dollar almost as great as the happiness from the 100th?

I think that this question has an obvious answer. Anybody who has lived in poverty can immediately answer that just a few dollars for food can make a huge difference. But how many wealthy executives would feel happy all day over a $3 bonus?

Of course this curve is non-linear. The arguments for inequality that are interesting seem to involve: 1) Whether a class of wealthy investors can stimulate the economy through free market investment and 2) Whether differences in economic outcomes is needed to incentive unpleasant but necessary labor. Now, the later is unlikely to explain Bill Gates or Warren Buffet (are their jobs really so vile?). SO the former really has to do a lot of heavy lifting . . . and is likely overstated.

But an assumption that income effects are perfectly linear seems so contrary to experience that I presume that this post is to stimulate thinking!

California Falling

In interesting news today, California is now at the very bottom of the top ten states for wealth. The continued prosperity of the East Coast is beginning to look a lot like a strong argument for density. Density has historically been a critical way of bringing ideas together. For a while it looked like California was an attempt to show how prosperity could work with lower density population patterns.

We'll see if this is a trend or an isolated blip, but it doesn't bode well for the West Coast pattern of settlement.

Is smoking really the most important predictor of obesity?

Does this headline really represent the data?:

The No. 1 Reason Americans Are Getting Fatter: We're Not Smoking

The text goes on to discuss the rise of anti-smoking laws and the increase in obesity. Then at the end of the article, they discuss the actual magnitude of the effect:

"Using the traditional Blinder-Oaxaca decomposition technique" -- a social science method often used to study two groups or components with different credentials; a method, essentially, of comparing apples to oranges -- "we find that cigarette smoking has the largest effect: the decline in cigarette smoking explains about two percent of the increase in the weight measures," Baum and Chou, both professors of economics at Middle Tennessee State University and Lehigh University, respectively, explain in the paper's abstract. "The other significant factors explain less."

Two percent? Really? So non-smoking factors explain 98% of the change?

So either the model explains very little of the variation or smoking is a small contributor to the obesity epidemic, regardless of how it ranked on a list of covariates. And this doesn't even consider the possibility of correlation (obesity is rising as smoking falls) of temporal trends instead of causation.

In either case, that is not a useful headline.

Beware of pundits bearing ADA arguments

Reading Paul Krugman (more a cumulative effect than any particular post) has gotten me thinking about how ADA arguments have come to dominate much of the Euro debate. ADA arguments (let me know if you have a better name) follow an Aggregate-Disaggregate-Aggregate pattern. Here's the classic example:

I. Ominous statement about Social Security and Medicare;

II. Frightening statistic about Medicare;

III. Draconian changes for Social Security and Medicare.

The troubling statistic never applied in any way to Social Security. It invariably referred to some aspect of Medicare that was completely different from the first program but those not listening carefully could easily come away with the impression that the statistic applied to both.

Now the most common example is the PIGS Austerity argument which goes like this:

I. Portugal, Ireland, Greece and Spain are in trouble;

II. Greece engaged in profligate spending and ran up a huge deficit;

III. Portugal, Ireland, Greece and Spain need to slash spending immediately.

In a way, Greece makes an even better D in the ADA than Medicare does. Both entitlement programs do, at least, share some common troubles (though not to comparable degrees). With PIGS, two of the countries were actually recognized models of fiscal restraint, displaying the exact opposite of the behavior that got Greece into trouble, but through the magic of ADA, a large portion of the pundit class is now convinced that all four countries partied their way to ruin.

The Growth Fetish cont. -- Netflix and Dylan

Joseph has a great post up that dovetails nicely with my earlier post on attitudes to corporate growth and contraction in which he elaborates on Karl Smith's insightful reaction to a statement by Netflix CEO Reed Hastings. You should definitely read what both Joseph and Smith have to say but it was another aspect of Hastings' quote that caught my eye:

Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

This fable of CEO as Dylan at Newport, boldly walking away from proven success to try something new, is a cherished part of the mythology. It is not, however, true all that often. I can think one example offhand (CBS's rural purge of 1971) and of many counterexamples where a business lost a lot of money trying to do something new to avoid the dreaded contraction. Interestingly, one of these counter-examples is Borders which hastened its demise with an ill-considered attempt to expand into overseas markets.

Principal agents

I suspect that this reaction to a press release by the CEO of Netflix is just a principal agent problem:

In classical economics AOL should have died. Borders should have died.They should have spun every dime out to the shareholders who could have invested in the next big thing themselves.

However, Hastings is specifically saying this is the mark of a bad CEO and everyone nods there heads. He is saying that we should burn shareholder profits in an effort to move away from what made the company great.

Shareholders are diluted across thousands of mutual funds and cannot easily exercise control. Returning money to these people also means no longer being the CEO of Borders or AOL. Management loses access to resources and are looking for jobs with less experience. If there was a cultural sense in which winding down the firm made an executive more employable at a later firm, that would be different.

But, as it is, why would an executive ever decide to walk away from the resources of managing a large company when they could profit from spending down the corporate resources. It is not like they can be held accountable by the shareholders, in any meaningful sense. They merely need to promise that, in their judgement, they can invest the money more effectively than the shareholders and keep going.

Heck, how many people working for a large firm consider themselves as working for a shareholder pool as opposed to working for the CEO? After all, only one of these two groups has any day to day authority in the company and access to complete information.

Leave SpongeBob aloooooooone!

I have to admit a certain bias here. I'm a big fan of Mr. Squarepants. I like the classic Fleischer look with the occasional Wolverton grotesque touches, the witty asides to the more sophisticated viewers, the sensibility that built the climax of the first episode around a Tiny Tim song and the cultural literacy to pick the lovely and wonderfully apt "Livin' in the Sunlight, Lovin' in the Moonlight" for the song in question (and, of course, the fact that in Bikini Bottom you can build a campfire under water).

SpongeBob has been all over the news lately, even making the teaser for at least one local station's 11:00 broadcast. The cause of the furor was a recent study, described here on All Things Considered:

"I would not encourage parents of a 4-year-old boy to have him watch SpongeBob right before he goes in for his kindergarten readiness assessment," Dimitri Christakis told Shots. He's a child development specialist at Seattle Children's Hospital who wrote a commentary on the new study, which was just published in the journal Pediatrics.

But fans of the optimistic denizen of Bikini Bottom can take solace in the fact that the new study comes with a boatload of caveats. Just 20 4-year-olds were tested after watching the popular Nickolodeon show, and they watched it for nine minutes. That's a very small sample size, and it hardly reflects the real TV-watching habits of young children, who commonly watch two to five hours a day of TV.


And the researchers, psychologists Angeline Lillard and Jennifer Peterson of the University of Virginia in Charlottesville, didn't measure if the problems with attention and executive function lasted. But they did compare the SpongeBob watchers to 20 children who watched Caillou, a slower-paced PBS show that features a sweet yet whiny preschooler. Another 20 colored for 9 minutes.

Neither of those groups had problems with the tests, which involved remembering a series of numbers, following rules, and delaying gratification. (That test asks the preschoolers to resist eating a plateful of Goldfish crackers for 5 minutes, which would be hard for many members of the NPR Science Desk.)

But the kids who watched SpongeBob, which changed scenes every 11 seconds, did significantly worse on the tests than either the children who colored, or those who watched educational TV. Caillou changed scenes every 34 seconds.

Other studies have found that children who watch a lot of TV as preschoolers have more problems with attention in the elementary-school years. Christakis, who has conducted several of those studies, says that the findings of the new study are consistent with what he's found. It's not SpongeBob himself who's the culprit, he says, but fast-paced or violent shows. "It's overstimulation that causes the problem," he says. The theory is that overstimulation while a child's brain is developing makes it harder to focus on sustained tasks later on.

This is the classic one-two punch of so much behavorial science: observational studies with data confounded to within an inch of its life* and little n experiments that answer a trivial (and in this case painfully obvious) question that relates only tangentially to the major issues.

This incredibly hyped study basically showed that small children have trouble concentrating immediately after they get wound up. This conclusion is not exactly news worthy. Anyone who has ever dealt with groups of pre-schoolers can tell you that the transition from squealing with laughter to sitting quietly can be difficult and that's really all this study tells us.

There has been a long history of research, going back at least to Seduction of the Innocent, built around puritanical disapproval of children seeking out stimulating entertainment. It is based on a vision of young people as miniature Roderick Ushers with constitutions so delicate that anything but lives of unrelenting blandness would damage them forever.

I don't buy it. Kids are remarkably resilient, often emerging relatively unscarred from some truly tough situations. It's difficult to believe that a few extra camera angles would cause them irreparable damage.

More importantly children have an evolutionary imperative to seek out stimulation. Their appetite for excitement and laughter matches and often exceeds their appetite for food and drink. There's a reason for this. Our creativity, our curiosity and our ability to organize and explore our world through narrative are all connected to that desire for fun.

This is not to say you should give your preschooler the remote any more than you should give a four-year-old free run of the refrigerator. Providing structure and maintaining balance are part of a parent's job, as is reading to your kids and taking them outside to play and any number of other things that everyone knows are important for a growing child. Television should certainly take a backseat to these things. You can even make a good case for eliminating it entirely.

Just make sure it's based on common sense, not questionable research.


*yeah, 'data' is plural -- what are you, the grammar police?

Logic on social security

Somehow, I doubt that this post will be influential:

Oftentimes, however, I see people on your television programs or your televised debates making reference to the idea that “younger workers” should divert some of our payroll tax money into some kind of private retirement accounts. At this point you, the national political reporter, absolutely must ask them how we’re going to pay current benefits of this happens. What privatizers want to say is that current retirees will keep getting benefits and future retirees will be okay despite our lack of benefits because we’ll have private accounts. But current retirees can’t get benefits if my money is in a private account. And my account can’t be funded if I’m paying benefits for current retirees.

The obvious answers are either a) we will stop paying benefits or b) taxes are about to hit a new and large high as we switch from Paygo to pre-funded accounts. If the answer is a), why do we trust these same people not to play games with the individual accounts when they start to become a major liability (i.e. have to be paid out)? I am not against option b) but it seems to be an unusual direction for the United States to go, and an enormous financial sacrifice for a fairly small policy gain.

I also think that the distinction between lending to the government, via a private savings account, and having a future claim on government revenues is a narrower difference than most people think. After all, playing with the tax rates on withdrawals from these accounts has the same effects as a benefit cut in social security (and both are within the easy ability of the government to accomplish).

How do you say Los Angeles

For the curious, Americans often pronounce the names of cities in interesting or unusual ways. It seems there was actually a risk Los Angeles could have ended up pronounced with a hard "g" (like angle instead of angel".

Loss AN-ju-less versus Loss AN-guh-less: did they pick correctly?

What is up with Arkansas?

Looking at the student loan defaults rates by state, one is struck by how much the defaults are concentrated in the South East. Why would this be so?

But nothing is as shocking as how badly the for-profit institutions do. I think some sober looks at these numbers make sense before we conclude that for profit is automatically better, especially given that student debt is large and can no longer be discharged by bankruptcy.

Medical spending as a zero-sum game

Marketplace has a good piece on the debate over hospital construction in Detroit. It raises real questions about creating new jobs by adding what seems to be unneeded capacity to the health care system.

Definitely worth a look.

Professionals and Advancement

A few years ago, a Fortune 500 company I was working with started worrying about retaining their technical people. The wages were competitive and the bonuses were good, but the concern was that statisticians, programmers and other people who were doing analytic work and who weren't interested in management really didn't have a career track. In other words, even with high salaries and incentive pay, it's difficult to hold on to good, highly skilled professions without offering some opportunity of advancement.

With almost all careers, we expect a certain level of ratcheting advancement. We generally assume that if we maintain a certain quality of work, we will see a more-or-less steady increase in either our compensation, our employability or our job security. This advancement can take all sorts of forms from traditional promotions to a salesman's contact list to a writer's readership, but whatever the form, it is exceedingly rare to find jobs where you start each year about where you started the last one and it's next-to-impossible to find one that would be considered a 'profession.'

(Of course, there are many freshwater economists who are deeply uncomfortable with this ratcheting effect, who would argue that an ideal labor market should have no memory, that the services provided by a long time employee should be treated no differently than any other commodity. Long time OE readers will probably know I don't agree with the idea that labor should be treated as just another market, but that's a topic for another time. For now we're talking about the way things are.)

The discussion of teacher compensation and job security has almost entirely ignored the larger question of advancement, looking at the unusual contractual protections afforded the profession but failing take into account the equally unusual limitations. Take a minute and try to think of professions that have the following career constraints:

Few opportunities to move up the org chart. Not only is the structure here relatively flat, but unlike many industries, the move to management is almost a complete break from your previous role. Thus 'rewarding' the best teachers by making them administrators is a questionable strategy. We obviously need exceptional principals but we can't have teacher career track focused on taking the best teachers out of the classroom;

Non scalable work. Even if you accept claims about class size not mattering (and there's a lot to dispute in the reasoning behind those claims), there are still hard limits to the number of fourth graders one person can teach in a year. Compare this to someone like a journalist who can, in a sense, sell the same piece of work a virtually unlimited number of times;

Bounded compensation. Though movement reformers talk a lot about different incentive pay plans, pretty much all of them are metric based and have pre-determined maximums;

Lack of entrepreneurial opportunities. It is true that administrators can go out and start their own charters but teachers can't start their own classes;

Limited chances for promotion through relocation. This does happen but it's discouraged with good reason. The winners tend to be high-income suburban schools. Add to this the logical results of movement reforms that effectively reduce job security for teachers in schools bad neighborhoods and you have a huge incentive to actually widen the achievement gap.

In other words, we have here another case of advocates for business-based solutions who don't understand how businesses actually operate. Not coincidently, this is also an area where conservatives with actual business experience (like Jim Manzi) tend to take more nuanced positions.