More "moral" economics via Chait

While we're on the subject...

One of the really insidious things about the ant-and-the-grasshopper view of the European crisis is the way that the conflicting facts have been revised and the revisions have gone directly into the conventional wisdom. Jonathan Chait has a recent example:

David Brooks today devotes his column on Europe to the familiar conservative morality tale, in which the European countries in trouble are paying the price for their slothful, profligate ways:

Over the past few decades, several European nations, like Germany and the Netherlands, have played by the rules and practiced good governance. They have lived within their means, undertaken painful reforms, enhanced their competitiveness and reinforced good values. Now they are being brutally browbeaten for not wanting to bail out nations like Greece, Italy and Spain, which did not do these things, which instead borrowed huge amounts of money that they are choosing not to repay.

Does anybody else on the Times op-ed page care to rebut this? Perhaps somebody who has glanced at the relevant data? Yes, you there, the bearded man with the Nobel Prize in economics:

How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. Turn on your TV and you’re very likely to find some pundit declaring that if America doesn’t slash spending we’ll end up like Greece. Greeeeeece!

But the truth is nearly the opposite. …

Only Greece ran large budget deficits during the good years; Spain actually had a surplus on the eve of the crisis.

On his blog, Krugman also has a chart showing that Italy and Spain both had shrinking debts as a percentage of GDP in the dozen years before the crisis.

Perhaps the most remarkable thing about this is the fact that Krugman and numerous other economists have been trying to correct these mistakes for a long time, often in prominent forums, and yet even normally reliable sources like Marketplace nonchalantly refer to the profligacy of Spain and Ireland alnog with that of Greece as established facts.

It's funny. In a debate that focuses so much on virtue and personal responsibility, so little attention is given to dishonest arguments and professional negligence.

Economics and Morality

I have noticed a rather poisonous idea that is starting to get noticed -- the link between moral virtue and economic success. Consider these two points below.

Matt Yglesias:

To be clear, I don't think we're looking at hypocrisy exactly. Instead it goes back to the preference for morality tales. Whoever is up at the moment must be up because of their greater moral virtues. I seem to have somehow missed the conservative articles lauding Germany and the Netherlands from back four or five years ago. Instead at the time I was reading lots of stories about the triumph of the Celtic Tiger, the genius of the flat tax in the Baltic states, articles praising Silvio Berlusconi and so forth. Certainly at no point during the Bush administration was there a lot of talk in the right-wing press about the evils of household debt, the overwhelming merits of current account surpluses, or any of the rest of it.

Andrew Gelman:\

Nothing here about “hardworking” or “virtuous.” In a meritocracy, you can be as hardworking as John Kruk or as virtuous as Kobe Bryant and you’ll still get ahead—if you have the talent and achievement. Throwing in “hardworking” and “virtuous” seems to me to an attempt (unconscious, I expect) to retroactively assign moral standing to the winners in an economic race.

The reason that I consider this to be a poisonous idea is that distracts us from the actual moral actions of the people involved. I'd consider the "all bosses are bad" to be an equally poisonous notion. Painting a social class with either virtue or vice is likely to distort thinking and policy in bad ways.

Economic success is good; we all like living in a world where utility is maximized. But I'd thought the linking of material success to moral virtue (consider the finale of the story of Job) had gone out of style. Instead we live in a world where people with significant moral failing (think Steve Jobs) can still contribute to economic success.

Linking these two concepts interferes with assisting the economic losers as it tends to attach the stigma of blame. This is not to say that hard work may not correlate with economic success but that it is important to remember that hard work does not necessarily lead to economic success.

Just ask a medieval serf!

"So crazy it just might work"

Another strong effort from This American Life with all the superlatives that normally apply, but this one is of special interest to the kind of people who would read a blog called Observational Epidemiology. It describes an unlikely collaboration between a cancer researcher and a layman who claimed to have more or less invented a cure for cancer in his garage. The story lays out in painful detail how differently a scientist and a non-scientist see problems, even when they seem to be in agreement.

You can listen for free but I'd strongly recommend sending them a few bucks in appreciation.

Act One, Mr. Holland's Opus. OK, true story. A guy goes to college on a music scholarship. And then afterwards, he ends up going into science. And he becomes a cancer researcher. His name is Jon Brody. And 19 years after graduating, Jon is invited back to his old college to give a talk about his work. And the speech he gives is mainly about how important it's been in his research to think outside the box, to use an overused phrase. To think outside the box, to be ready to turn away from what's familiar and try some new idea.

And then after his speech, Jon is approached by his old orchestra teacher, a guy named Anthony Holland. And Professor Holland, to Jon's great surprise, says, "Speaking of thinking outside the box, I've actually been working on an experiment for a few years that I'd like to show you. Come look at this video. I think you'll find it very interesting." So what could Jon do? He'd just actually given a whole talk about keeping an open mind.

What resulted from this was the kind of scientific collaboration that almost never, ever happens-- a serious cancer researcher teaming up with an amateur to try to make a breakthrough. Gabriel Rhodes is a documentary filmmaker. And he's been following the story from the beginning, back when Jon watched that video.

Intellectual Property

Apple appears to be suing as part of its business plan:

Apple makes great products, but you wouldn’t know it from the way it’s attacking Samsung. Rather than let the marketplace decide whose products are better, Apple wants the courts to decide. Specifically, Apple is slugging it out with Samsung in a minimum of 19 lawsuits in 12 courts in nine countries on four continents.

Let that sink in for a minute. Apple is trying to use intellectual property law as a bludgeon around the world to protect its sales.

I think that we need to think carefully about what these laws exist to do and to promote. Apple is a profitable and successful company even with competitors. It might well be less profitable and successful if competitors could not enter into it's space. Imagine if the basic functionality of the telephone (talking remotely to people) was under patent. What would be the incentive for innovation?

Intellectual property is a very slippery idea; the gap between compensating for innovation and creating rent-seeking behavior seems razor thin.

Emotionally an eight-year old

An enormously revealing (bordering on the delusional) response from Washington Post reporter Paul Kane. The questioner said that there was " no factual basis" for a claim that Kane and his colleagues made. This charge was part of a larger widely-circulated accusation that Kane and co. have repeatedly distorted their coverage to maintain a comfortable narrative and avoid the blowback that inevitably follows when you hold powerful people responsible for their actions.

Kane is familiar with these accusations (he's the one who brings up the subject) and it's clearly a sore point, because when he hears the question he angrily... Well, I'm not sure what the hell he does but he certainly does it angrily.

Q. (IM)MORAL EQUIVALENCE

Paul, I'm guessing you won't be sympathetic to the following point, but I'll put it out there anyway. Most reporting on the supercommittee--like most reporting on the deficit--reflects an acceptance of a basic fallacy. Whenever there is an impasse, there seems to be a desire to blame both sides equally, on the theory that if only Democrats would concede more, Republicans would reciprocate (all evidence to the contrary notwithstanding). Yes, Democrats have drawn lines in the sand, but as Greg Sargent and other commentators have documented, when you compare the specifics, there is no factual basis for blaming both parties equally. So my question is, why does the Post's coverage do so anyway, either explicitly or implicitly?
– November 21, 2011 11:48 AM

A. PAUL KANE:

Yeah, you're right. I think this point is just absurd and ridiculous. This is a big thing among folks calling it "moral equivalence" (Fallows, Ornstein) and others calling it the "cult of balance" (Krugman).

It's just stupid. If you want someone to tell you that Republicans stink, read opinion pages. Read blogs. Also, the underlying sentiment on the left is that this is the real reason why things went wrong in 2010: That the mainstream media is to blame. Sorry, I think that's the sorta head-in-sand outlook that leads to longer term problems for a movement.

Greg is a fine writer. He's an opinion writer, in the opinion section of the web site. I encourage you to keep reading him. And I encourage you to keep reading the news coverage, which should always strive to present both sides of the story. If you really don't want to hear anything about the other side of the story, I really do encourage you to stop reading the news section.

You'll notice he never says "I never implied that both sides were equally to blame." or "Both sides are equally to blame." Instead he calls the complaints 'stupid' and says that if people don't like his rules they can just go home.

Kane's stunted emotional development might be amusing if not for the bigger story. I'll try to come back later and flesh the following out but here is the need-to-get-to-bed version.

Our ability to have a productive public discourse has been eaten away by this and other problems including:

a decline in standards of accuracy;

undermining of authoritative sources like the CBO;

subsidized debate by partisan foundations;

an increased use of press releases as news and a tendency of journalists to simply print what they're told;

coziness with subjects;

more and more groupthink.

As someone who likes the idea of a democracy, these things scare the hell out of me.

Lots of good stuff

From NPR:

Priya sits between two operating tables. When she finishes one patient, usually in less than 10 minutes, she turns to the next table, where the patient is draped and ready. This way, there is no time wasted between surgeries. Priya says she performs 30 to 40 surgeries a day.

And Marketplace:

But what if I told you that there's a way to cut the deficit by as much as $7 trillion over the next 10 years? That's way more than the $1.2 trillion the super committee was supposed to cut. And the best part? Congress wouldn't have to do much at all. Anything, really.

And Richard Thaler via Salmon:

Having decided that charitable giving is a worthy cause, the government subsidizes charitable gifts from certain households, and for those chosen to be part of the plan, every dollar donated to a charity is increased by a specified percentage. To qualify, taxpayers must have a substantial home mortgage; the subsidy rate increases with taxable income. Low-income taxpayers receive no subsidy, but donations from qualified high-income taxpayers are subsidized by as much as 40 percent — or more…

And Harvard via TPM:

I hate John D. Cook

As God as my witness, I swear I was getting ready to do a post looking at argument from authority in terms of informative priors.

Apple Stock

Karl Smith is bearish on Apple:

On the one hand you can buy Apple stock for $375 a share and pay $7 to ScottTrade. On the other hand I also have a trash can in which you can deposit your $375, pay me $5 and I will set it on fire for you.

Clearly, I am offering the better deal as in both cases you have approximately zero probability of getting your money back and I am willing to burn it for $5 whereas you have to pay ScottTrade $7.

This is really one of the paradoxes of the stock market. It is not clear whether or not companies that do not issue dividends will ever be investments that pay off. The longer Apple puts its cash in executive compensation without rewarding owners, the higher the risk that Karl Smith is right.

How many rich families do you know that sustained multi-generational wealth via the stock market? How many do it with real assets? It is worth thinking about.

Another statistics/auteur theory post -- causality

[the second in a very infrequent series]

From the LA Times:

Cinema trends ebb and flow, but one facet of Hollywood moviemaking proving remarkably consistent is gender inequality, according to a study being released Monday by USC's Annenberg School for Communication & Journalism.

In a survey of the top 100-grossing movies of 2009 — including "Transformers: Revenge of the Fallen," "Harry Potter and the Half-Blood Prince" and "The Twilight Saga: New Moon" — researchers found that 32.8% of the 4,342 speaking characters were female and 67.2% were male, a percentage identical to that of the top-grossing movies of 2008.

"We see remarkably stable trends," said USC Annenberg associate professor Stacy L. Smith. "This reveals an industry formula for gender that may be outside of people's conscious awareness."

...

Researchers found that the sex of the storytellers had a significant effect on what appeared on-screen. In movies directed by women, 47.7% of the characters were female; in movies directed by men, fewer than a third of the characters were female. When one or more of the screenwriters was female, 40% of characters were female; when all the screenwriters were male, 29.8% of the characters were female.

The article doesn't quite come out and say it explicitly but I think it's fair to read this as claiming that there's a causal relationship between director's gender and the number of female characters, and that's really not feasible.

Gender of characters with speaking roles (which seem to be the ones we're talking about) are specified in the screenplay and, despite a widely held opinion to the contrary, directors don't write screenplays. This leaves us with two possibilities: writer/directors are confounding the data or the causal relationship runs the other way -- a screenplay with more female characters is more likely to be directed by a woman (perhaps because female directors are seen as less capable of handling male-heavy action films).

This question of causal direction has interesting implications for other auteurist analyses. How many of the common themes we see in a director's work are the result of the artist's personal vision and how many are the result of a certain director being assigned a certain type of picture (director as subgenre)?

Take Dial M for Murder. Thematically, it certainly feel like Hitchcock, but it was a successful stage play before it was a movie and pretty much all of the themes were in place before anyone even considered a motion picture version. In this one case isn't it reasonable to suggest that the themes caused the studio executives to pick Hitchcock rather than Hitchcock being responsible for these themes?

Sad news

I think that the statement speaks for itself:

My wife, Kimberly Webb Joyner, died this morning in her sleep from unknown causes. She was 41.
She leaves behind two little girls she loved more than anything, Katie, who turns 3 on New Year’s Eve, and Ellie, who was born June 21.

I have always respected Dr. Joyner (even if I often disagreed with him) and I am deeply sorrowed to hear of this tragedy. Best wishes to him and his family from the OE team.

Contradictions

Karl Smith is striking me as an optimist:

In any case, during the GOP Google debate there was a poll that asked GOP voters if someone should be denied medical treatment because they could not afford it. 80% said no. This is the end of the major question in my mind. If you answer no then you have de facto signed on to socialized medicine through some means.

After all, he is demanding consistency here. I am not sure that humans are especially good at consistency. People often get quite annoyed at me when I drive the speed limit. I have the attitude that if we all want to drive faster on the road I am game, but I am unwilling to get a speeding ticket because local government cannot reach consensus on an appropriate speed limit.

In the same vein, I suspect that there can be a lot of daylight between the principle here and the application. That being said, I'd be delighted if we did adopt a more socialized medical system, purely for reasons of economic efficiency.

Living with Mistakes the easy way -- larger points

Andrew Gelman fact-checks the New York Times:

For example, David Brooks wrote the following, in a column called “Living with Mistakes”:

The historian Leslie Hannah identified the ten largest American companies in 1912. None of those companies ranked in the top 100 companies by 1990.

Huh? Could that really be? I googled “ten largest american companies 1912″ and found this, from Leslie Hannah:

No big deal: two still in the top 10 rather than zero in the top 100, but Brooks’s general point still holds. As Brooks said, we have to live with mistakes. This is more a comment on how a statistician such as myself will see a number and immediately feel the urge to check it.

...

Again, this is no criticism of Brooks—as a journalist, he’s of course more interested in good stories than in getting the details right (recall the notorious $20 dinner at Red Lobster). That’s ok. Storytelling is his job, numbers are mine.

I appreciate Gelman's sharp eye and I can understand why, being a nice guy, he tends to favor catch-and-release criticism, but I disagree sharply with his conclusions here.

For starters, creative destruction a big part of the story Brooks is telling, both in this column and in his body of work collectively. In this narrative, it's a tough process, but a healthy and fundamentally fair one. Here's the sentence that precedes Gelman's excerpt from Brooks: "Even if you make it to the top, it is very hard to stay there."

We can argue about the validity of this view, but there's no question that Brooks' incorrect statement supported this point while the corrected version undercuts it. There are millions of businesses and if success is truly determined solely by who has the best business model, the best execution and the best timing, a long run in the Fortune 500 (with shifts in markets and changes in management) would be a hell of a feat. The number we actually see would certainly imply something more at work (regulatory capture, anti-competitive practices, etc.).

So yes, I would call this a big deal with respect to the story Brooks is telling.

Perhaps more importantly, I have a problem with the distinction drawn here between statisticians and the rest of the world. It's true that the ability to sniff out suspect numbers and questionable findings is an essential part of being a good statistician, but it's also part being a good journalist (and a good engineer and a good accountant and any number of other professions).

As statisticians we need strong mathematical intuition and a heightened sense of how numbers relate to each other, but we don't have any claim to the urge to check the unlikely. David Brooks was simply being a bad journalist when he wrote that passage. It was not because of inability -- Brooks is smart and highly capable -- but because he didn't care enough to get it right. He know there would be no real consequences either for him or his paper if he got it wrong.

And a lack of consequences, my friends, makes living with your mistakes amazingly easy.

"[T]he numbers show that wage inflation is — literally — the least of the problems when it comes to university cost inflation"

The quote comes from Felix Salmon and it's part of an excellent discussion (nicely summarized at Rortybomb). If you're interested in either education or the economy (where student debt is becoming a major factor), you should read all of the posts, but if I had to pick one point it would be this unbelievable projection cited by Malcolm Harris:

And while the proportion of tenure-track teaching faculty has dwindled, the number of managers has skyrocketed in both relative and absolute terms. If current trends continue, the Department of Education estimates that by 2014 there will be more administrators than instructors at American four-year nonprofit colleges.

Also posted at Education and Statistics.

Probably the damnedest thing you'll see this weekend

And you think you have trouble getting out there for your morning jog...

Peak Life Expectancy

I am often skeptical of these claims that we will see the next generation have a shorter life expectancy as these claims require models. These models may be incorrect for a variety of reasons: misspecification, noise, shifting patterns of disease, unexpected technological improvements, and so forth.

But what was fascinating was the map in the article. The places in the United States where life expectancy is dropping are focused mainly in the Southeast. Now that distribution is, itself, interesting as the southeast has long had health issues: think of the classic stroke belt. Furthermore, it is an area of high inequality that has a climate that is very compatible with a sedentary lifestyle.

Contrast this with the California coast (and especially Los Angeles) where life expectancies are actually rising, or even New York city. Could it be that an urban lifestyle is actually life enhancing (both in terms of quantity and quality)?

So perhaps, instead, what we have is an ecological experiment to really try and understand these phenomena.