Some thoughts on cinema overe at MippyvilleTV

Arrested (cinematic) Development

With friends like these.. Peter Bogdanovich and Citizen Kane

More Econ 101

Worth pondering

So, when somebody says that the government should buy paper from a private provider, hey, great. There are lots of buyers and sellers of paper. Go for it. If somebody wants to contract out janitorial work or food service, again, there are lots of buyers and sellers of those services. But I’ve never seen how contracting out more specifically governmental tasks really improves things. You go from having a monopoly provider, with all the disadvantages thereof, to a monopsony buyer, that still has to exert oversight (which is subject to all sorts of information problems and all sorts of good and bad incentives). And if there’s only one buyer, that buyer is, effectively, a monopoly provider for the public.

In all sorts of arenas, information is the real limiting factor.  I like to apply this to fields like health care.  There is no real open market in health care.  We have subsidized insurance or government provided insurance for the majority of customers.  The plans that exist often lock in networks that make it more challenging to comparison shop.  Most customers do not have the ability to shop around on price.  Treatments are legally protected from being sold on the open market (you can't self treat with a statin).  Medical doctors are a protected guild that has a limited number of residencies (and thus a cap on members) leading to increased costs due to shortages. 

None of this looks like a functional market with good information, equal quality goods, freedom of entry/exit, or substitution effects on treatment. 

Worth pondering. 

One hundred degrees by moonlight

When you add up all of the associated costs of global warming, I don't see how a good cost benefit analysis could possibly support doing nothing.

From All Things Considered:

Phoenix actually suffers from two heat problems. One is a product of growth. Desert nights don't cool down they way they used to, because energy from the sun is trapped in roads and buildings, a phenomenon researchers call the "urban heat island effect."

As Phoenix grows, so does the problem, says Nancy Selover, the state climatologist.

"We keep thinking we'll probably see a night when we only get down to 100 as a minimum temperature, which is kind of shocking," Selover says.

Stock Markets

Brad Delong

Historically, people who invest in indexed mutual funds like the Vanguard S&P make 5.5%/year above inflation (but, alas! only 1%/year since January 1, 2000); people who invest in actively-managed mutual funds like those run by Fidelity make 4.5%/year above inflation (but, alas! only 0%/year since January 1, 2000); people who actively trade individual stocks turning over their portfolio once year or so as it appears Paul Ryan does make 3.5%/year above inflation (but, alas! only -1%/year since January 1, 2000); and day-traders who trade every day lose 5%/year (and, alas! have lost 10%/year since January 1, 2000).

These differences in returns are a lot of the reason that I see it as critical to have a paternalist view on retirement savings.  The more involved the individual invester is, the worse that they seem to do in the brave new world of finance.  Passive investing, the best option listed, depends critically on individual stocks not going out of balance with the whole (ask any Canadian about Nortal and Canadian stock index funds).  But all of the other options are worse. 

If the more recent (since 2000) figures are the result of demographic factors and not as a result of "unique" or "unlikely" economic factors (due to the liquidity crisis or what not) then the future of stock market investment is bleak indeed.  At the very least, periods of slow growth like this are not good signs for the future. 

Not sure about the message here

I just saw this ad. a few moments ago. I suppose it's a good sign that the Romney team got the updated ads out this quickly, but "Comeback Team" may not be the ideal slogan. It could be read as :the team to lead America's comeback." That's OK but it's not the first reading that comes to mind. 

When I see the phrase  "Comeback Team," I normally think "sure, we're behind but don't count us out." That may be a realistic message but I don't think it's one the campaign wants to push.

What's a winning strategy for a lottery (and what does winning really mean)?

Two interesting stories on lotteries, one recent, the other old but still relevant.

The first, from Felix Salmon, tells of a type of lottery with a positive expected value if you bought your tickets at the right time :

Because the jackpot was basically never won, it couldn’t just keep on rising indefinitely. So Cash WinFall had a mechanism for distributing it: when the jackpot rose above $2 million, it would “roll down” into smaller prizes. For instance, if you got five out of six numbers correct in a normal week, you would win $4,000; in a roll-down week, you would win $40,000.

A bunch of what can only be called professional lottery players jumped on this quirk, and would buy up hundreds of thousands of dollars’ worth of tickets in roll-down weeks, when the swollen jackpot was certain to get distributed. By buying so many tickets, they pretty much guaranteed that they would buy enough winning tickets to turn a profit — in a typical roll-down week, they would win back 15% to 20% more than they gambled.

Weirdly, the big risk here was the 1.4% chance that the jackpot would be won — as happened, for instance, on July 10, 2008. That worked out very well for the winner, Wenxu Tong, the general partner of a company called Tong’s Fortunelot Limited Partnership, who took home nearly $2.5 million. But all the other consortiums trying to game the system that week all did very badly, losing hundreds of thousands of dollars.

There was a tinge of scandal to Estes’s reporting. “Cash WinFall isn’t being played as a game of chance,” she quoted Mohan Srivastava as saying. “Some smart people have figured out how to get rich while everyone else funds their winnings.’’ And a few days after her story appeared, the Boston Globe ran an editorial under the headline “Lottery game is fatally flawed; treasurer should shut it down”. The argument? In any lottery game, according to the paper, “the odds should be stacked equally against rich and poor”. And eventually, earlier this year, Cash WinFall was indeed phased out.

Now Gregory Sullivan, the state inspector general, has written a 25-page report on the Cash WinFall game, which is well worth reading; Estes, naturally, has written it up for the Globe, under the headline “Lottery officials knew about Cash WinFall’s flaws, IG says”. She never mentions, however, the report’s conclusion: those “flaws” ended up being very profitable for the state, and were a way for Massachusetts to get significant lottery revenues not only from the poor but also from the rich.

The second, from This American Life back in 2007, looks at the impact of winning a lottery as reported by a man whose job it was to buy those jackpots for a lump sum payment:

What Ed found was that, if lottery winners felt like they could relate to him, could trust him, then they'd be much more willing to do the deal, no matter what the terms. And Ed found it wasn't hard to get them comfortable because they actually had a lot in common.


Ed Ugel: It was just a natural fit for me. One of the biggest things that helped me was my intimate understanding of the mind of a gambler.

A fellow I did a deal with in Florida, we went to a notary to get certain pages of the contracts, all the contracts needed to be signed. Some of the signature pages needed to be notarized. And this notary happened to also sell lottery tickets. And when we went and got these pages notarized, he whipped out a wad of bills out of his pocket and bought 1,000 scratch tickets while the notary slash lottery ticket salesperson was notarizing the signature pages on his contract to sell me his annuity from the lottery win. He was sitting there. He didn't even look at the contracts. He's just scratching away. He couldn't even wait to get away from the booth. I'll never forget the way the notary looked at me sort of in awe. And yeah, it was a little daunting, a little bizarre seeing it. But I knew just who this cat was. I'd been that guy. And I would like to think that maybe I was a little bit better than scratch tickets in the airport, but I don't know that scratch tickets in the airport are that much classier than video poker machines in the strip clubs of Oregon.

Is there a political historian in the house?

It seems unusual to announce a VP pick more than two weeks before the convention. How common is this sort of thing?

My problems with Matt Yglesias' Slate piece

Joseph recently had a post on Matt Yglesias's Slate piece on data. I pointed out in the comments that I wasn't that impressed. Here's a more detailed explanation.

I realize that Yglesias is writing for a general audience and that can muddle the issue, but I keep getting the feeling that he really doesn't get the subtlety here, that he misses the fundamental asymmetry between significance and insignificance and the importance of what Friedman and Rowe are saying.

I don't want to get caught up in the weeds of interpreting (let alone defending) p-value, but if you see a contextually significant result you pretty much know that there's a relationship there. It may not be causal or useful and it may not be what it appears, but there's something.

If you don't see a significant result, you don't know anything. Maybe there's nothing there or maybe there's too much noise or the relationship is outside the range of data or you could be using techniques that miss nonlinear relationships (an argument for CHAID and CART but that's a topic for another post). You certainly wouldn't draw a conclusion like burning fossil fuels doesn't cause heat.

As for the thermostat scenario, Yglesias focuses on this as an example of observational analysis missing a relationship. That's true but it's a very specialized case of a wide spread problem (lots of things cause us to miss relationships). Furthermore, it misses the real profundity of the analogy: it is the job of self-regulating systems to put forces in opposition, to set up destructive interference. The better the system works, the less appears to happen.

And finally, while I'm in a picky mood,  Yglesias should realize that lots of natural sciences (astronomy, meteorology) make very limited use of experiments.

Two essential posts on the Ryan pick

Nate Silver looks at the electoral implications.

Jonathan Chait handles the historical context.

Nate Silver answers a question I've had for a while

From Nate Silver's analysis of Ryan's selection as VP (emphasis added)

The economy? Well, it isn’t very good. But it also doesn’t appear to be getting much worse, and some recent signs — like the July jobs report — suggest a slight brightening of the outlook. It’s not quite the case that incumbent presidents are favored to win unless there is an outright recession, but that also isn’t that far from the truth. Incumbent presidents tend to get the benefit of the doubt from voters, especially when, as in Mr. Obama’s case, they are regarded as likable, their party is in its first elected term, they are perceived as competent on foreign affairs and they have avoided major scandals.

I'd noticed that while assessments of political history often talked about a one-term president, I didn't hear much about how long a party held the White House. which always struck me as an important potential factor in a model. It's good (though hardly surprising) that Silver is considering it, but I do have to wonder how many of the experts on CNN are being as thorough.

Harm Reduction

DrugMonkey has a post on legalization efforts for marijuana in Washington state.  I think that this might be my public health background, but why is the focus on on harm reduction and not the legal status of the drug? I have no trouble believing that use of this substance may have adverse effects over the long term.  But so do legal substances like tobacco and alcohol.  Furthermore, how does the harm stack up to the harm done by a term in a prison?  A lifetime of reduced employment opportunities, acculturation in a brutal environment as well as being a victim of the violence that occurs in jails.

Why not look for middle grounds?  A heavily taxed substance that minors are prevented from buying (the tobacco model)?  Decriminalization so that use equals fines and not police breaking down one's door (the Canadian model)?

Why is the focus not on maximizing public health outcomes?

Another data point on the competence of NBC Universal*

I was thinking about the Christian Slater show My Own Worst Enemy the other day (not a sentence I write that often) specifically I was thinking about how much valuable Olympic ad space NBC burned on the show in 2008 before panicking at a slow start and pulling the plug in the middle of the first story arc.

On today's All Things Considered, Andrew Wallenstein had a nice piece on NBC's attempts to use the Olympics to promote its fall schedule, complete with some embarrassing examples that had slipped my mind:

Sure, you may be spending a lot of time with NBC this summer. But they'd like you to start thinking about the fall, too. That's why what seems like every third commercial during the Olympics is for the network's own shows. Animal Practice, Go On, Chicago Fire ... they're all on NBC's fall schedule, and you may feel like you're hearing about them — complete with lame sports metaphors — as much as you're hearing about gymnastics and track.

But the network isn't stopping at mere promotion; they're airing entire episodes of select shows after primetime coverage of the competition. Some will even start their seasons right after the closing ceremonies.

You may ask yourself: If the Olympic Games are such a powerful viewer magnet, why not schedule all the fall shows to start right after they end?

The answer: Because it almost never works. NBC has tried again and again over the years to use the Olympics as a launch pad for other programming. But do you remember Father Of The Pride in 2004? Or Conviction in 2006? Didn't think so. Both are examples of shows that failed to take off after being heavily promoted during Olympic coverage.

There are a number of theories as to why it doesn't work. First, there's the distinct possibility that none of the shows NBC has tried to launch out of the Olympics were all that good. Or maybe it's the fact that the Olympics provide what NBC's rivals dismiss as a "rented audience," meaning they're the kinds of viewers who flock to the Olympics but aren't interested in much else.

Along similar lines, TV by the Numbers looked at the track record of the new shows NBC promoted during the 2008 Olympics:

My Own Worst Enemy (the Christian Slater curse is born!) lasted 9 episodes
Knight Rider, lasted 17 episodes
Kath & Kim, lasted 17 episodes
America's Toughest Jobs (reality, started late August, season/series finale Oct)
Crusoe (started after ATJ) lasted 12 episodes.

As mentioned before, NBC has been badly run for years. No network has ever done more to deserve fourth place. By comparison, CBS is much better run and the small upstart Weigel is even more impressive. In theory, we should see huge salaries at CBS, loads of market interest and good press for Weigel and heads rolling like bowling balls at NBC Universal. Instead we're getting one out of three. It took years and thirty plus million in severance to get rid of Zucker and the chances are good that you've never heard of Weigel outside of this site.






* The people who brought you Battleship -- the Movie and this remarkable piece of business logic.

Yglesias on the Dangers of Observational Data

Matt Yglesias has a piece on the Dangers of Data that really should be the Dangers of Observational Data!  True randomized or quasi-randomized experiments, when you can do them, have none of these limitations ascribed to the thermostat problem (and, in physics, an experiment is how you would figure out what the thermostat actually does). 

I am also amazed by the different foci that fields put on different methodological issues.  In observational pharmacoepidemiology we are obsessed with the issue of confounding by indication and constantly worry that it is leading to non-trivial amounts of bias.  The concept behind confounding by indication is awfully similar to the problem described by Milton Friedman's thermostat.  But I never hear economists bring that up as a major issue with observational data; perhaps because they lack experiments to tell them how often an observational estimate is wildly inaccurate (whereas in pharmacoepidemiology these experiments are slow and rare rather than non-existent). 

None of this is to say that you cannot do valid inference with observational data -- you most definitely can.  But it does highlight the need to be very, very careful. 

An almost perfect example of modern political reporting (and I don't mean that in a good way)

From NPR, sadly, Ari Shapiro reports that both candidates have tried to associate themselves with the Clinton legacy. That's a valid, newsworthy topic, but to cover it you have to acknowledge some basic asymmetries. Having a popular Democratic ex-president is more likely to help the Democrats. By the same token, it's easier for Obama to point out similarities between his policies and Clinton's than it is for Romney.

You won't, however, get that from Shapiro. In his report, both parties are pursuing the same strategy with apparently the same risks, potential rewards and level of rhetoric consistency.

As long as Bill Clinton has been on the public stage, there have been people of both parties willing to say negative things about him. But this year, even high-profile Republicans are waxing nostalgic about the Clinton years. This was Newt Gingrich on CNN after Democrats announced that the former president will have a prime speaking spot at the convention.

NEWT GINGRICH: President Clinton got four consecutive balanced budgets. President Obama has had huge deficits. So I think having Bill Clinton there is going to remind people of a Democrat they used to like, and may in fact shrink Obama by comparison.

SHAPIRO: On the campaign trail, Mitt Romney has been applauding the Clinton welfare program as an accomplishment for the ages. Here he was in Illinois this week.

MITT ROMNEY: One of the things that happened in the last couple of decades was one of the greatest bipartisan successes we've seen. And that was President Bill Clinton and Republicans coming together to reform welfare.

SHAPIRO: Republicans who praise Bill Clinton can show that they are not mindless partisans. It's a way of saying: There are Democrats I like, just not the one in office right now. Of course, the Democrat in office right now has tried to co-opt Clinton's legacy, too.

PRESIDENT BARACK OBAMA: My theories have been tested. Last time they were tried was by a guy named Bill Clinton.

SHAPIRO: On the campaign trail, Barack Obama makes it sound like he's running to continue the Clinton administration.

(APPLAUSE)

OBAMA: And that's why I'm running for a second term as president of the United States, to go back to what works.

Do we really have to go to the tape here? Do we have to compare the "bad things" Democrats said about Clinton (irresponsible, opportunistic triangulator) to those said by Republicans (drug dealing, Manchurian Candidate who raped his lesbian wife and countless other women and had his best friend murdered)? Do we have to review the statements that Republicans like Gingrich made about Clinton's policies at the time? Do we need to point out that Obama "makes it sound like he's running to continue the Clinton administration" because his policies actually are largely a continuation of Clinton's policies, and where there are difference on things like taxes, Clinton is generally to the left of Obama?

As James Fallows, Paul Krugman and many others have noted, journalistic fairness does not consist of saying the same number of good things and bad things about both parties. That's not balance; it's cowardice and it's undermining our ability to have a productive discussion (and in a democracy that's a bad thing to undermine).

the clothesline paradox

Shane Greenstein has some smart things to say about orphan technologies:

Does the clothesline paradox apply to information technology? There is a relationship between the clothesline paradox and digital dark matter, but there is also a subtle and important difference. It is important to keep those differences straight. It makes a difference to several contemporary policy debates.

That will take some explaining. There are some terms to define.

The clothesline paradox comes from energy economics. For a definition here is a quote from this well-meaning article from the Whole Earth Catalogue:

If you take down your clothes line and buy an electric clothes dryer the electric consumption of the nation rises slightly. If you go in the other direction and remove the electric clothes dryer and install a clothesline the consumption of electricity drops slightly, but there is no credit given anywhere on the charts and graphs to solar energy which is now drying the clothes.

In other words, standard approaches to economic measurement do not count inputs that lack a price. The clothesline paradox leads to under-counting the importance of activity that uses free endowments from nature. It is one of the quirks of modern economic measurement. No price equals no value.

Why does that matter? For one, out of sight leads to out of mind. The sun does not have a firm that lobbies on its behalf. Policy conversation tends to favor existing firms with seemingly big economic contributions, and tends to underestimate the importance of the free.

Perhaps more importantly, when a new technology (which uses the free inputs) substitutes for existing economic activity, on first glance it looks like the new technology brings about a decline in total economic activity. That appearance is misleading, of course, because the savings goes into other economic activity, but those gains are diffuse and difficult to identify.

A third aspect matters as well. An unpriced input tends to come without restrictions on use. There are very few laws governing the proper use of the sun. (Ok, there are a few zoning laws, actually, but you get my point).

This bothers Tim O’Reilly. Why? He argues that open source software suffers from a clothesline paradox. Open source software is an input into one trillion dollars worth of activity, he estimates. Yet, because the open source is unpriced, it gets little or no credit.

Simon Phillips of InfoWorld liked this point, and gave a catchy label for the effect, calling open source software “The Stealth Stimulus Package.” Phillips goes on to compare the open source software and the clothesline paradox, arguing for their similarity.

There is a good insight there, but also an interesting oversight. The interesting insight is worth stressing. Open source software deserves credit, but there is more. This comparison reminds me of an old column in this space, one devoted to “digital dark matter.” Digital dark matter are “important building blocks of the digital economy that we do not measure using standard tools.” (Indeed, the first example of digital dark matter in that essay is open source, where the lack of price is the source of the issue.)

There is a key difference between using the sun and using open source software, however. Nobody has to invest in the sun in order to keep the light coming. Not so for some digital dark matter. Fail to invest, and stuff will not arise.

For my take on a related subject, check here.