Monthly Archives: November 2016

The Fake News Problem

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Typical Washington Post Headline:

D.C. Council to vote on nation’s most generous family leave law: 11 weeks off, up to 90 percent pay

Note the modifier “generous.” Not “intrusive” or “coercive” or “attempting to be generous with other people’s money” or “blithely unaware of unintended consequences.” Just “generous.” Why didn’t every government think of that? Why not have a whole year off, with 150 percent of pay? That would be even more “generous.”

Interestingly, the print edition had a much more neutral headline, but the lead paragraph still refers to the potential for a “generous” paid leave policy.

I see this editorial bias in many stories, particularly the local ones. I have remarked before how the Montgomery County School system is always described as having an “excellent reputation,” when the only thing that is excellent about it is the pay and benefits lavished on the employees, most of whom are not classroom teachers. The outcomes, which the Post never looks at, but which are readily available on the state department of education web site, are mediocre.

Finally, I would note that the Post‘s coverage of Fidel Castro was much less antagonistic than its coverage of Donald Trump. This is a case where I think that the attempt to view a phenomenon along the progressive oppressor-oppressed axis, and accepting Castro’s self-designation as a savior of the oppressed, is pathetically misguided. Instead, conservatives who view Castro as barbaric along the civilization-barbarism axis and libertarians who view him as coercive along the liberty-coercion axis strike me as much more sensible.

One of my fantasy jobs is “conservative curmudgeon” at the Post. I would write a weekly column listing all of the biases I find each week in the paper, most of which are not even in the editorial section. Maybe next year I will start a regular weekly series of blog posts along those lines.

Defining Terms in the Social Disciplines

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Chelsea Leu writes,

Chemists don’t squabble about what oxygen is, but if psychologists convene a conference on a fuzzier concept like “trust,” says Colin Camerer, an economist at Caltech, they’ll spend the first two days disagreeing about what the word actually means.

Pointer from Tyler Cowen.

I agree that many important terms in the social definitions are poorly defined. Examples include trust, culture, and happiness. Ethnicity, which is very important in political studies, may not be well defined. I am not sure that such terms as extroversion or openness are well defined. Even IQ may not be that well defined.

Security prices are well defined. As a result, theory and empirical research in finance tends to be more robust than elsewhere in economics. However, even finance has its less well-defined concepts, such as “expectations.”

I should point out that the problem of poorly-defined terms arises not because social scientists are less intelligent or careful than natural scientists. The problem is that social science has to deal with phenomena of the mind. Oxygen is part of the physical world. Trust and extroversion exist in the mental world.

I have noted that in all of the social disciplines there is a bias in favor of explaining outcomes on the basis of physical phenomena, such as natural resources and physical capital, rather than on the basis of mental phenomena, such as culture and institutions. In part this may reflect frustration with the challenge of defining terms when describing mental phenomena.

Although exhortations to social scientists to define terms may be helpful, I think it is important to understand that exhortations alone cannot solve the problem. Mental phenomena are harder to pin down.

Who Needs the FCC?

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The WaPo reports,

Many of the FCC’s existing functions could be farmed out, Jamison wrote in the blog post. Subsidies for phone and Internet service could be handled by state governments, while the Federal Trade Commission could handle consumer complaints and take action against abuses by companies. There are some details that were not addressed in the blog post due to time constraints, Jamison said Tuesday, such as the possible need for new state-level powers to address broadband monopolies.

The story refers to Mark Jamison, an adviser to President-elect Trump.

I think it would be a great idea to reconstitute the FCC for the 21st century. Recall my essay, Sidestep the FCC and the FDA. There, I argue for replacing the FCC’s spectrum licensing system (which Jamison would retain) with an arbitration board to deal with disputes among spectrum users.

Unlike the FCC, the arbitration board would presume that any spectrum could be used for any purpose. The board would set ground rules for users to deal with one another to resolve potential conflicts. These ground rules might specify which user has priority until an agreement can be reached. The ground rules might set expectations for how negotiations ought to be conducted and resolved. If parties are unable to resolve disputes, then the board would rule on that specific dispute.

My thinking reflects a view of spectrum that I encountered over 15 years ago, which says that there really is no such thing as “interference” if you have the right hardware, software, and protocols in place.

Regulation and Sustainability

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Concerning a new EPA regulation, Jennifer Ko writes,

many industry and environmental groups have failed to address one important aspect of biofuel regulations—the effect that increased ethanol use will have on dwindling water supplies in the United States. Jay Famiglietti, a senior water scientist at the U.S. National Aeronautics and Space Administration, questions the prudence of policy decisions that drain stressed water supplies to irrigate water-intensive crops. Many of the nation’s top ethanol producing states sit in the “breadbasket” of America where farmers irrigate crops, such as corn, using water from underground aquifers. In Kansas, the main source of water—the largest basin of freshwater in the United States—is dwindling rapidly, in part due to the water used up by massive acres of crops earmarked for ethanol production.

If policymakers fail to consider the relationship between energy and water, Famiglietti warns that “consequences will be huge.”

Pointer from Mark Thoma.

In Specialization and Trade, I argue that market prices tend to do a better job than environmentalist intuition at indicating sustainability. Water tends to be under-priced, in part because agricultural interests lobby for low prices. They also lobby for higher ethanol mandates. And the EPA, which is supposedly here to protect the environment, helps the agricultural interests.

Regional Variation in Medical Treatment

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Amy Finkelstein, Matthew Gentzkow, and Heidi Williams write,

Our findings confirm that supply-side factors are important, while also revealing that patient preferences and health status together account for a large share of variation. Once we address the endogenous measurement issue with patient health, we find that roughly a quarter of the geographic variation in log health care utilization can potentially be attributed to observable patient health. Whether the remaining patient component reflects preferences or unmeasured health remains an open question

Pointer from Alex Tabarrok, who suggests that the supply-driven variation represents an upper bound (a high one) of sorts on inefficient use of medical procedures. I disagree. There also can be demand for medical services with high costs and low benefits, fueled by third-party payments.

I continue to believe what wrote a decade ago in Crisis of Abundance. That is, the fundamental reason that health care spending is very high in this country is that we obtain a lot of medical services that have high costs and low benefits. You can address that either with top-down rationing or with having patients face a larger share of the costs and being forced to make choices.

Erik Hurst on the Labor Market

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In a podcast with Russ Roberts. Self-recommending.

An excerpt (there were many to choose from):

in earlier periods, manufacturing jobs were, you know, slowly going away. But at the same time, population was growing. So new young people could come into the market, and they adjust; and they don’t see, there isn’t enough jobs in manufacturing, and they kind of reallocate to other sectors. In the early 2000s, we lost, as I said before, about 4 million manufacturing jobs, in the early 2000, 2004, 2005 period. You know, from 1980 to 2000, we lost about 2 million manufacturing jobs over that 20-year period. And here we lost, you know, very quickly. And it might be that when shocks happen quickly, it just takes people longer to adjust. Some people get displaced; and then they have to work through, you know, accumulating new skills, moving to a different sector, moving to a different location. And if the young are more likely to do that than older workers, then we have to have enough young to kind of clear the market. And that might just take a little time. So, I don’t think this is going to be a long-run problem. I just think it’s–you know, we are seeing the medium run responses to this right now.

Trumpophobes: Is this really 1933?

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Some of my Facebook friends say that it is. Here are some of the events that took place in Germany in 1933.

The Reichstag Fire Decree is passed in response to the Reichstag fire, nullifying many German civil liberties.

Hundreds are arrested as the Nazis round up their political opponents

Dachau, the first Nazi concentration camp, is completed (it opens 22 March)

The Reichstag passes the Enabling Act, making Adolf Hitler dictator of Germany

The recently elected Nazis under Julius Streicher organise a one-day boycott of all Jewish-owned businesses in Germany.

The Law for the Restoration of the Professional Civil Service is passed, forcing all “non-Aryans” to retire from the legal profession and civil service

The Gestapo is established in Germany

The Nazis stage massive public book burnings throughout Germany

All non-Nazi parties are forbidden in Germany

My challenge to all Trump-ophobics is this. Look at this list of events, and come up with something comparable that you expect to occur under President Trump. Make your prediction in the form of a $100 bet. I will take the other side and give you 50-1 odds. That is I pay $5000 if, for example, Congress passes something like the Enabling Act.

Note that Bryan Caplan and Scott Alexander have also expressed a willingness to bet against Trumpophobes.

Social Science is Mis-named

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John Tierney writes,

In a classic study of peer review, 75 psychologists were asked to referee a paper about the mental health of left-wing student activists. Some referees saw a version of the paper showing that the student activists’ mental health was above normal; others saw different data, showing it to be below normal. Sure enough, the more liberal referees were more likely to recommend publishing the paper favorable to the left-wing activists. When the conclusion went the other way, they quickly found problems with its methodology.

I prefer the term social disciplines for economics, political science studies, sociology, anthropology, psychology, and history.

I believe that it is true in general that one’s instinct is to focus on methodological flaws when results conflict with your priors and to ignore methodology and instead focus on results when a study finds congenial results. Probably this affects natural science as well, but my guess is that in natural science results are often more robust, so that if you do not like the results you cannot just carp about the methods.

In fact, it probably would be a good idea of journal editors would send out papers stripped of their results for peer review. That is, the referee should recommend for of against publication of a paper based on the methods used and the question asked, not on the answer obtained.

Outline for an Econduel

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The topic is, “Should we think of economics as a science?”

Against

Thinking of economics as a science is incorrect as a description and unwise as a prescription. As a description, the claims that economists make are not as robust as claims made in natural sciences. As a prescription, claiming that economics is a science leads to a belief in the capability of economic policy-making that is unwarranted and dangerous.

For

It is true that it is not possible in economics to make claims that are as precise and verifiable as in chemistry of physics. But economics still contains valuable laws, such as the law of supply and demand. And economists still should attempt to follow the scientific method as best they can. If no one believes that economics is a science, then that opens things up for all sorts of bad intuition and nonsense to enter the policy debates.

I have more thoughts, but nobody reads blogs on Thanksgiving, anyway.

Wither Factor-Price Equalization?

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Elisa Giannone writes,

The interaction of SBTC [skill-biased technical change] and agglomeration economies imply that more educated locations have larger skill premium. High and low-skill workers have some degree of complementarity, so, agglomeration effects raise the wages of all the workers. The differential increase in the wages of high-skill workers makes the migration patterns for high and low-skill workers diverge: high-skill workers migrate to educated cities more than do low-skill workers. Migration has a twofold effect. First, the more workers migrate to a location, the marginal productivity of each will decrease, hence, the returns will decrease. Second, when more high-skill workers move to a location, productivity goes up because of agglomeration effects, raising the wages of all the workers, but especially the wages of the high-skill workers.

Pointer from Tyler Cowen.

She points out that within the U.S. since 1980, wages have stopped converging across cities, and this is mostly due to divergence among high-skilled workers. So we are not getting factor-price equalization, and she wants to try to explain why. Her explanation strikes me as quite complex (it includes more than just what is in the quoted paragraph) and a bit just-so-story-ish, but that is what happens when you observe a phenomenon that challenges a core interpretive framework.

If you believe in factor-price equalization, then you predict that workers with similar skills will tend toward the same pay in different locations. The word “similar” often gives me pause. As consumers, we value different amenities. In my prime, I could have earned a higher wage working in Manhattan, but relative to the people who chose to work there, I valued the amenities less. I wonder how much of the apparent divergence can be traced to the interaction of consumer preferences with other factors. I am guessing that assorattive mating fits in somewhere.