Not that Bill Walton, although this one is plenty tall. Here we are. Starting with the 3-axes model, we go on to a wide-ranging discussion that was fun for me.
Monthly Archives: January 2018
Null Hypothesis Watch
Two papers that claim to reject it.
1. Michael Lovenheim and Alexander Willen write,
We see consistent evidence that 12 years of exposure to a collective bargaining law negatively impacts both cognitive and noncognitive scores among men. AFQT percentile declines by 10.2, a 20.9% effect relative to the mean.
See also the abstract, quoted by Tyler Cowen.
2. Michael Gilraine, Hugh Macartney, and Robert McMillan write,
California’s statewide class size reduction program of the late-1990s. . .caused marked reductions in local private school shares, consequent changes in public school demographics, and significant increases in local house prices — the latter indicative of the reform’s full impact. Second, using a generalization of the differencing approach, we provide credible estimates of the direct and indirect impacts of the reform on a common scale. These reveal a large pure class size effect of 0.11 SD (in terms of mathematics scores), and an even larger indirect effect of 0.16 SD via induced changes in school demographics. Further, we show that both effects persist positively, giving rise to an overall policy impact estimated to be 0.4 SD higher after four years of treatment (relative to none).
I am skeptical of both papers. I am not convinced that the methods used truly eliminate possible confounding factors. But I have not read either paper closely.
Interesting sentences
we see increased prevalence of depression, bipolar, and schizophrenia across time and culture. Our genetic heritage has clearly not changed and yet the incidence of mental illness is changing.
Read the whole thing.
Moderate voters?
Those old enough to remember the decades before the ’90s, then, may tend to see permanent majorities around the corner because they expect a return to normalcy. Mr. Fiorina, by contrast, argues that frequent shifts in political control are now the norm because of the way the parties have changed. He rejects the common view that American voters are “polarized.” Instead, he says, the parties have become polarized, in a process he calls the “sorting” of the electorate.
So we have parties captured by extremists, and voters trying to find the moderates. Possibly related: Nassim Taleb’s forthcoming book.
The Tyranny of Metrics
The book by Jerry Muller will be out shortly. It makes a strong case against the over-use of quantitative measures to fix compensation. Education is one example.
If you believe the null hypothesis, then compensating teachers based on outcomes only introduces randomness into their pay.
Meanwhile, without referring to the book, in talking about health care and education, Megan McArdle writes,
So when we measure outputs, we are getting at best a very distorted picture of the value of the services provided. Modern industrial management is simply not designed for this sort of situation. If you feed human inputs into a machine system, you are quite likely to grind up the humans in the process.
Read the whole thing.
Resistance Watch
However, Facebook is trying to get eyeballs on ads, as is Twitter, as is Google. To do this, they fine-tune the content they show you to make it more attractive to your eyes—and by ‘attractive’ I do not mean pleasant. We humans have an evolved automatic reflex to pay attention to threats and horrors as well as pleasurable stimuli: consider the way highway traffic always slows to a crawl as it is funnelled past an accident site. The algorithms that determine what to show us when we look at Facebook or Twitter take this bias into account. You might react more strongly to a public hanging in Iran than to a couple kissing: the algorithm knows, and will show you whatever makes you pay attention.
Pointer from Tyler Cowen.
Trigger warning: lots of smug rhetoric presuming that the left is correct on climate change, net neutrality, financial regulation, etc.
Looking ahead, Stross writes,
Your phone will be aware of precisely what you like to look at on its screen. With addiction-seeking deep learning and neural-network generated images, it is in principle possible to feed you an endlessly escallating [sic] payload of arousal-maximizing inputs. It might be Facebook or Twitter messages optimized to produce outrage, or it could be porn generated by AI to appeal to kinks you aren’t even consciously aware of. But either way, the app now owns your central nervous system—and you will be monetized.
One key point on which I agree with Stross is that I am surprised and disappointed that of all of the possible ways to pay for content on the Internet, the advertising model dominates. I understand why micropayments did not take off–Clay Shirky diagnosed the “mental transactions costs” involved. But if the subscription model (what I called “clubs” in my essays from twenty years ago) were dominant, then the interests of consumers and content providers would be better aligned. With the advertising model, the relationship is necessarily adversarial. The content provider needs to grab and hold your attention, whether that works to your benefit or not. Bad consequences follow.
Resistance Watch
Two from Monday’s WSJ.
1. David Benoit in a front-page story on Apple writes,
A leading activist investor and a pension fund are saying the smartphone maker needs to respond to what some see as a growing public-health crisis of youth phone addiction.
2. Regular columnist Chris Mims writes,
In the face of pressure brought by a growing roster of Facebook investors and former executives, many of whom have publicly stated that Facebook is both psychologically addictive and harmful to democracy, the Facebook founder and chief executive has pledged to “fix” Facebook by doing several things, including “making sure that time spent on Facebook is time well spent.”
For a while, the term “gamify” was big in educational technology. The thinking was (and perhaps still is) that if you turn learning into a game, you can improve educational outcomes.
With social media, we have gamified social interaction. When people share, they look for rewards in the form of positive responses.
I am not a fan of this gamification, in either setting.
Bitcoin and the prospects for a dollar collapse
For Medium, I take a skeptical view of the value of Bitcoin as a hedge against hyperinflation.
For citizens looking for hard assets, gold is not the only option. Other commodities, such as copper or wheat, are traded in futures markets. By taking long positions in those commodities, you can profit from inflation. There are mutual funds that invest in commodity indexes, just as there are stock mutual funds that invest in stock indexes.
Martin Gurri on the Trump Administration
It’s a zero-sum struggle for attention that rewards the most immoderate voices – and, without question, Donald Trump is a master of the game. His unbridled language mobilizes his anti-elite followers, even as his policies appeal to more conventional Republicans and conservatives.
Read the whole thing.
Credit scoring and securitization
more than just soft information is lost when lenders rely on generic credit scores. Practical obstacles — and in some cases political considerations — exclude from the scores factors, such as income and education, that self-evidently affect creditworthiness. Moreover, score-based lenders, like Friedrich Hayek’s central planners, rely on “statistical information” that ignores “crucial circumstances of time and place.” From their far-away perch, they cannot recognize substance abusers, nor can they distinguish workers in plants scheduled to close from judges with lifetime tenure.
He argues that we need more traditional banking, involving credit judgment and originate-to-hold, and less securitization using credit scores. My thoughts.
1. Although in theory underwriting judgment could lead to wise decisions to over-ride credit scores, in practice I do not think this happens. Human underwriters are not geniuses. And they do not necessarily know when the information they have is really news to the scoring system. Maybe the scoring system does not explicitly know that someone is a substance abuser, but it may nonetheless observe behavior that reflects that substance abuse. I believe that judgmental over-rides tend to lead decisions that are worse, not better.
2. As Bhide points out, some of the shift toward originate-to-distribute was influenced by capital regulations.
3. In mortgages, the private securitization market remains pretty dormant. That is, without a guarantee from Freddie and Fannie, investors are reluctant to buy mortgage securities just based on loan-to-value ratios and credit scores.
4. I think that for bank regulation, stress testing is the least bad way to promote safety and soundness. Stress tests for mortgage portfolios should include scenarios of falling house prices. Stress tests for consumer portfolios should include rising unemployment.