Statistics vs. Calculus in High School

Posted on by

From a podcast with Russ Roberts and Erik Brynjolfsson (the guest):

Guest: My pet little thing, I just wanted to mention, is I’m not as much of a fan of calculus as I once was, and I’m on a little push in my high school to replace calculus with statistics. In terms of what I think is practical for most people, with the possible exception of Ph.D. economists: calculus is just widely needed. But that’s sort of a tangent. Russ: Well, it’s interesting. My wife is a math teacher, and she is teaching a class of seniors this year, split between calculus and statistics, for one of the levels of the school. And statistics is–I agree with you. Statistics is in many ways much more useful for most students than calculus. The problem is, to teach it well is extraordinarily difficult. It’s very easy to teach a horrible statistics class where you spin back the definitions of mean and median. But you become dangerous because you think you know something about data when in fact it’s kind of subtle. Guest: Yeah. But you read newspapers saying–I just grimace because the journalists don’t understand basic statistics, and I don’t think the readers do either. And that’s something that appears almost daily in our lives. I’d love it if we upped our education in that area. As data and data science becomes more important, it’s going to be more important to do that.

Most of the discussion concerns the new book The Second Machine Age, or what I call “average is over and over.”

Paranoia Along Three Axes

Posted on by

Cass Sunstein writes,

The first is a wildly exaggerated sense of risks — a belief that if government is engaging in certain action (such as surveillance or gun control), it will inevitably use its authority so as to jeopardize civil liberties and perhaps democracy itself. In practice, of course, the risk might be real. But paranoid libertarians are convinced of its reality whether or not they have good reason for their conviction.

He lists five signs of libertarian paranoia. I expected to hate the article, but I agree with it more than I disagree. In the three-axis model, paranoia means seeing others as representing the “bad” end of your preferred axis. So when a libertarian thinks that conservatives and progressives are merely out to crush liberty and expand coercion, that is a paranoid libertarian.

Similarly, when a conservative thinks that progressives and libertarians are merely out to tear down civilization and replace it with barbarism, then that is a paranoid conservative. Finally, when a progressive thinks that conservatives and libertarians are merely out to help the oppressors keep down the oppressed, then that is a paranoid progressive.

Over-rated in Economics

Posted on by

Tyler Cowen writes,

at any point in time, the most overrated economists are the most highly rated young empirical economists at the top schools.

He says this is because empirical results do not hold up terribly well, and because what matters in empirical work is the overall body of work done by the profession, not so much the contributions of particular individuals.

I think that economists in policy-hot fields tend to be over-rated. Macro is one example. Health care is another. When I think of Jonathan Gruber or David Cutler, what comes to mind are their policy opinions, rather than any research discoveries. They are rated highly by economists who think that Gruber and Cutler know how to fix the health care system. Given that I do not believe this to be the case, I have to view them as dangerously over-rated.

I think that the fields of economic history and financial institutions are under-rated. Doug Diamond is known for his paper with Dybvig, but he has done other stuff that I like that has not received as much attention. Consequently, I think of him as under-rated. Gregory Clark may be under-rated. In my macro memoir, I end up saying that if I had it to do over again, I would pursue economic history and financial institutions as fields, rather than macro.

Many years ago Dick Startz wrote advice to economists on the job market. He said that the quality of professors at lower-institutions tends to be higher than you probably expect. Given that observation, it would be easier to find under-rated economists at lower-tier institutions and easier to find over-rated economists at top-tier institutions.

Treating Conservatism as a Personality Defect

Posted on by

My latest book review.

In Our Political Nature: The Evolutionary Origins of What Divides Us, author Avi Tuschman interprets political attitudes in terms of human evolutionary strategies. Conservatives have personalities that align with one set of strategies, and liberals have personalities that align with another. It is an intriguing analysis, but one to which I have a number of objections.

Tuschman’s thesis is that conservatism is fundamentally about marrying within the tribe (endogamy). Liberalism is fundamentally about exogamy.

In my own Three Languages book, I try not to demand and oversimplify ideological views. I talk about the three axes as languages that are used to achieve closure on issues and demonize those who disagree. However, I assume that people arrive at their views via reason.

Tuschman does not credit people with reason. However you rationalize your beliefs on immigration or gay marriage, if you are antagonistic it is because you are inclined toward endogamy and if you are favorable it is because you are inclined toward exogamy.

Profile of Ragnar Frisch

Posted on by

Co-winner of the first Nobel Prize in economics. The profile, by Arild Sæther and Ib E. Eriksen, is devastating. Frisch became an ardent supporter of central planning. The authors quote him writing

The blinkers will fall once and for all at the end of the 1960s (perhaps before). At this time the Soviets will have surpassed the US in industrial production. But then it will be too late for the West to see the truth. (Frisch 1961a)

To me, the moral of the story is that you can be very confident, highly respected, and completely wrong.

Government and Scale

Posted on by

Don Boudreaux writes,

– the number of citizens per each of the 50 states in the U.S. is today, on average, 6,300,000 (or more than 27 time larger than in 1789);

– the average number of citizens represented by each of the 435 members of the U.S. House of Representatives today is about 724,000 – meaning that the typical member of the U.S. House today represents a number of citizens 13 times larger than was represented by his or her counterpart in 1789;

– – the average number of citizens represented by each of the 100 members of the U.S. Senate today is 3,150,000 – meaning that the typical member of the U.S. Senate today represents a number of citizens 23 times larger than was represented by his or her counterpart in 1789.

For a long time, I have made an issue of this. I believe that as government scales up, it gets worse. My recent essay offered international evidence for this. I discuss it in the widely-unread Unchecked and Unbalanced. Michael Lotus and James Bennett in America 3.0 also suggest that a country with more states, each less populous but with more governing autonomy, would be a desirable future. Almost ten years ago, I wrote We Need 250 States.

Eating Out More

Posted on by

Timothy Taylor finds a USDA report, which says that

Between 1977-78 and 2005-08, U.S. consumption of food prepared away from home increased from 18 to 32 percent of total calories.

Since 1970, the proportion of food spending that is spent on eating out has increased from about 25 percent to about 43 percent.

Taylor and the USDA focus on the consequences for obesity. I would add that this trend will increase measured GDP. When you spend time preparing a meal at home, it does not count as GDP. When you eat out, the time spent preparing the meal does count as GDP.

I believe that this represents a legitimate increase in GDP. My comparative advantage is not in food preparation. The same is true for most people. Spending less time in the kitchen represents economic progress.

Although I eat out much less than most people, I rarely spend more than 20 minutes preparing a meal. That means that I eat a lot of prepared foods. I do think that most meals that you eat at home have a higher ratio of nutrients to calories than most meals that you eat outside the home. Perhaps that will change at some point.

The New Piketty Book and Social Security Privatization

Posted on by

I have not read it, but Tyler is touting it. Apparently, Piketty argues that it is normal for the return on capital to exceed the growth rate of the economy.

I always thought that this was impossible. Ten years ago, I wrote,

If stock prices grow at 7 percent per year while the economy grows at 2 percent per year, then the ratio of stock prices to GDP (P/Y) fifty years from now will be more than ten times what it is today. How could that happen?

If the price-earnings ratio of the stock market (P/E) stays constant, then in order for P/Y to increase tenfold, the ratio of earnings to GDP (E/Y) has to increase tenfold. However, corporate profits are over 10 percent of national output today, so that if the ratio increases by tenfold, then corporate profits will be more than 100 percent of national output. That is impossible.

Alternatively, suppose that the ratio of corporate profits to national output stays constant. Then we need the P/E ratio to increase by tenfold in order to get a tenfold increase in P/Y. So, if the P/E ratio today is about 25, then in fifty years it will be 250. That would require investors to almost ignore risk and the time value of money in valuing stocks. No one believes that this is possible.

Perhaps Piketty has a better grasp on this than I do. But if the return on capital is going to exceed the growth rate of the economy, then this strikes me as powerful argument in favor of privatizing Social Security, so that people don’t get cheated out of these wonderful returns. Again, I have not read the book (it will be released in about 6 weeks). Does he come out in favor of privatizing Social Security? If not, then why not?

The Medical Analogy

Posted on by

Michael Huemer writes,

Voters, activists, and political leaders of the present day are in the position of medieval doctors. They hold simple, prescientific theories about the workings of society and the causes of social problems, from which they derive a variety of remedies–almost all of which prove either ineffectual or harmful. Society is a complex mechanism whose repair, if possible at all, would require a precise and detailed understanding of a kind that no one today possesses. Unsatisfying as it may seem, the wisest course for political agents is often simply to stop trying to solve society’s problems.

Pointer from Bryan Caplan. Similarly, in my almost-finished book on macro, I write,

From my perspective, the conventional structure of aggregate demand and aggregate supply offers nothing but a set of just-so stories. It is the equivalent of the ancient Greek theory of medicine which holds that health is governed by the four humors of black bile, yellow bile, phelgm, and blood.