The Seen and the Unseen in Movies
Loyal reader Lewis Lehe writes to ask about how economics is explained in popular media.
Are there any films/videos/pieces of visual media that show "the unseen" well? Films can only depict a few characters or places, so they tend to underweight benefits that are spread across large groups. Roger and Me is a fine example: we can see the devastation of Flint, but it would be difficult to see the gains from comparative advantage–i.e. returns to shareholders, slightly cheaper cars for consumers and so forth…
If there are no films that do this well, what ways could a filmmaker remedy these imbalances?
Larry Ribstein who has written extensively on economics in the movies notes:
The closest to what you're looking for in a movie speech is Larry the
Liquidator's speech (Danny De Vito) to the shareholders in Other
People's Money, in which he explains why their "dead" company should be
liquidated, despite the immediate loss of jobs, and the money put to
work creating more viable jobs.
There are films and television shows which convey the idea of the invisible hand but unfortunately they are not much about benefits. I am thinking, for example, of The Wire, which uses character but in the final analysis is about how character is dominated by the larger forces of supply, demand, and money. In The Wire drug dealers come and go but the drug market is forever. The Wire also shows how money and markets connect and intertwine white and black, rich and poor, criminal and police in a grand web that none of them truly comprehends–a product of human action but not of human design. (Traffic, the movie and miniseries, shows in a similar way how drug markets connect the high and the low in both the United States and Mexico.)
It's not comforting that in some ways the best vision of how markets work comes from portrayals of the drug market but The Wire does show how a filmmaker could tell the story of the seen and the unseen and still make a successful work of art.
The Meaning of Statistical Significance
Science News has a good piece by Tom Siegfried on statistical significance and what it means. Siegfried covers a lot of ground including Ioannidis' argument, Why Most Published Research Findings are False, Oomph versus statistical significance, and the meaning of the p-value. On the latter point, Siegfried writes:
Correctly phrased, experimental data yielding a P value of .05 means that there is only a 5 percent chance of obtaining the observed (or more extreme) result if no real effect exists (that is, if the no-difference hypothesis is correct).
He then explains why a 5% level of significance doesn't mean that there is a 95% chance that the result could not have happened by chance.
All of this is correct but there is another more common error that Siegfried does not address. Suppose that a researcher runs a regression and gets a coefficient on some variable of interest of 5.2 and a p value of .001. In explaining his or her results the researcher says "a effect of this size would happen by chance alone only 0.1% of the time." Now that sounds very impressive but it is also misleading.
In economics and most of the social sciences what a p-value of .001 really means is that assuming everything else in the model is correctly specified the probability that such a result could have happened by chance is only 0.1%. It is easy to find a result that is statistically significant at the .001 level in one regression but not at all statistical significant in another regression with small changes such as the inclusion of an additional variable. Indeed, not only can statistical significance disappear, the variable can change size and even sign!
A highly statistically significant result does not tell you that a result is robust. It is not even the case that more statistically significant results are more likely to be robust.
Now go back to Siegfried's explanation for the p-value. Notice that he writes "Correctly phrased, experimental data yielding a P value of .05…" Almost everything of importance is buried in those words "experimental data." In the social sciences we rarely have experimental data. Indeed, even "experimental data" is not quite right – truly randomized data might be a better term because even so-called experimental data can involve attrition bias or other problems that make it less than truly random.
Thus, the problems with the p-value is not so much that people misinterpret it but rather that the conditions for the p-value to mean what people think it means are really quite restrictive and difficult to achieve.
Addendum: Andew Gelman has a roundup of other comments on Siegfried's piece.
Solar Furnace
Hat tip: Boing Boing. And here is an interesting interview with Bill Gross of eSolar who argues that information technology and modularity can be used to scale solar furnaces (by using cheaper mirrors combined with IT to focus the mirrors) in a way that panels cannot.
Assorted Links
1. More tragedy of the commons. See also here for a great video from 60 Minutes useful for teaching this material.
2. Alan Greenspan's new paper, The Crisis.
3. Larry White talks with Richard Timerberlake about the gold standard in an Econ Journal Watch podcast.
Fairtest
Tim Harford gives his stamp of approval to randomized trials:
What is missing is the political demand for tests of what really works. Too many policies on education, welfare and criminal justice are just so much homeopathy: cute-sounding stories about what works leaning more on faith than on evidence. Politicians and civil servants, faced with some fancy new idea, should get into the habit of asking for a proper randomised trial. And we, as citizens, should be equally demanding….
We’ve had FairTrade coffee – what about FairTest policies? Most voters don’t know much about randomisation or trial protocols, but they’ll know when they see the FairTest logo that a policy has had a proper, scientific test to see if it works.
See the Tragedy of the Commons
Warning: Stefan Geens, an expert in the use of Google Earth, has taken a close look at the Zimbabwe photos and he argues that they are the unfortunate result of misinterpreting Google post-processing and updating. I am not an expert but at the present moment I find his analysis compelling and I have taken down the powerpoints in which I incorporated the flash animation produced by the Center for Global Development.
A few points of importance. First, the sharply delineated lines in the photos dividing communal and privately owned land is real and is evidence consistent with the tragedy of the commons. Geens writes to me:
The observation that the communal farmland seems worse off than the private farmland is a plausible one. And since the Landsat imagery could well have been taken around the year 2000 (or even earlier), Richardson's image can reasonably be used to support the thesis that communal farmland is not as well managed as private land.
What cannot be supported is the "animation" aspect which appears to show but in fact does not show a change over time.
I should note that I have no reason to think that there was any malfeasance on the part of the Center for Global Development, a great organization, or Craig Richardson who originally brought attention to the photos. Indeed, my reading of Geens is that without some expert help it would be hard not to make some errors in interpreting Google images, which have a more complicated provenance than one would imagine. In addition, Richardson emailed me that he showed the images to farmers and government agriculture officials in Zimbabwe who agreed that they were representative of what was going on on the ground. (See also Geens on this point noting burning.) Nevertheless, although the redistribution of land in Zimbabwe clearly led to a drop in productivity and output, the animation is not evidence on this point.
One interesting point about this episode is that the story and the flash animation have been on the CGD website for several years but the huge exposure of MR means that we can draw on the expertise of many people around the world. Although I put some work into putting the powerpoints together I am pleased that we were able to correct this so quickly.
Original post follows but with PPs deleted.
—-
In 2000 Zimbabwe began to forcibly redistribute land from private but predominantly white-owned commercial farms to much poorer black farmers who toiled on communal lands. Stunning pictures from Google Earth collected by Craig Richardson show the result.
Take a look at the Before picture. The communal land on the left is dry, dusty and unproductive compared to the private farmland on the right which is green and dotted with blue ponds and lakes. Why? There were two theories to explain this difference.
- The Tragedy of the Commons – the farmers on the communal lands did not have the incentives to invest in the land and thus the land eroded and turned to desert.
- The land on the right (which was owned mostly by whites) was better quality land.
Both theories could be true. Regarding the latter explanation, however, notice that the dry communal lands on the left are sharply delineated from the green private farms on the right–so sharply that soil quality and rainfall alone are unlikely to explain the difference.
So what happened after the land was redistributed beginning in 2000 and all of it made communal?
Click on the arrow to progress between before and after photos
After reform the land quality worsened everywhere. In particular, note that the blue lakes and ponds on the right became dry and empty as farmers no longer had an incentive to invest in maintaining these resources. The tragedy of the commons.
This excellent visual look at the tragedy of the commons was produced by
Todd Moss at The Center for Global Development based on pictures and
ideas from Craig Richardson. Of course Zimbabwe had many problems before and after this forcible land redistribution. You can find more pictures, background information and a lengthier discussion of this episode here.
Temporary Marriage in Shiite Islam
ON A DUSTY MORNING in the holy city of Qom, I went looking for a shrine in a walled cemetery of martyrs known as Sheikhan. The graveyard's walls are lined with glass cases containing the framed photos of soldiers felled by the Iran-Iraq war. The shrine, I'd been told, is a hangout for women seeking temporary marriage, an intriguing mechanism in Shiite Islam for relieving sexual frustration. In the Islamic Republic of Iran, sex outside of marriage is a crime, punishable by up to 100 lashes or, in the case of adultery, death by stoning. Yet the purpose of a temporary marriage is clear from its name in Arabic–mut'a, pleasure. A man and a woman may contract a mut'a for a finite period of time–from minutes to 99 years or more–and for a specific amount, mehr in Farsi, which the man owes the woman.
Interesting throughout, from Mother Jones.
Assorted Links
1. More on Israel's new "no-give, no-take" organ donation system.
…Robby Berman, founder and director of the Halachic Organ Donor Society,
a Jewish organization based in New York, said ultra-Orthodox Jews can't
have it both ways…. "Every Jew has a right to be against an organ donation, but then you can't come and say 'give me an organ.''
2. Are birds shrinking due to climate change? At last, the climate change and evolution deniers can unite.
3. Not from the Onion: Apple: Free iPad With Every Replacement Battery.
4. Chinese airports at nowhere:
"…when the $57-million airport opened in late 2007. Local officials were
so confident that tourists would flock to this beautiful, mountainous
county in southwestern China that they made the terminal big enough to
accommodate 220,000 passengers annually…A grand total of 151 people flew in and out of Libo last year."
Addendums
5. Inhalable chocolate and coffee.
6. Matt Ygelsias, world's most underpayed blogger?
Hat tips to Daniel Lippman and Dave Undis.
A daylight savings time confession
Had the idea of a government plan to shift the clocks back and forth twice and year been proposed today I am reasonably certain that I would have been against it. I probably would have argued that it would be chaotic, inefficient and unnecessary (private firms could agree with their employees to change working hours at any time, right?). Central planning of time! Washington bureaucracy messing with the clocks! Get your government hands off my time!
And yet, it works and I like it. It is good to be reminded of this twice a year.
The Economics of Sainthood
Barro, McCleary and McQuoid have a new paper, The Economics of Sainthood (a preliminary investigation)
Saint-making has been a major activity of the Catholic Church for centuries. The pace of
sanctifications has picked up noticeably in the last several decades under the last two popes, John
Paul II and Benedict XVI. Our goal is to apply social-science reasoning to understand the
Church’s choices on numbers and characteristics of saints, gauged by location and socioeconomic
attributes of the persons designated as blessed.
I couldn't help laughing at sentences such as these:
Another result is the significantly negative coefficient on pope’s tenure, given by the
coefficient -0.0229 (s.e.=0.0095) in Table 3, column 1. This result implies that a one-standard deviation
increase in tenure (8.5 years in Table 2) reduces the canonization rate by 0.2 per year.
Thus, there is a little evidence that popes experience saint-making fatigue as their tenure in office
lengthens.
Saint-making fatigue; who knew?
The Mystery of Sudden Acceleration
Here is Ted Frank on the Toyota sudden acceleration problem.
The Los Angeles Times recently did a story detailing all of the NHTSA reports of Toyota “sudden acceleration” fatalities, and, though the Times did not mention it, the ages of the drivers involved were striking.
In the 24 cases where driver age was reported or readily inferred, the drivers included those of the ages 60, 61, 63, 66, 68, 71, 72, 72, 77, 79, 83, 85, 89–and I’m leaving out the son whose age wasn’t identified, but whose 94-year-old father died as a passenger.
These “electronic defects” apparently discriminate against the elderly, just as the sudden acceleration of Audis and GM autos did before them.
Statistical Addendum: A number of commentators are worried about selection effects (hat tip Don). Here is background information from FARS. In 2008 there were 50,186 drivers involved in a car accident with a
fatality. Of these 8066 were 60 years of age or over. Thus in 2008 the
probability that a driver in a car accident with a fatality was 60
years of age or over was 16%. Using the figures above the probability
that a driver in a car accident involving sudden acceleration in a Toyota was about
54%. Of course, the sample size is very small.
What I’ve been listening to
Norwegian rocker Ida Maria and her debut album, Fortress Round My Heart. Here is one excellent, manic track.
Invest in People with Income Contingent Loans
Three entrepreneurs are offering a share of their life’s income in exchange for cash upfront and have banded together to form the Thrust Fund, an online marketplace for such personal investments.
Kjerstin Erickson, a 26-year-old Stanford graduate who founded a non-profit called FORGE that rebuilds community services in Sub-Saharan African refugee camps, is offering 6 percent of her life’s income for $600,000.
(quoted here). A closer look reveals that this is more of clever marketing play to interest donors in supporting a philanthropy. What, for example, does Kjerstin want do with the money? She writes:
Some people may think that it's crazy to give up a percentage of your income for the sake of scaling a nonprofit venture. But to me, it makes perfect sense.
Well it does make perfect sense for Kjerstin but not so much for a profit-seeking investor (moreover any income would be taxed twice, a problem with equity financing in general but especially so here without corporate tax breaks.) Investing in just one entrepreneur is also risky – why not subdivide the investment and invest in many?
Jeff at Cheap Talk raises a larger but closely related issue, "Why don’t we replace student loans with student shares?" In fact, Milton Friedman advocated income contingent loans in 1955.
The counterpart for education would be to "buy" a share in an individual's earning prospects: to advance him the funds needed to finance his training on condition that he agree to pay the lender a specified fraction of his future earnings. In this way, a lender would get back more than his initial investment from relatively successful individuals, which would compensate for the failure to recoup his original investment from the unsuccessful. There seems no legal obstacle to private contracts of this kind, even though they are economically equivalent to the purchase of a share in an individual's earning capacity and thus to partial slavery
…One way to do this is to have government engage in equity investment in human beings of the kind described above. …The individual would agree in return to pay to the government in each future year x per cent of his earnings in excess of y dollars for each $1,000 that he gets in this way. This payment could easily be combined with payment of income tax and so involve a minimum of additional administrative expense. The base sum, $y, should be set equal to estimated average–or perhaps modal–earnings without the specialized training; the fraction of earnings paid, x, should be calculated so as to make the whole project self-financing.
Another Nobelist of a more liberal stripe, James Tobin, helped to implement an income-contingent tuition program at Yale in the 1970s. Alas, the program was terminated largely due to rent-seeking when many Yale graduates become so successful that the repayment amounts became substantial and the nouveau riche chose to default (also here).
Bill Clinton later tried to take the idea national but it didn't get very far in the United States. (Not coincidentally Clinton had been a beneficiary of the Yale program.)
Australia, however, implemented an income contingent loan program in 1989. Australian students don't pay anything for university when they attend but once their
income reaches a certain threshold they are charged through the income tax system. Many other countries are experimenting with income contingent loans.
Hat tip to Alexander Ooms.
Perkins versus Promise Academy Charter School
I was astounded to read in the NYTimes that Bill Perkins, state senator from Harlem, opposes charter schools:
Over the last decade, as charter schools have multiplied, Mr. Perkins has undergone a dramatic shift and emerged as their most outspoken critic in the Legislature, writing guest columns in newspapers and delivering impassioned speeches criticizing the “privatization” of public schools.
When officials of the city’s Department of Education announced last year that they planned to place a charter school inside the Public School 123 building in Harlem, Mr. Perkins was infuriated. With help from his chief of staff, several parents and teachers’ union representatives staged a protest there on the first day of school, holding signs that labeled charter schools as “separate and unequal.”
Perkins's opposition is astounding because among the charter schools he opposes are Geoffrey Canada's Harlem Children’s Zone schools. Here from the NBER Digest is a summary of recent research on these schools:
Will Dobbie and Roland Fryer find that in the fourth and fifth grade, the math test scores of charter school lottery winners and losers are virtually identical to those of a typical black student in the New York City schools. After attending the Promise Academy middle school for three years, black students score as well as comparable white students. They are 11.6 percent more likely to be scoring at grade level in sixth grade, 17.9 percent more likely to be scoring at grade level in seventh grade, and 27.5 percent more likely to be scoring at grade level by eighth grade. Overall, Promise Academy middle school enrollment appears to increase math scores by 1.2 standard deviations in eighth grade, more than the estimated benefits from reductions in class size, Teach for America, or Head Start.
These increases are very large and although supported by randomized experiment I wouldn't be surprised if future research cuts them down but if the true effect were even a quarter as large it would still be big news. As Fryer told David Brooks “The results changed my life as a researcher because I am no longer interested in marginal changes."
I don't know why anyone interested in the welfare of children would want to discourage this kind of experimentation.
Department of Yikes
According to USA Today:
Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available.
These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.
Thus, if these numbers are to be believed, federal workers on average earn in wages and compensation 50% more than workers in the private sector doing the same job. Bear in mind that the federal workers are paid by the private sector workers. We can't all be insiders.
The figures do seem large to me, however, and they do not correct for a variety of factors such as age or experience so take them with a grain of salt.