Housing the Poorest Hurricane Victims
Since many victims have had to travel quite a distance to obtain temporary shelter and many will have to move further from New Orleans to obtain permanent housing within a reasonable time, these vouchers should be available to any public housing agency in the country to serve families displaced by the hurricane. To avoid delays in getting assistance to these families, the vouchers should be allocated to housing agencies on a first-come-first-served basis and any low-income family whose previous address was in the most affected areas should be deemed eligible. We should not take the time to determine the condition of the family’s previous unit before granting a voucher.
Getting the poorest displaced families into permanent housing is an urgent challenge. It requires bi-partisan support for Congress to act promptly, quick action by HUD to generate simple procedures for administering these special vouchers, and housing agencies in areas of heavy demand to add temporary staff to handle the influx of applications for assistance.
Even with the best efforts of all parties, the proposed solution will not get all the low-income families displaced by Hurricane Katrina into permanent housing tomorrow. However, it will be much faster than building new housing for them. And it will show them that the federal government cares about their plight and is working to do what it can to help.
Ivory Tower
Ivory tower economist gets apartment to match.
Thanks to Newmark’s Door for the pointer.
Essays on Cost
For those further interested in the opportunity cost question, the Library of Economics and Liberty is featuring this month L.S.E. Essays on Cost edited by James Buchanan and George F. Thirlby and including essays by Hayek, Coase and others.
This sentence from Buchanan’s preface caught my eye:
In any general theory of choice cost must be reckoned in a utility rather than in a commodity dimension.
Buchanan’s short book Cost and Choice is also available.
Not Just Low Prices
From the Washington Post:
While state and federal officials have come under harsh
criticism for their handling of the storm’s aftermath, Wal-Mart is
being held up as a model for logistical efficiency and nimble disaster
planning, which have allowed it to quickly deliver staples such as
water, fuel and toilet paper to thousands of evacuees.In
Brookhaven, Miss., for example, where Wal-Mart operates a vast
distribution center, the company had 45 trucks full of goods loaded and
ready for delivery before Katrina made landfall. (emphasis added).
The tragedy of Jonathan Kozol
Jonathan Kozol has spent a good deal of his life writing eloquently and passionately about children and the sad state of education in America. The depths of his passion and caring are to be admired and applauded. The tragedy is that his eloquence has often been put to ill use attacking the one reform that would really help – private schools and school choice. Kozol’s good intentions, therefore, earn him no free pass from me.
In a recent interview he said:
[Private schools] starve the public school system of the presence of well-educated,
politically effective parents to fight for equity for all kids.
Kozol’s argument can be summed up thusly:
Letting people escape over the Berlin Wall starves the East German system of the presence of well-educated,
politically effective people to fight for the equity of all East Germans.
Barricading parents into the poor schools their government offers them is like barricading people into communist East Germany. People, even well-educated, politically effective people, should not be used as tools to further some social engineering scheme.
But is the argument even true? Kozol, draws on Hirschman’s great book Exit, Voice and Loyalty, but like many who read that book he shows no sign of understanding any of its subtleties.
Yes, exit and voice can be substitutes and reducing exit may increase voice. But more often than not, voice and exits are complements. When you complain of delay where is your voice more likely to be heard; at a restaurant or at the department of motor vehicles?
It’s the threat of exit that makes people listen.
Moreover, shutting down exit does not guarantee that voice will arise. The people whose children are stuck in the worst-performing schools have neither voice nor exit – they are like the people of New Orleans who did not have the means to escape nor the political power to compel help from others.
Finally, we go to the data. Kozol’s argument implies that places with more exit should have worse public schools. But in fact a large body of research shows that the opposite is true. Places with more choice – whether that choice comes from private schools, charter schools, or even choice among public schools – have better schools. Exit and the threat of exit makes educators listen.
But will Kozol listen? Sadly, I think not because his fundamental opposition to vouchers is not economic but aesthetic. He says:
Vouchers elevate the lowest instincts of humanity over the most beautiful instincts.
Need I quote Adam Smith in response?
Taxes and Prices
Suppose there is an
auction for a pearl. The person with the highest demand is willing to
pay $5000 the person with the next highest demand is willing to pay
$4999. The winner must pay a tax of $1000 to the government.
With
the tax the two bidders bid until the price reaches $4000 at $4000
(note that $3999+$1000 tax= net of $4999) the low bidder drops out and
the high bidder wins. Total price to the high bidder is $5000, $4000
to the seller and $1000 to the government.
Now with no tax a
price of $4000 leaves two bidders in the ring so the price must rise
higher. In fact, the price must now rise to $5000 to get the second bidder
to drop out. Final price to the high bidder is $5000 – the seller gets
$1000 more in revenues and the government gets nothing.
If one wants to challenge the gas-tax argument then to place to do so is to argue that a temporary reduction in the tax, leading to more profits for the oil companies, will stimulate supply enough to have a significant effect on reducing price. Any other argument is incorrect.
Government Stops Red Cross from Entering New Orleans
I did not see the Red Cross in all the pictures of New Orleans broadcast over the past week. Where were they?!! Don Boudreaux at Cafe Hayek points us to the incredible answer:
According to
the Disaster FAQs section of the American Red Cross’s website:
- Access to New Orleans is controlled by the National Guard and local
authorities and while we are in constant contact with them, we simply cannot
enter New Orleans against their orders.
- The state Homeland Security Department had requested–and continues to
request–that the American Red Cross not come back into New Orleans following
the hurricane. Our presence would keep people from evacuating and encourage
others to come into the city.
It’s one thing for the government to be incompetent, this I expect. But then get the F. out of the way. People are dying.
Blackwater in New Orleans
Private security firms are stepping into the vacuum created by the failure of the government to protect life and property in New Orleans.
The Steele Foundation, headquartered in San Francisco, was called in
by several major corporate clients to the inundated city where local
police are scarce and food, water or fuel has yet to arrive from the
federal government."At this point, all of our efforts are focused on providing physical
security for people who are trapped as well as providing humanitarian
relief," said Kenn Kurtz, chief executive officer of the Steele
Foundation. The company is looking after clients with hotels and holed
up employees and their families, some with urgent medical needs."Right now these people are alone…there is no military presence in downtown New Orleans," he said.
The Steele Foundation, which at one time protected Haiti’s president
Jean Bertrand Aristide and operates in Iraq, specializes in business
risk consulting, protective security work and training.The company has set up a mobile command post in downtown New Orleans
and its clearly-identified security teams are armed but mostly with
non-lethal ammunition, Kurtz said. Some 16,000 military rations,
bottled water as well as fuel have been brought in but looters have
attacked the company’s vehicles."We can’t get fuel into many places because it’s too dangerous to travel," Kurtz.
Blackwater USA is sending about 50 employees to the Gulf region
along with a transport helicopter and two cargo planes, according to
spokeswoman Anne Duke. The security company has offered to help the
Coast Guard with pro bono rescue work and is working with
private-sector firms to help protect infrastructure and cultural
buildings in the city, she said."I definitely don’t think Blackwater would have been contacted if it
wasn’t a serious situation," said Duke. She declined to detail who the
company is working for in the area.Blackwater, which draws on former military and law enforcement personnel, has taken on some very high-profile tasks in Iraq.
Easy Econ Graphs?
Scott Bardsley asks:
…what’s
the best way to draw graphs in economics? There doesn’t seem to be a good
answer, much to the frustration of those of us who’d like to take econ
notes on our computers. Illustrator is too large and expensive. Word is
quite clumsy–it’s awkward to draw multiple lines that are positioned
relative to text and the autosnap is too sensitive. Paint doesn’t let you
move your lines after they’ve been drawn.Is there a quick and easy way to do econ graphs, or is this an opportunity
for some clever programmer?
I use Mayura Draw. Mayura is a vector based program which means each line or shape is an object that can be picked up moved, resized etc. Curves such as indifference curves can be easily adjusted in order to draw tangencies. Figures can also be expanded or contracted without loss of quality. I particularly like that you can export files in EPS (encapsulated postscript) format which allows for very high quality printing. I used it to draw this graph. Mayura Draw would not be good, however, for drawing on the fly and the fact that it is vector based makes filling an area a bit of a chore.
Two years ago I considered buying a Tablet PC, which in theory ought to be perfect for taking notes and drawing in real time but the market for Tablet PCs never took off and I’ve never seen any of my students using one.
Comments are open if you have thoughts, suggestions or relevant experiences.
Opportunity Cost
The answer is b, $10. Your next best alternative to the Clapton concert is attending the Dylan concert which has a benefit of $50 and a cost of $40 or a net benefit of $10. The net benefit is what you give up by attending the Clapton concert.
Why Most Published Research Findings are False
Writing in PLoS Medicine, John Ioannidis says:
There is increasing concern that in modern research, false findings may be the majority or even the vast majority of published research claims. However, this should not be surprising. It can be proven that most claimed research findings are false.
Ioannidis presents a Bayesian analysis of the problem which most people will find utterly confusing. Here’s the idea in a diagram.
Suppose there are 1000 possible hypotheses to be tested. There are an infinite number of false hypotheses about the world and only a finite number of true hypotheses so we should expect that most hypotheses are false. Let us assume that of every 1000 hypotheses 200 are true and 800 false.
It is inevitable in a statistical study that some false hypotheses are accepted as true. In fact, standard statistical practice guarantees that at least 5% of false hypotheses are accepted as true. Thus, out of the 800 false hypotheses 40 will be accepted as “true,” i.e. statistically significant.
It is also inevitable in a statistical study that we will fail to accept some true hypotheses (Yes, I do know that a proper statistician would say “fail to reject the null when the null is in fact false,” but that is ugly). It’s hard to say what the probability is of not finding evidence for a true hypothesis because it depends on a variety of factors such as the sample size but let’s say that of every 200 true hypotheses we will correctly identify 120 or 60%. Putting this together we find that of every 160 (120+40) hypotheses for which there is statistically significant evidence only 120 will in fact be true or a rate of 75% true.
(By the way, the multiplying factors in the diagram are for those who wish to compare with Ioannidis’s notation.)
Ioannidis says most published research findings are false. This is plausible in his field of medicine where it is easy to imagine that there are more than 800 false hypotheses out of 1000. In medicine, there is hardly any theory to exclude a hypothesis from being tested. Want to avoid colon cancer? Let’s see if an apple a day keeps the doctor away. No? What about a serving of bananas? Let’s try vitamin C and don’t forget red wine. Studies in medicine also have notoriously small sample sizes. Lots of studies that make the NYTimes involve less than 50 people – that reduces the probability that you will accept a true hypothesis and raises the probability that the typical study is false.
So economics does ok on the main factors in the diagram but there are other effects which also reduce the probability the typical result is true and economics has no advantages on these – see the extension.
Sadly, things get really bad when lots of researchers are chasing the same set of hypotheses. Indeed, the larger the number of researchers the more likely the average result is to be false! The easiest way to see this is to note that when we have lots of researchers every true hypothesis will be found to be true but eventually so will every false hypothesis. Thus, as the number of researchers increases, the probability that a given result is true goes to the probability in the population, in my example 200/1000 or 20 percent.
A meta analysis will go some way to fixing the last problem so the point is not that knowledge declines with the number of researchers but
rather that with lots of researchers every crackpot theory will have at least one scientific study that it can cite in it’s support.
The meta analysis approach, however, will work well only if the results that are published reflect the results that are discovered. But editors and referees (and authors too) like results which reject the null – i.e. they want to see a theory that is supported not a paper that says we tried this and this and found nothing (which seems like an admission of failure).
Brad DeLong and Kevin Lang wrote a classic paper suggesting that one of the few times that journals will accept a paper that fails
to reject the null is when the evidence against the null is strong (and thus failing to reject the null is considered surprising and
important). DeLong and Lang show that this can result in a paradox. Taken on its own, a paper which fails to reject the null provides evidence in favor of the null, i.e. against the alternative hypothesis and so should increase the probability that a rational person thinks the null is true. But when a rational person takes into account the selection effect, the fact that the only time papers which fail to reject the null are published is when the evidence against the null is strong, the publication of a paper failing to reject the null can cause him to increase his belief in the alternative theory!
What can be done about these problems? (Some cribbed straight from Ioannidis and some my own suggestions.)
1) In evaluating any study try to take into account the amount of background noise. That is, remember that the more hypotheses which are tested and the less selection which goes into choosing hypotheses the more likely it is that you are looking at noise.
2) Bigger samples are better. (But note that even big samples won’t help to solve the problems of observational studies which is a whole other problem).
3) Small effects are to be distrusted.
4) Multiple sources and types of evidence are desirable.
5) Evaluate literatures not individual papers.
6) Trust empirical papers which test other people’s theories more than empirical papers which test the author’s theory.
7) As an editor or referee, don’t reject papers that fail to reject the null.
UHaul Pricing
I’m not convinced by his example but Andrew Roth (a former student of mine) has a found a nice source of data that could be used to discuss demand and supply, the difficulties of identifying price discrimination, and why it’s efficient to have "women enter free" nights at clubs.
Some high income earners are leaving
California because of its punitive tax rates. Could low- and
middle-income workers be leaving as well? One crude measure is to
examine the one-way rental rates for U-Haul vans. Using U-Haul’s website, I queried a one-way rental for a 10-foot van for October 1st, 2005.
One-Way Trip
Price Los Angeles to Las Vegas
$454.00 Las Vegas to Los Angeles
$119.00
Hattip to E. Frank Stephenson at Division of Labor.
No Pain Relief for Tort Sufferers
James Hamilton takes a look at one of the key studies on Vioxx and heart attacks. He is not greatly impressed.
I took a look at one of the studies on which the decision was
justified, written by Dr. David Graham and co-authors and published in Lancet
in February. This study looked at 8,143 Kaiser Permanente patients who
had suffered a heart attack and had also at some point taken a
nonsteroidal anti-inflammatory drug (NSAID), of which Vioxx (rofecoxib)
is one. Of these patients, 68 were taking rofecoxib while 4,658 were
receiving no medication at the time of their heart attack, a ratio of
(68/4658) = 1.46%. For comparison, the study looked at 31,496 other
patients who had also at some point taken an NSAID, matched for
characteristics like age and gender with the first group, but who
didn’t have a heart attack. The ratio of rofecoxib users to those with
no current medication was slightly lower (1.05%) in this second group,
which one might summarize as a (1.46/1.05) = 1.39-fold increase risk of
heart attack from taking rofecoxib compared to no NSAID. Is that
statistically significant, in other words, can you rule out that you’d
see a difference of that size just by chance? Yes, the study claimed,
but just barely.On the other hand, this was not a controlled experiment, in which
you give the rofecoxib randomly to some patients and not others in
order to see what happens. Rather, something about either these
patients or their doctors led some of them to be using rofecoxib and
others not. Dr. Graham and co-authors looked at a variety of indicators
that suggested that the rofecoxib patients already had slightly
elevated risk factors for coronary heart disease. Once they controlled
for these with a logistic regression, their study found an elevated
risk factor of heart attack for rofecoxib takers of 1.34, which was not
statistically significantly distinguishable from 1.0.The strongest evidence from this study was a claimed dose-effect
relation. Of these 68 rofecoxib-using heart-attack patients, 10 of them
were taking doses above 25 mg per day. Only 8 patients in the much
larger control group were taking so high a dose, implying an elevated
risk factor of 5 to 1 for high-dose patients. Again observable risk
factors could explain some of this, with the conditional logistic
regression analysis bringing the implied drug-induced risk down to 3 to
1. According to the study, this elevated risk factor was still
statistically significant, even though the inference is based on the
experience of just 10 patients.The obvious question here is whether in fact the authors were able
to observe all the relevant risk factors. The study openly acknowledged
that it did not, missing such important information as smoking and
family history of myocardial infarction.…[E]ven if
there actually is an elevated risk of the magnitude the studies suggest
but can’t prove, the question is whether I might want to accept a 1 in 4,000 risk of dying from a heart attack in order to get the only medication timt makes my pain bearable and a mobile life livable. And if I say no to the Vioxx, I may end up taking something that is less effective for my pain but has risks of its own.…. How did we arrive at a
system in which 12 random Texans are assigned responsibility for
evaluating the scientific merits of statistical evidence of this type,
weighing the costs and benefits, and potentially sending a productive blue-chip American company into bankruptcy protection?
See also my op-ed Bringing the Consumer Revolution to the FDA.
Not since Mark Twain
Jon Stewart destroyed Christopher Hitchens on Friday’s Daily Show. Hitchens tried to take the line that people against the war in Iraq were capitulationist, blame America-firsters. Here’s part of the transcript:
Stewart: The people who say we shouldn’t fight in Iraq
aren’t saying it’s our fault. That is the conflation that is the
most disturbing to me.
Hitch: Don’t you hear people saying that we made them nasty. . .
Stewart: I hear people saying a lot of stupid
[bleep]. . . But there is reasonable dissent in this country
about the way this war has been conducted, that has nothing to do with
people believing that we should cut and run from the terrorists, or that we
should show weakness in the face of terrorism, or that we believe that
we have in some way brought this upon ourselves. They believe that this war is being conducted without transparency, without credibility, and without competence…
Hitch: I’m sorry, sunshine. I just watched you ridicule the president for saying he wouldn’t give a timetable…
Stewart: No, you misunderstood why. . . .What I ridiculed the president [about] was [that] he refuses to answer questions from
adults as though we were adults and falls back upon platitudes and
phrases and talking points; that does a disservice to the goals that he
himself shares with the very people he himself needs to convince.
Hitchens knows he has been beat and can hardly wait to escape at the close (watch the video here).
The Virtues of Judicial Independence
I worry when conservatives rail against out-of-control judges. Who else but an independent judge can smack-down out-of-control bureaucrats and politicians like this?