Results for “manipulation”
76 found

The Myth of Chinese Meritocracy

No doubt you have heard how the leadership of China is meritocratic and composed of technocrats with PhDs. Minxin Pei suggests that there is less than meets the eye.

…Contrary to the prevailing perception in the West (especially among business leaders), the current Chinese government is riddled with clever apparatchiks like Bo who have acquired their positions through cheating, corruption, patronage, and manipulation.

One of the most obvious signs of systemic cheating is that many Chinese officials use fake or dubiously acquired academic credentials to burnish their resumes. Because educational attainment is considered a measure of merit, officials scramble to obtain advanced degrees in order to gain an advantage in the competition for power.

The overwhelming majority of these officials end up receiving doctorates (a master’s degree won’t do anymore in this political arms race) granted through part-time programs or in the Communist Party’s training schools. Of the 250 members of provincial Communist Party standing committees, an elite group including party chiefs and governors, 60 claim to have earned PhDs.

Tellingly, only ten of them completed their doctoral studies before becoming government officials.

Simply put, Chinese institutions are not as good as those in say Mexico. Thus, China will not overtake Mexico in terms of GDP per capita any time soon, hence Chinese growth rates will fall. All we are seeing today is the logic of the Solow model in action.

Outcome Unbiased Journals

Chris Said, a neuroscientist, prods the NIH to support outcome-unbiased journals:

The growing problems with scientific research are by now well known: Many results in the top journals are cherry picked, methodological weaknesses and other important caveats are often swept under the rug, and a large fraction of findings cannot be replicated. In some rare cases, there is even outright fraud. This waste of resources is unfair to the general public that pays for most of the research.

The Times article places the blame for this trend on the sharp competition for grant money and on the increasing pressure to publish in high impact journals. While both of these factors certainly play contributing roles…the cause is not simply that the competition is too steep. The cause is that the competition points scientists in the wrong direction.

…scientific journals favor surprising, interesting, and statistically significant experimental results. When journal editors give preferences to these types of results, it is obvious that more false positives will be published by simple selection effects, and it is obvious that unscrupulous scientists will manipulate their data to show these types of results. These manipulations include selection from multiple analyses, selection from multiple experiments (the “file drawer” problem), and the formulation of ‘a priori’ hypotheses after the results are known.

…the agencies should favor journals that devote special sections to replications, including failures to replicate. More directly, the agencies should devote more grant money to submissions that specifically propose replications….I would [also] like to see some preference given to fully “outcome-unbiased” journals that make decisions based on the quality of the experimental design and the importance of the scientific question, not the outcome of the experiment. This type of policy naturally eliminates the temptation to manipulate data towards desired outcomes.

Greece and Benford’s Law

To detect manipulations or fraud in accounting data, auditors have successfully used Benford’s law as part of their fraud detection processes. Benford’s law proposes a distribution for first digits of numbers in naturally occurring data. Government accounting and statistics are similar in nature to financial accounting. In the European Union (EU), there is pressure to comply with the Stability and Growth Pact criteria. Therefore, like firms, governments might try to make their economic situation seem better. In this paper, we use a Benford test to investigate the quality of macroeconomic data relevant to the deficit criteria reported to Eurostat by the EU member states. We find that the data reported by Greece shows the greatest deviation from Benford’s law among all euro states.

The full article is here, hat tip goes to Chris F. Masse.

Have track and field performances peaked?

I don't know much about track and field, but I found this article interesting, excerpt:

Today 64 percent of track and field world records have stood since 1993. One world record, the women’s 1,500 meters, hasn’t been broken since 1980. When Berthelot published his study last year in the online journal PLoS One, he made the simple but bold argument that athletic performance had peaked. On the whole, Berthelot said, the pinnacle of athletic achievement was achieved around 1988. We’ve been watching a virtual stasis ever since.

It seems unlikely to me that we have reached a true peak, rather a temporary plateau with slower-than-average growth, until the next breakthrough in training, technique, genetic manipulation, or whatever.  Does that sound familiar?

Request for movie opinions

From DL, a loyal MR reader and correspondent and link sender: "Mine [request] would be: what movies have you seen recently and were they good or not? I have recently seen Black Swan, The King's Speech, The Fighter, Rabbit Hole, Casino Jack and Somewhere."

I wrote: "Aronofsky's *Black Swan* = *Red Shoes* + *Repulsion* + Cronenberg + Tchaikovsky + something else too."  Overwrought, but I liked it.  The King's Speech was an extremely well done hammy manipulation, tugging on all the right strings and targeting the American soft spot for Brits.  True Grit suggests the Coen brothers are more superficial than they seem, rather than the contrary; rewatch the original for a better time.  The rest remain below my watch threshold for now, though Somewhere is due to come to Fairfax.  Even good movies about boxing I don't seem able to enjoy.  Political biopics I never like.

Catch Shares

Catch Shares are expanding in California, Oregon and Washington starting in January.

Under the catch-share system, fishery managers set an overall catch limit at the beginning of the season. Each fisherman will own a percentage of that catch. Just like shares in the stock market, the quotas can be traded or sold. The idea is that a market-based system will give fishermen more flexibility.

Not everyone is happy. Larry Collins, president of the Crab Boat Owners Association in San Francisco, is doubtful.

Collins is concerned that a market-based system will bring market manipulation. Under the rules, you don't have to be a fisherman to buy fish quotas, so it's possible that speculators or even environmental groups could buy into the market.

"You want hedge fund managers deciding when the people catch fish? Is that who you want to own your fish, or do you want to own them?" Collins asks.

Collins is also concerned about fishermen who make smaller catches. In Alaskan fisheries that use catch shares, some smaller boats opted to sell their fish quotas.

"That concentrated the resource in fewer and fewer hands. Now, I tend to think that public trust resources should be used to employ as many people as possible," he says.

Both of these features are benefits not costs. It's true that speculation can create bubbles and other problems but speculators also make the market more future-oriented and this will help to avoid the collapse of fishing stocks by making prices a better early warning system. Moreover, if environmentalists want to buy catch shares to increase the fishing stock then I am all for it.  In Modern Principles, Tyler and I discuss how we bought and retired some SO2 making the air cleaner for everyone (you are welcome! :)). 

Fewer, larger boats is also a benefit not a cost. Under the current system the influx of small boats is simply a form of rent-seeking which raises net social costs–too many fisherman chasing too few fish. Catch shares reduce over-capitilization in the industry raising productivity (see also Modern Principles on this point).

The main problem with catch-shares is setting the size of the catch, which inevitably is a politicized process. Massachussetts congressmen, for example, are trying to withold funds from NOAA until catch shares are increased. Nevertheless with so many fishing stocks nearing collapse it is clear that some limits are needed. Moreover, before catch-shares are put in place few people in the industry appreciate that temporary limits can lead to long-term increases in catch as the fishing stocks recover to sustainable levels. After catch-shares are put in place, however, it is sometimes the fishermen who lobby for greater limits not for monopoly reasons but as they come to recognize that a smaller limit leads to a larger stock and larger profits.

Here is my previous post, Reversing the Decline in Fish Stocks, on catch shares with more links.

Hat tip: Daniel Lippman.

If aggregate demand is so low, why are profits so high?

That's not a facetious or sarcastic question, I am puzzled.  Here is one story from yesterday:

Major corporations are expected to report some of their strongest profits in years.

“It has been one of the strongest profits recoveries ever,” said David S. Bianco, chief United States equity strategist for Bank of America Merrill Lynch. “You have got to go back to the Depression to find a profits recovery that outpaces this one.”

What are the options?

1. It's earnings manipulation and real economic profits aren't high at all.  Or they may represent capital consumption.

2. It's an oligopoly model and mark-ups are countercylical (NB: this would eaier to maintain if the recovery in output had been weaker).

3. Aggregate demand is recovering but a) workers are unemployed because, at current margins, their labor simply isn't worth very much, and b) real interest rates are low because of cushions of corporate cash.

4. We're seeing a lot of cost-lowering positive supply shocks, but AD remains stagnant.

Each of these explanations has its problems.  What other hypotheses should I be considering?

Addendum: Arnold Kling comments.

Getting tough with Germany?

Maybe I've covered too many Paul Krugman posts lately, but since he blogged Germany, and I'm now covering Germany, it's worth a quick look.  After proposing that we get tough with the Chinese, Krugman wrote:

And it’s also important to send a message to the Germans: we are not going to let them export the consequences of their obsession with austerity.

Nicely, nicely isn’t working. Time to get tough.

Yet Germany already has passed a constitutional amendment mandating a more or less balanced budget by 2016.  Germany also has EU treaty obligations (admittedly, they broke them in the past, though I suspect they view those lawless days as behind them) limiting the German fiscal deficit to three percent of gdp.

Would trade sanctions on Germany lead to a trade war with the entire EU directly, or only indirectly?

There's also a distinction between a balanced budget and the overall level of government expenditure, the latter being quite high in Germany.  The German government spends a lot of money, in various ways, putting people to work.  It's called the city of Berlin!  Plus they have stronger automatic stabilizers than does the U.S..  Deficits are not the only tool of job promotion or aggregate demand promotion.

Germany also transfers a good bit of money (or for that matter political capital) to the poorer EU nations and in that manner boosts global consumption.  Not to mention the billions the country has borrowed and spent, designed to turn the Ossis into permanent consumers, including at a global level.

Germany, unlike China, has not been engaging in currency manipulation.  In large part German exports are so high because Germany is a productive economy, with quality outputs well geared to world markets.  There are plenty of fiscally austere countries, at various points in time, which do not have Germany's track record of export success.

You can make an argument that bundling with some weaker countries has artificially lowered the value of the German currency.  But even now the Euro is stronger than the deutschmark had been and in that sense Germany gave its currency an artificial boost, the opposite of what China has been doing.

It seems that Krugman is interested in helping the U.S. through a get tough measure.  Yet the last time Germany borrowed lots of money, spent massively on consumption, on an unprecedented scale, and ran a current account deficit…well, the country still ran a significant trade surplus with the United States.  Without the fiscal deficit maybe it would have been a bigger surplus, but still how much can we expect to gain here in terms of AD?

On another front, Germany is finding itself unable to much control the fiscal policies of Greece and they have entered in a common political union with a (supposedly) binding fiscal rule.  Germany also has numerous European countries on its side in its struggle with Greece and is much larger, relative to Greece, than the United States is to Germany.  If Germany can't control the fiscal policy of Greece, how much can we control Germany?

This is one "get tough" program that is headed nowhere fast.

Assorted links

1. The words that NYT readers look up most often.

2. Robin Hanson's earlier post on movie manipulation.

3. Bob Litan on derivatives reform; one idea in this piece is that clearing works easiest under highly capitalized monopoly yet monopoly brings other problems, such as stifled innovation and less favorable terms of trade.

4. Buy real estate in Panama?

5. The size of the called strike zone varies with the count.

6. Races.

7. Why did Texas escape the housing bubble?

Hollywood opposes betting markets on film revenue

While the industry’s opposing comments were not yet final on Wednesday afternoon, Mr. Pisano and others said they were expected to cite a host of potential problems. Those include the risk of market manipulation in the rumor-fueled film world, conflicts of interest among studio employees and myriad contractors who might bet with or against their own films, the possibility that box-office performance would be hurt by short-sellers, difficulty in getting or holding screens for films if trading activity indicated weakness and the need for costly internal monitoring to block insider trades.

Among the potential abuses, the studios contend, is that a speculator might leak an early version of a film to the Internet and then profit from its subsequent poor performance at the box office.

The full story is here.  I suspect that once you cut past the rhetoric the most important factor on that list is: "difficulty in getting or holding screens for films if trading activity indicated weakness…"

The recorded music industry has collapsed for a number of reasons, but one is that pre-purchase web listening helps consumers avoid songs and albums they don't really want to buy.  There are fewer mistaken music purchases today than in say 1986 but of course that also means fewer music purchases.  That's good for consumer welfare, even if it's not always good for the music corporations and artists.  If the same trend came to the movie sector, many current business models would prove unsustainable.  As it currently stands, previews often try to trick audiences rather than enlighten them; sampling a pre-purchase MP3 file in contrast can only enlighten you.

Counterintuitively, introduction of the betting markets could make movies worse in quality (relative to my tastes at least), by inducing producers to focus on making "the sure thing," especially if betting on the movie starts very early.  (Keep in mind that the fixed costs of using theaters may require a minimum level of market interest above some threshold.)  I don't so much mind bad movies because I simply walk out of them, so I prefer a higher variance in quality than may be socially optimal.

So much of our cultural industries have been built on consumer mistakes and those days are coming to an end, rapidly.

High-frequency trading

A few MR readers ask about high-frequency trading.  Senators are calling it unfair because some traders have access to more powerful computers,and better quants, than do others.  The traders with the most powerful aids get there first and make more money.  Here is a typical critique.  Felix Salmon is also skeptical.

I do not worry about high-frequency trading.  Telegraphs and telephones also brought their own, earlier versions of high-frequency trading.  As did stock index futures.  There are second-best arguments relating to hockey helmets and the like but that is the case with most forms of progress and greater economic speed.  You don't have to think that the current profits measure the current social value of high-frequency trading to argue that the overall trend should be allowed.  The correct judgment of efficiency occurs at the system-wide level, not at the level of the individual trading strategy.  The short-run story is that private profits exceed social returns but in the longer run the trading activity and liquidity brings increasing social returns and better communication of information.

I'm not a believer in the strong versions of efficient markets hypotheses, so I do admit that high-frequency trading, like just about every other trading strategy, can bring short-run "whiplash" effects on market prices.  But if you don't like it, you can trade yourself at much lower frequencies, which is probably what you should be doing anyway.  At the same time high-frequency trading smooths out or shortens many other cases of price whiplash.  High-frequency trading brings more liquidity into the market.  Call it "low quality liquidity" if you wish, but it still looks like net liquidity to me. 

The complaint is that this liquidity sometimes vanishes.  Maybe high-frequency trading can scare other traders out of the market;
that charge has been leveled against every method of informed
trading.  In the short run it is sometimes true but markets respond by
upping the general requirements for quality trading and many market
participants rise to meet the new standard or else switch to longer
time horizons.

On the critical side there is lots of talk of "unfairness" and "manipulation," combined with snide references to the financial crisis.  I'd like to see a serious efficiency argument against high-frequency outlined and defended, without the polemics.  That would include a case that regulation will prove workable and catch only the "bad liquidity," while at the same time avoiding capture by envious and inferior competitors. 

If high-frequency trading is used to trick other traders into revealing their demand schedules, and then canceling orders, I can see a case for regulating that particular practice.  On that issue, here is background, from a critic, but note that these charges seem to be unverified.

The philosophical question is why it might possibly be beneficial to have market prices adjust within five seconds rather than within fifteen.  One second rather than five?  0.25 rather than one?  If you had been writing in the year 1800, what comparisons would you have chosen? 

Remember that old comic book where they had Superman race against The Flash?  The Flash won.  Someone had to, just keep that in mind.

How to get people to vote

KAHNEMAN: …there are
those effects that are small at the margin that can change election

You call and ask people ahead of time, "Will you vote?". That’s all.
"Do you intend to vote?". That increases voting participation
substantially, and you can measure it. It’s a completely trivial
manipulation, but saying ‘Yes’ to a stranger, "I will vote" …

MYHRVOLD: But to Elon’s point, suppose you had the choice of calling up
and saying, "Are you going to vote?", so you prime them to vote, versus
exhorting them to vote.

KAHNEMAN: The prime could very well work better than the exhortation
because exhortation is going to induce resistance, whereas the prime‚ the mild embarrassment causes you to make what feels like a
commitment, and the commitment, if it’s sufficiently precise, is going
to have an effect on behavior.

THALER: If you ask them when they’re going to vote, and how they’re going to get there, that increases voting.

KAHNEMAN: And where.         

Here is the whole dialogue, on the importance of the environment and priming effects for human psychology; it is very interesting throughout.  I thank Stephen Morrow for the pointer.

So how do you get some people not to vote?

Borjas on Indoctrination

According to FIRE, The Foundation for Individual Rights in Education:

The University of Delaware subjects students in its residence halls to
a shocking program of ideological reeducation that is referred to in
the university’s own materials as a “treatment” for students’ incorrect
attitudes and beliefs….

The university’s views are forced on students through a
comprehensive manipulation of the residence hall environment, from
mandatory training sessions to “sustainability” door decorations.
Students living in the university’s eight housing complexes are
required to attend training sessions, floor meetings, and one-on-one
meetings with their Resident Assistants (RAs). The RAs who facilitate
these meetings have received their own intensive training from the university, including a “diversity facilitation training” session at which RAs were taught, among other things,
that “[a] racist is one who is both privileged and socialized on the
basis of race by a white supremacist (racist) system. The term applies
to all white people (i.e., people of European descent) living in the
United States, regardless of class, gender, religion, culture or

George Borjas writes:

Why am I super-sensitive to this? Because as a young boy I myself went through a one-year course in ideological reorientation. I attended an elite elementary Catholic school in Havana. Castro took over, the Catholic school was shut down, and I got transferred to a revolutionary school where the entire day was spent teaching Marxist-Leninist ideology. Luckily, this lasted only a year and I continued my education in Miami (where the entire school day was instead spent talking about the upcoming football game). I am certain that the blind zealotry that I saw in the young teacher’s eyes that year turned me off from that particular way of viewing the world for the rest of my life. One can only hope that many of the students forced to attend the re-education programs at Delaware and other universities react in the same way.

I’d be interested to hear from anyone with first hand experience of the University of Delaware program.

Paul Krugman, pussycat

The Conscience of a Liberal is um…not that polemic.  It’s not that shrill.  There is an argument, to be sure, but the book has much more economic history than I had expected, and much more political history.

I’ve already blogged on The Great Compression; Krugman’s more detailed account in the book does emphasize the role of war, wage and price controls, and very high rates of taxation.  Normative questions aside, Krugman’s positive analysis isn’t as far from mine as I had been expecting from his blog post.

Some claims in the book are simply wrong: "…if there’s a single reason blue-collar workers did so much better in the fifties than they had in the twenties, it was the rise of unions."  (p.49)  Of course it was instead greater capital investment per head and better technology; if Krugman means relative status he needs to say so.  This conflation of relative and absolute magnitudes is a running problem throughout the first part of the book.

Most of all, today’s world — or even an extrapolated version thereof — isn’t nearly as like the Gilded Age as Krugman suggests.  Absolute standards of living really do matter, and most Americans today live very fine lives, or if they don’t the economy is not at fault.

Krugman writes of "the vast right-wing conspiracy" repeatedly, and in these moments he verges on the shrill.  But Bush receives virtually no attention; perhaps Krugman is simply sick of writing about the guy

Conservatism rose in the 1980s in large part because the mid to late 1970s were such an economic mess and because American had lost so much relative status internationally.  Krugman won’t face up to that; instead he blames the Republican manipulation of "the race card," even though at the time racial tensions arguably were lower than ever before.  Of course in a relatively close election any single factor can be called decisive but I found this discussion well below the standards of the political science literature, even the popular political science literature.

Krugman calls for single-payer health insurance, tax hikes, and raising the minimum wage.  He doesn’t come off as all that radical.

His theory of government failure is that wealthy right-wingers hijack the state to redistribute wealth to themselves, and that’s all we hear on what’s wrong with government.  That’s the part of the book I find hardest to swallow, but if you’re asking "should I read this?" the answer is yes.

My prediction: For lack of red meat, this book won’t sell nearly as well as Naomi Klein’s latest.  At my Borders, circa 4 p.m., they hadn’t even unpacked it.  "Yeah, we have that in the back somewhere, I haven’t seen it yet." was what the guy said.

My question:  Is Paul Krugman willing to come out and simply pronounce: "Margaret Thatcher turned the UK around and for the better"?  If so, how does this square with his broader narrative?  And if not, why not?

Addendum: Here is Ed Glaeser’s review.

Justin Wolfers wants to know

And can you think of a better reason than that?

There is currently some very unusual activity going on in the election markets at
InTrade: Over the past two weeks, there appears to have been a concerted effort
to bid up the price of the contract tied to Hillary winning the Presidency, and
on the back of essentially no news, the price climbed from about 25, up to 40,
and now is at about 35.  My usual coauthor, Eric Zitzewitz, suggested that
this looks a lot like manipulation, and the best evidence of this (apart from
the absence of any news) is that over the same period, the odds on Hillary
winning the Democratic nomination are essentially unchanged at 50.  It
just can’t make any sense to buy PRES.CLINTON at 40, when
2008DEM.NOM.CLINTON is at 50. 

All told though, this manipulator has been
surprisingly successful.  And this is where our experiment comes in.
I wonder whether the manipulator will be just as successful when a broader
audience becomes aware of this possibility?  We tried a first experiment a
week ago – Eric mentioned this anomaly while at a prediction markets
conference in Palm Desert (Robin was with
us).  In turn, this led to a bit of pressure on the price, but the
manipulator held firm.  We were wondering whether a simple post on
Marginal Revolution (tipped off by a loyal reader) pointing to this mis-pricing
might lead to further price pressure?  As such, if you were to blog on the
mis-pricing, that would serve a second purpose, of giving us truly experimental
variation in public attention.  And all of this holds the promise of
learning a bit more about manipulation in prediction markets.

OK people, trade away!

Addendum: Here is Eric Zitzewitz, over at Chris Masse, on same.  And Koleman Strumpf says no manipulation.