Results for “average is over” 1575 found
Tax Bryan Caplan
Bryan Caplan argues that IQ research has strong policy implications. His conclusion:
The more IQ matters, the more likely it becomes that existing government policies are a waste of money – and that you would get a bigger payoff by doing less – or maybe nothing at all.
Surely this deserves some discussion of the Flynn Effect, that near-universal albeit mysterious process whereby average IQs rise each generation. Should we re-gear government policy to subsidize whatever factors deserve the credit for this phenomenon?
But I have a simpler worry about Bryan’s libertarian conclusion. When Bryan says "IQ matters a great deal" I hear "inelastic factors of production." IQ won’t change much in the short run, and perhaps IQ — rather than effort or environment — accounts for more of good (and bad) outcomes than we used to think. But we all know that inelastic factors of production can be taxed and subsidized without much deadweight loss. More generally, the belief that value comes from inelastic factors will not favor markets or liberty. The historical correlation between IQ research and anti-egalitarian social engineering is not a complete accident.
Yes IQ matters for policy, but I see no particular reason why libertarians should welcome this conclusion. Libertarian philosophy does better under the traditional story of the self-made man. Thomas More, I believe, understood a similar point, albeit in the language of his time.
Addendum: Here is Jane Galt on same topic.
My macro class has been asking me what kind of exam they can expect
Try this question:
"Simon Grant and John Quiggin argue that taking the equity premium seriously–-the well-known fact that the average annual historical return of stocks is seven times that of government bonds and other debt-–has many implications, the most robust of which is that recessions are extremely costly even if they don’t lower average consumption and that macroeconomic stabilization policies are more important than has been thought."
True or false, and why? Under what conditions is your answer wrong (always the proper query)? Here is a relevant link, though registration is required.
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.
Not putting their money where their mouths are
Inspired by Robin Hanson’s work on betting markets, James Annan, a climate scientist, has been trying to get skeptics of global warming to put up or shut up, mostly with no success on either front. A number of prominent skeptics refused to bet (perhaps having learnt from Paul Ehrlich’s embarassment) or offered to bet only at very high odds in their favor (i.e. implicitly admitting that they thought the probability of global warming was high). The failure to bet is telling and a nice reminder that even markets with no trades can tell you things of importance!
Finally, however, Annan has found some takers. From Nature (subs. required):
James Annan, who is based at the Japan Agency for Marine-Earth Science and Technology in Yokohama, has agreed a US$10,000 bet with Galina Mashnich and Vladimir Bashkirtsev, two solar physicists who argue that global temperatures are driven by changes in the Sun’s activity and will fall over the next decade. The bet, which both sides say they are willing to formalize in a legal document, came after other climate sceptics refused to wager money…
Both sides have agreed to compare the average global surface temperature between 1998 and 2003 with that between 2012 and 2017, as defined by the records of the US National Climatic Data Center. If the temperature drops, Annan will pay Mashnich and Bashkirtsev $10,000 in 2018, with the same sum going the other way if the temperature rises.
I hope that a TradeScience market like TradeSports can be established to make such bets more routine and even more informative.
Outsourcing Blogs
Our general business model is a two tiered effort to hire Chinese
citizens to write blogs en masse for us at a valued wage. …We estimate that our current blogforce
of 25 can support around 500 unrelated blogs…When a vendor
needs to promote a new product to the internet demographic we will be
able to create a believable buzz across hundreds of ‘reputable’ blogs
and countless message boards. We can offer a legitimacy to advertisers
that doesen’t exist anywhere else.The second tier of our plan
is a blog vacation service where our employees fill in for established
bloggers who need to take a break from regular posting. As all bloggers
know, an unupdated blog is quickly forgotten. For a nominal fee we can
provide seamless integration of filler.
So far the enterprise is nothing more than a blog about starting the business. But it does make for some amusing reading.
Our initial results have been a little bit below what we expected.
To increase our authenticity we are trying to isolate and remedy
problem groups. Our design process centers around 3 general groups.
They are:1. Teenage girls
2. Normal Bloggers (yuppies, moms, average college students)
3. Super Bloggers (bipolars, cynics, liberals, outcasts, super-hip)
Teenage girls are apparently the easiest for Chinese sweat-shop workers to imitate but Super Bloggers are tough. The entrepreneurs, however, have uncovered the formula:
To create convincing Group 3 product we need to have extensive
faux-archives (to give the illusion of a faithfully updated blog) and
we need to drop a lot of obscure pop-culture references. The key to
good Group 3 is to spend 80% being negative about certain areas of
culture and 15% excessively positive. The last 5% should be used for
self-loathing because the blogger likes certain ‘un-hip’ culture.
Yup, he got the percentages just about right.
Thanks to Noel Welsh, who claims he blogs at Untyping.
Do consumers prefer ambiguous names?
Today we have crayons called "Inch Worm," "Jazzberry Jam," "Tropical Rain Forest," "Manatee," "Bittersweet" and "Razzmatazz." Or have you noticed you can’t understand half of the ice cream flavors these days?
Miller and Kahn discovered that there’s method — and perhaps even profit — to this maddening name game. In one test, 100 students taking part in an unrelated study were told that after they had finished the research task they should select jelly beans from six containers as a reward for their participation. They were told that each container held a different flavor of jelly bean. Half the students saw containers labeled with ambiguous names ("white Ireland," "moody blue"), while the other half saw those same containers with more specific descriptive names ("marshmallow white," "blueberry blue"). As the researchers had hypothesized, students took nearly three times as many jelly beans on average from a container that bore a vague name as from one that carried a specific name. In another study involving 60 students, participants were told to pretend they were ordering sweaters from a catalogue. The sweaters in question came in various colors, and these shades were described either ambiguously or using common descriptive names. Again, the students clearly preferred the vague names when making their buying choices. A third test turned up similar results.
Why does ambiguity seem to sell? Miller and Kahn theorize that, without real information, consumers try to understand why the product has such a jazzy name and fill in the blanks with imagined desirable qualities.
Here is the full story. Here is another summary. Here is the paper. Here is one researcher’s home page.
Critical Decline?
In perusing back issues of econ journals I’ve always enjoyed the critical commentary sections. Today, however, commentary is less frequent. Writing in the latest issue of Econ Journal Watch, Coelho, De Worken-Elly III, and MCClure present some hard data on the decline. The Quarterly Journal of Economics, for example, used to prints lots of short commentary pieces but now hardly prints any.
The authors decry the decline but don’t explain it.
One explanation is that the opportunity cost of space at the top journals has increased. One hundred years ago the top journals were (more or less) the AER, JPE, and QJE, all among the top journals today. One hundred years ago the journals published about the same amount of material as they do today. Yet the number of economists today is many times that of one hundred years ago. Since more articles are competing for the same number of printed pages it follows that on the intensive margin average article quality will increase and on the extensive margin types of articles with lower value will decline. Since comments are on average of less value than original contributions it’s not surprising that they have declined over time.
At the same time as commentary has declined in the top journals, the total number of journals has increased so it’s not obvious that total commentary has declined. Indeed, don’t we now have EJW?
The used book market can boost the demand for new books
Professors Ghose, Smith and Telang chose a random sample of books in print and studied how often used copies were available on Amazon. In their sample, they found, on average, more than 22 competitive offers to sell used books, with a striking 241 competitive offers for used best sellers. The prices of the secondhand books were substantially cheaper than the new, but of course the quality of the used books (in terms of wear and tear) varied considerably.
According to the researchers’ calculations, Amazon earns, on average, $5.29 for a new book and about $2.94 on a used book. If each used sale displaced one new sale, this would be a less profitable proposition for Amazon.
But Mr. Bezos is not foolish. Used books, the economists found, are not strong substitutes for new books. An increase of 10 percent in new book prices would raise used sales by less than 1 percent. In economics jargon, the cross-price elasticity of demand is small.
One plausible explanation of this finding is that there are two distinct types of buyers: some purchase only new books, while others are quite happy to buy used books. As a result, the used market does not have a big impact in terms of lost sales in the new market.
Moreover, the presence of lower-priced books on the Amazon Web site, Mr. Bezos has noted, may lead customers to "visit our site more frequently, which in turn leads to higher sales of new books." The data appear to support Mr. Bezos on this point.
Applying the authors’ estimate of the displaced sales effect to Amazon’s sales, it appears that only about 16 percent of the used book sales directly cannibalized new book sales, suggesting that Amazon’s used-book market added $63.2 million to its profits.
Furthermore, consumers greatly benefit from this market: the study’s authors estimate that consumers gain about $67.6 million. Adding in Amazon’s profits and subtracting out the $45.3 million of losses to authors and publishers leaves a net gain of $85.5 million.
Sundry observations about Dubai
1. My very chatty and friendly Pakistani barber, while holding a razor to my throat, asked me to pledge that we would continue an email correspondence for the rest of our lives. Every sentence he referrered to me as "Very Great Boss," and repeatedly expressed his satisfaction that I was not one of those "two-assed men" who are otherwise so common. Imagine Borat with Eric Idle-like intonations. But you know, I still am not sure if he was weird.
2. If they promise you a "surprise desert tour," be warned it will involve scaling (and descending) a fifty-foot high sand dune with a four-wheel drive at full speed. No matter what they tell you, this is not fun. Afterwards the driver spoke: "We have accidents (pause)…but not so many casualities [sic]. The vehicles roll over, but the sand is soft."
3. If you want to find heavily veiled women (not hard to do), the easiest way is to visit the fancy shopping malls and head directly for the make-up counter.
4. I am told that the dowry for the average (native) Dubai woman is now running about $150,000. Many Dubai men are substituting into foreign women.
5. The "traditional" belly dance was done by a Russian woman; Dubai women are no longer allowed to do such things in public.
Indian Forecast Error
India receives 90% of its rain during monsoon season so forecasting monsoons is critical for productive farming. Fortunately, according to an article in Nature (subs. req.), the Indian Meteorological Department has found a way to make its forecast better than any other available – they have suppresed publication of the other forecasts. The Indian government says this is necessary to prevent "confusion."
The main competitor to the government’s statistical model, which has not reduced its forecast error in 70 years, is from an Institute based in Bangalore which uses a climate model. The Institute and government forecasts can differ dramatically. The Institute, for example, forecast that rainfall would be 34% below average in June and 12% below average in July while the government forecast "normal or above normal rains."
The rainfall in June? 35% below average. No confusion about that.
Thanks to Robin Hanson for the pointer.
I always hated homework
LeTendre and Baker led a team of researchers who analyzed educational data collected in the fourth, eighth and 12th grades in more than 40 countries in 1994, as well as data from an identical study in 50 countries, conducted five years later.
Virtualy wherever they looked, the researchers found no correlation between the average amount of homework assigned in a country and academic achievement. For example, teachers in many countries with the highest scoring students — such as Japan, the Czech Republic and Denmark — gave little homework. At the other end of the spectrum, countries with very low average achievement scores — Thailand, Greece and Iran — have teachers who assign a great deal of homework, Baker noted.
Note that U.S. teachers have been increasing homework amounts, while Japanese teachers have been decreasing it. In neither country do general achievement levels appear to be responding.
That is from Richard Morin’s WP Unconventional Wisdom column, although this installment is not yet on-line (I added the link to the text). Here is a good summary, with more information, it notes that homework may place a special burden on poor families.
We need to be careful about drawing strong inferences from negative results on heterogeneous data, nonetheless this fits my priors. I worry about this more than grade inflation, although I suspect the latter, by making grades less informative, induces overinvestment in extracurricular activities.
India has a long, long, way to go
…most of the country is still denied access to free markets and all the advantages they bring. India opened its markets in 1991 not because there was a political will to open the economy, but because of a balance-of-payments crisis that left it with few options. The liberalization was half-hearted and limited to a few sectors, and nowhere near as broad as it needed to be.
One would have expected India’s growth to be driven by labor-intensive manufacturing but, almost by default, it instead came in the poorly licensed area of services exports. The manufacturing sector, ideally placed in terms of labor and raw material to compete with China, never took off. India’s restrictive labor laws, a remnant of the socialist infrastructure that India’s first prime minister, Jawaharlal Nehru, put in place in the 1950s and 1960s, were politically impossible to reform. It remains excruciatingly difficult for most Indians to start a business or set up shop in India’s cities.
This is painstakingly illustrated in “Law, Liberty and Livelihood”, a new book edited by Parth Shah and Naveen Mandava of the Center for Civil Society in New Delhi, which documents the obstacles in the way of any Indian who wishes to start a business in one of India’s big cities. Messrs. Shah and Mandava write: “Entrepreneurs can expect to go through 11 steps to launch a business over 89 days on average, at a cost equal to 49.5% of gross national income per capita.” Contrast the figure of 89 days with two days for Australia, eight for Singapore and 24 for neighboring Pakistan.
That is from The Asian Wall Street Journal, read more here. Do not forget that "outsourcing jobs" are about one percent of the Indian labor force. Most of the country is agriculture, and while the Green Revolution fed millions, agricultural productivity has made few other strides into the modern age.
What are the gains to illegal immigration?
Not the gains the U.S., I wish to know how much the migrants are better off.
Typically a rural Mexican goes from earning two dollars a day to ten dollars an hour. Over a year’s time this could amount to a difference of about $25,000. Multiplied by many millions of immigrants, this is a considerable sum.
But other economic arguments point to lower numbers. First, it costs about $1500 to cross the border illegally. (N.B.: That’s not $1500 a year, that is $1500 for the entire crossing, which may keep you in the U.S. for years.) After all, life in Mexico is more fun and keeps you closer to your family. The illegal migrants I have known have mixed feelings about life in the U.S. and many have returned to Mexico.
So is that the value of a marginal crossing?
The $1500 figure does not measure the option value of crossing. You might not pay $1500 to cross now, but the ability to cross in general is worth more. But even an option value of 10x use value only gets us up to $15,000.
Consider another argument. Transactions costs aside, in equilibrium the average returns to being a rural Mexican in Mexico should equal the average returns to being a rural Mexican illegally in Texas. If not, migration will bring about equalization. Those average returns cannot differ by more than $1500 per person, no?
A further question is where — rural Mexico or El Paso — you find greater economic congestion. To me the answer is not obvious, but this could lower the social value of illegal Mexicans in Texas. If another Mexican crosses, the greatest costs are imposed on the Mexicans already present in the U.S..
Could it be that the greatest gains are reaped by those back home who get the remittances?
How about infra-marginal values? Some pay $1500 to cross but value the experience at much more. Still, if we are considering marginal shifts in border policy, the $1500 figure still seems relevant.
Might credit constraints matter? The difference between willingness to pay and willingness to be paid?
How about the next generation? Perhaps we should use a very low social discount rate to evaluate these future benefits. If you will be born in El Paso in 2019, you are not, in the meantime, sitting around feeling costs of impatience. And since you will not have grown accustomed to life in Mexico, you are much better off in the United States.
I conclude that we do not have a very good handle on this question.
Cell phones for (beneficial) social control?
Smoking cessation programmes that use text messaging can double the
quit rate in young smokers, according to a clinical trial in New
Zealand.The
trial led by Anthony Rodgers, director of the Clinical Trials Research
Unit at the University of Auckland, NZ, is the first to test the use of
mobile phones as an aid to giving up smoking.In
the study, over 850 young smokers who wanted to quit received text
messages, such as: “Write down 4 people who will get a kick outta u
kicking butt. Your mum, dad, m8s?”The
smokers, whose average age was 25 years old, received five messages a
day for a week before their designated “quit day”, and for the
following four weeks. Then they received three messages a week for a
further five months. They were also given one month of free personal
texting, starting on their quit day, as an incentive.A
similar group of young smokers received one month free texting six
months after their designated quit day, but no text messages designed
to help them quit.
Six
weeks after quit day, 28% of the group that received the texts claimed
to have quit, compared with 13% of the control group. To check these
self-reported results, the team analysed levels of cotinine, a nicotine
breakdown product, in the saliva of one in 10 of the participants. The
results were the same for both groups – about half of those who claimed
to have given up were actually still smoking. Quit rates appeared to
remain high after six months, although the results are less certain
because many of the participants were lost to follow up.
Repetition does matter; here is the story.
Is Islam good for prosperity?
People of Arab descent living in the US are better
educated and wealthier than the average American of non-Arab descent.
That is one surprising conclusion drawn from data collected by the US
Census Bureau in 2000. The census also found that Arab Americans are
better educated and wealthier than Americans in general.Whereas
24 per cent of all Americans hold college degrees, 41 per cent of
Arab-Americans are college graduates. The median annual income of an
Arab-American family living in the US is $52,300 – 4.6 per cent higher
than the figure for all other American families. More than half of such
families own their home. Forty-two per cent of people of Arab descent
in the US work as managers or professionals, while the overall average
is 34 per cent.
My take: Islam is an excellent religion for motivating commercial success (yes I do know that many Arab-Americans are Christians). It is less effective at supporting rule of law, democracy, and checks and balances. For those features, the idea that Christ is an individual victim, tortured by the Roman state, comes in handy. Here is the link for the data.