Results for “Tests”
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Celebrity misbehavior

Celebrities appear to engage in more anti-social behavior than the rest of us. What might be some reasons for this?

1. Famous people are simply crazy.

2. Rich people can get away with more.

3. Stars seek publicity, even “bad” publicity, to boost their celebrity.

4. Many celebrities are young and thus immature.

5. Celebrities are stressed, lack privacy, and are out of touch with the real world.

6. Celebrities get away with more because they can. You cannot substitute for them very easily.

Some of these propositions receive explicit tests from Todd Kendall of Clemson University. Kendall looks at technical fouls in the NBA; this penalty is assigned when a player hits another, screams at the referee, or engages in other forms of unsportsmanlike conduct. We learn the following:

a) Technical fouls are positively correlated with bad behavior off the court.

b) The more dominant a player is on a team, the more likely he commits technical fouls. Remember this guy?

c) Youth does not predict a player’s propensity to commit technical fouls. In fact older players commit more technical fouls. (Note to self: counterexample)

d) Committing technical fouls, adjusting for other variables, is not associated with higher income (this goes against number three above.

e) On a given team, technical fouls are not “contagious.”

f) Much of bad behavior is not predicted by any particular variable and thus can be thought of as idiosyncratic.

My take: The worst offenders are frustrated, spoiled brats who hate losing, can’t stand their teammates, but carry their teams on their backs.

Addendum: It is not easy to get your parents to sue you, read this update from the world of tennis.

It’s a mad, mad, mad, mad cow world

The market is often accused of under-providing safety. Consider, however, that the Department of Agriculture is refusing to let a Kansas beef producer test its cattle for mad cow disease. Yes, you read that right. The producer, Creekstone Farms, is losing $40,000 a day because it exports its beef to Japan where such tests are required. The testing of individual cattle, however, runs contrary to the DOA/industry message that American beef is perfectly safe without expensive testing.

The mad cow case is a clear example of regulatory capture. By the way, the DOA aquired its power to decide minimum and maximum testing standards test under the Virus Serum Toxin Act of 1913 – it was captured a long time ago.

Don’t be surprised if the DOA requires such testing in the near future. I am reminded of the similar folic acid story that I wrote about with Dan Klein at

In 1992, the federal Centers for Disease Control and Prevention (CDC) recommended that women of childbearing age take folic acid supplements. Studies showed that taking folic acid reduced risks of babies suffering neural-tube birth defects such as anencephaly and spina bifida. The FDA immediately announced, however, that it would prosecute any food or vitamin manufacturer that placed the CDC recommendation in its advertising or product labeling (Calfee 1997). The public did not learn of the importance of folic acid until Congress passed the Dietary Supplement Health and Education Act of 1994, which loosened the FDA’s vise on the advertising of vitamins and other dietary supplements. Within only a few years of its ban on publicizing the CDC recommendation, the FDA made a complete turnabout. Since 1998, the agency has required manufacturers to fortify a variety of grain products with folic acid–that which is not prohibited is mandatory.

A possible cost of diversity?

Professor Joanna Shepherd (Clemson) presented “Racial Diversity, Residential Segregation, and Crime: An Industrial Organization Analysis of Racial Competition” at N. C. State. She finds that, other things equal, more racially diverse areas have more crime. From her conclusion:

My econometric analysis of counties from 1990-1999 and metropolitan areas in 1980,
1990, and 2000 finds that both diversity and segregation increase crime. Moreover, tests of the
combined effect of diversity and segregation reveal that segregation worsens diversity’s effect on
crime. My results are robust to many alternative specifications. Moreover, tests confirm that my
diversity measures are not proxying for racial groups that disproportionately commit crime. Nor
are the results caused by any potential endogeneity between crime and diversity. Finally, my
estimations are designed so that my racial diversity measure is not picking up other types of
diversity, such as income diversity or religious diversity, which could increase crime.

The results from my econometric analysis confirm the predictions of my industrial organization theory of racial competition. The theory suggests that diversity increases both inter and intra-racial crime as racial groups compete. Segregation sharpens the competition.

My results in no way establish that diversity is bad; diversity provides countless benefits such as awareness of other racial groups and an intermingling of cultures. However, this paper, for the first time, focuses on one of diversity’s costs: increased crime. To determine the optimal amount of diversity in a region, one must weigh diversity’s numerous benefits against the costs.

She hypothesizes that a primary means by which diversity affects crime is provision of local goods. Areas that are more diverse tend, other things equal, to provide less public goods.

Kidney swaps

Your spouse is dying of kidney disease. You want to give her one of your kidneys but tests show that it is incompatible with her immune system. Utter anguish and frustration. Is there anything that you can do? Today the answer is yes. Transplant centers are now helping to arrange kidney swaps. You give to the spouse of another donor who gives to your spouse. Pareto would be proud. Even a few three-way swaps have been conducted.

But why stop at three? What about an n-way swap? Let’s add in the possibility of an exchange that raises your spouse on the queue for a cadaveric kidney. And let us also recognize that even if your kidney is compatible with your spouse’s there may be a better match. Is there an allocation system that makes all donors and spouses better off (or at least no worse off) and that maximizes the number of beneficial swaps? In an important paper (Warning! Very technical. Requires NBER subscription.) Alvin Roth and co-authors describe just such a mechanism and show that it could save many lives. Who says efficiency is a pedestrian virtue?

See here for more on how to alleviate the shortage of transplant organs.

Don’t miss the gorilla

Picture yourself watching a one-minute video of two teams of three players each. One team wears white shirts and the other black shirts, and the members move around one another in a small room tossing two basketballs. Your task is to count the number of passes made by the white team – not easy given the weaving movement of the players. Unexpectedly, after 35 seconds a gorilla enteres the room, walks directly through the farrago of bodies, thumps his chest and, nine seconds later, exits. Would you see the gorilla?

Fifty percent of all observers do not see the gorilla.

This is called inattentional blindness, the link offers some further examples and tests. The bottom line: if you are concentrating on one static task, you often fail to notice dynamic movement. This is one reason why you should not drive and talk on your cell phone at the same time.

The quotation is from the March issue of Scientific American. Here is the the original research. Here are some additional studies, also look here. Here is a page of video exercises, although now you know what and who to look for.

The bottom line for economics? Neither investors nor voters need be rational in procedural terms. Searching more does not guarantee a better outcome. An “obvious” bubble can catch large numbers of investors unaware. And we, as voters, can fixate on some aspects of candidates and miss entirely their most important qualities.

Loan markets in grades

A school in China is allowing students who don’t do well in tests to borrow a few extra marks as long as they pay them back with interest.

The scheme was recently introduced by Penglai Road No 2 Primary School in the Huangpu District of Shanghai, reports Xinhua.

Students who do poorly on a test can ask their teachers to lend them a few points to improve their grade, but twice as many points must be paid back on the next test, assuming they achieve a better mark.

If they don’t, interest on the loan continues to run at 100% per test until it is paid off.

It is reported that about 40% of students at the school have taken out such loans.

Why the monopoly provision? If you are going to do this at all, allow students to trade and lend points among themselves, thereby establishing a competitive equilibrium price.

From Ananova, thanks to Mitch Berkson for the pointer.

The continuing rise of the DVD

In 2003 a new DVD issue was released every 57 minutes, giving us over 9000 titles for the year (Entertainment Weekly, Jan.23-30).

The film industry is changing accordingly. Hollywood now has greater incentives to issue movies for male taste. DVDs are often impulse buys, and men are bigger impulse buyers than are women, at least in the DVD market. Movies for children are favored as well, since children love repeat viewings. Note that in 2002 DVD sales and rentals accounted for 62 percent of moviemaking income. At least four-fifths of this sum came from DVD sales.

Fear of losses from piracy is causing accelerated DVD releases. If you wait too long with your DVD, illegal competitors will fill the market. Pirates of the Caribbean, for instance, was released on DVD only four months after the film’s release. Video releases, in contrast, used to come after six to twelve months. Some European films have been released simultaneously on DVD and in theatres, despite the protests of rental chains. Some insiders expect simultaneous or near-simultaneous release to be common practice in the future. Simultaneous release, of course, raises fears that one market will cannibalize the other. But one commentator noted: “I’m one of those who believes that ultimately everything will be available at a price. So, if you want to see it at home when it is at the theatres you can, but it will be a premium price.”

The bottom line: I’m psyched. DVDs are a wonderful medium for foreign films, subtitled films, complex films requiring explanation and accompanying disks, historical classics, and action movies. All of these I love. DVDs have opened up the entire world of Bollywood cinema — usually in Hindi — to easy subtitling and thus to American viewers. If these movies are too long for your taste, just flick to your favorite songs and dances, much easier than trying to do the same with a VCR. As the DVD rises in popularity, the quality of the best scene in a movie may become increasingly important.

Whither Haiti?

Protests have been growing in Haiti, check out this link for some compelling visuals. It is becoming ever clearer than Aristide is simply another Haitian mafia. Our previous support for him represents one of the more gullible episodes in American foreign policy. Most Haitians are turning against him as well, most of all because living standards have continued to deteriorate.

How might Haiti recover? It is hard to see a case for optimism. In many ways the country was richer in 1840 than it was today. One huge problem has been unchecked environmental degradation, brought on by poorly-defined property rights and a tragedy of the commons. The destruction of trees and the erosion of soil are continuing unchecked. Haitians commonly cut down trees for firewood but the collective impact of this practice has taken the life out of the soil. The country, which already is a net importer of food, is on the verge of not being able to feed itself at all. It will struggle to maintain its current per capita income of $400, noting that some estimates run closer to $250. Many Haitians are now asking for reparations.

Add on a totally corrupt port, dishonest politicians, no good roads, hardly any infrastructure, the Duvaliers’ destruction of intermediate civil society institutions, a rampant brain drain, few protections for foreign investors, and the complete absence of rule of law, and you have some real problems. The question is not so much how to improve policy, since policy does not reach most Haitians. Previous policies have destroyed so much value that it would be hard to find an institutional framework for current reforms, if Haiti’s politicians were ever so inclined. Most Haitians live in something approximating the state of nature. They are ruled, if that word can be used, by local mafias rather than by the national government.

By the way, did I mention that 85 percent of the population is illiterate and 99.9 percent carry malaria?

Public safety is breaking down as well. I used to visit yearly, but the number of carjackings, many carried out in broad daylight, have scared me off for the time being.

As Daniel Drezner would say, “Continuing…”

Are athletes Bayesians?

Mark A. Walker and John C. Wooders, economists at the University of Arizona, recently studied old videotapes of tennis matches involving stars like Bjorn Borg, Ivan Lendl and Pete Sampras. The economists looked at the serves in each match to see how well players randomly altered playing the ball to an opponent’s forehand or backhand.

Many people do poorly on similar tests when they are conducted in a laboratory. Ask somebody to write down a list of hypothetical coin-flip outcomes, for example, and the result will probably contain too few streaks of heads or tails. Because people know that the overall odds are 50-50, they underestimate how often three straight tails or four straight heads turn up.

But professional tennis players realize, on some level, that their opponent will have an advantage if he knows that a serve to the forehand is likely to be followed by one to the backhand. They do a relatively good job of mixing serves, though still not as randomly as a computer program would, Professors Walker and Wooders reported in a 2001 paper.

Controlled experiments yield similar results, read this account from The New York Times.

Here is the bottom line:

The more uncertainty that people face – be it caused by wind on a tennis court, snow on a football field or darkness on a country highway – the more they make decisions based on their subconscious memory and the less they depend on what they see.

Related research by Doru Cojoc of Clemson shows that chess players play mixed strategies to keep their opponents off balance. Furthermore they are more likely to play such sophisticated strategies, the higher the rewards on the line.

By the way, even plants seem to perform implicit calculations when they breathe, read this recent account. Armen Alchian, of course, once postulated a similar conjecture, namely that plants maximize sunlight without any conscious awareness of such a process.

Deirdre McCloskey’s Sins

Deirdre McCloskey has made a name for herself by critically examining the logic and rhetoric of economic arguments. She has a nice pamphlet summarizing her claims called “The Secret Sins of Economics.” It’s written for non-economists and nicely makes three points:

1. Some alleged problems of economics are virtues. For example, using math to describe and analyze economic behavior is actually good because math allows you to clearly deduce conclusions from premises.

2. There are some drawbacks to economics that are annoying, but acceptable. For example, economists assume people are always chasing profits. Her response is to say that this narrow focus tends to yield interesting insights. McCloskey identifies other drawbacks of economics and economists, such as professional arrogance, but asks that we forgive those because they really aren’t that bad.

3. McCloskey identifies two horrible, unforgivable economic sins – (a) economists tend to prove qualitative mathematical theorems whose conclusions depend on arbitrary, qualitative premises and (b) statistical analyses routinely confuse statistiscal and substantial significance.

These are pretty weighty charges – that much theoretical economic work is just a useless game and economists (among others) make routine statistical errors no decent statistics undergrad would ever make.

How to respond? I’m not a professional economist – so I can’t speak for the economics profession, but I think the second charge – misunderstanding of significance – is right on target. I’ve told students and colleagues many times that “not significant” does not mean “no effect.” It simply means that you can’t automatically reject the hypothesis that, according to an arbitrary standard, there is no effect, which is different than saying there really is no effect. As McCloskey says, significance is simply a measure of confidence in the effect’s measurement. The whole situation is quite bad. For a summary of anti-significance test views, see the book “What if there were no significance tests?”

This first charge doesn’t bother me too much. All academic endeavors must engage in thought experiments. In fact, bizarre, unrealistic thought experiments can lead to some great insights. But what McCloskey, I think, really focuses on is the lack of empirical discipline. That is to say, when you come up with the premise of your theorem, it should be well justified.

When I studied math, there was a real difference between how mathematicians did it and how physicists did it. Math people are purely concerned with what is logically possible (does B really follow from A?) but physicists employ “physical intuition” – a sense of what assumptions were appropriate, a gut feeling developed from doing lots of experiments and observation. That’s why a lot of physics seems mysterious to mathematicians – the math looks familiar, but why did the physics people choose mathematical model X over Y? McCloskey’s point could be rephrased as saying that economists should move away from the mathematician’s style of modelling (proving what is logically possible) to the physics style of modeling (developing models inspired and constrained by observation and experiment).

Blood supply and the FDA

Have you ever heard of Chagas disease? It is rare in the United States but common in Latin America, where 18 million people are infected and 50,000 die of it every year. Some little thingie crawls down your mouth and sucks your blood when you are sleeping (lovely), beware the thatched hut, and next thing you know, maybe about ten or thirty years later, your weakened heart or organs explode. There is no known vaccine, cure, or treatment.

Chagas is now making its way into the United States blood supply. Ideally, all donated blood should be screened for Chagas. But, can you believe this, the FDA needs to approve all blood tests of this kind. They haven’t approved any test for Chagas, nor have they shown much urgency in this regard, here is the full story.

About 30 tests are currently in use in Latin America, but none would appear to meet the FDA’s accuracy guidelines. In the meantime it appears someone would prefer that we have no test at all.

The New York Times put it as follows:

The failure of the blood industry and its regulators to develop a test since it was endorsed by a Blood Products Advisory Committee in 1989 seems to be a combination of bureaucratic inertia and divided responsibility for such a decision. Blood banks cannot use a test that the F.D.A. has not approved. The agency usually defers to its advisory committees, which have many experts from blood banks as members.

“It’s a political process that is not always fully engaged,” said Dr. Stuart J. Kahn of the Infectious Disease Research Institute, a Seattle group hunting cures for tropical diseases.

Whatever you think of the FDA as a regulator of drugs, this kind of bureaucratic control is hard to understand. Now it is longer enough for you to beware the thatched hut, you have to worry about the blood supply as well.

Genetic insurance

I agree with Alex (see immediately below) that adverse selection need not undo genetic insurance of some kind.

He doesn’t mention abortion, but I view genetic insurance as a possible substitute for abortion. Say you are a young Catholic couple, and you know that you would not abort a Down’s child, even if you detected the abnormality before birth. You also would know that caring for such a child would involve a greater than average financial burden. Might you not buy insurance against this contingency? (Of course many couples simply abort.) Furthermore, couples might buy the insurance when they marry, or at least before they conceive, it would not be hard to make “not being pregnant” as a prerequisite for buying the insurance, if secret genetic tests on the embryo were a huge problem.

The Downs example raises the question of why such insurance does not exist today. More generally, Robert Shiller raises the question of why we do not have more insurance markets than we observe. I don’t think there is a single correct answer. Sometimes I think people simply do not want to face the possibility of encountering certain kinds of difficult events, and buying insurance, in their eyes, admits that possibility into their lives. This obstacle, to me, appears contingent rather than necessary, so I can imagine greater scope for insurance markets in the future. Many financial markets are in any case of recent origin, so why should the growth of markets stop at our current selection?

Notes on Genetic Insurance

My idea of genetic insurance created some controversy with Randall Parker at FuturePundit, Brock Sides at Signifying Nothing, and MR’s guest blogger Lloyd Cohen raising some objections. One of the objections that all three had in common (dealt with in my papers but not in the post) is that adverse selection is still a problem if people lie about having taken a test. This minor problem is easily handled, however. Insurance companies could have a clause in the contract forbidding previous tests. We don’t worry so much about people having a theft and then buying home insurance and the issue here is quite similar. (See my papers for a little more on this issue).

Randall at FuturePundit, however, raises a more serious problem. As the price of genetic tests falls it will soon be economic to sequence a person’s entire genome at birth or even before (see Randall’s posts for some links on costs). In this case, genetic insurance works only if the parents buy the insurance. This is not so implausible (especially not for those who have their child’s DNA sequenced!) but it is a real issue. (We should also remember that genetic insurance will be quite cheap because most people do not have serious genetic defects.) If we have genetic insurance today, however, we can perhaps avoid the adverse selection problem for a couple of decades and that may be good enough for one of two things to happen 1) genetic engineering will reduce the need for insurance (sequencing is much more valuable if there is genetic engineering to correct defects) or 2) genetic insurance could evolve into a more Rawlsian scheme (perhaps involving government at some level) in which payments are made at birth to compensate for Nature’s genetic lottery.

More Bickering

Two quick notes on Tyler’s comment on my recent post on vouchers.

First, whether the school or the parent is sent the check is irrelevant (this is a basic theorem in economics). My point, however, was that parents cannot add-on to the voucher amount – i.e. the Chilean system has extensive price controls. Another way of saying this is that in the Chilean system parents never spend any of their own money on the private (subsidized) schools. I think a good voucher system requires that on at least some margins parents spend their own hard-earned dollars on their children’s education.

Second, Tyler thinks that the most convincing evidence is that Chileans did not improve on an international scale. Actually this is the least convincing evidence and it illustrates my point about the power of HU’s tests. The private schools in Chile increased by about 20 percentage points over the relevant time frame. Suppose that private schools were better than public schools by 10 percent then the aggregate gain at the national level would only be 2 percent. Small exogenous decreases in the quality of the public schools could easily swamp this gain.

Vouchers in Chile and Colombia

Tyler mentioned, following a depressed Brad DeLong, a new paper on education vouchers in Chile that does not find large achievement gains. I have some criticisms of the paper (see below) but I was surprised that neither mentioned the most important recent paper on vouchers, Vouchers for Private Schooling in Colombia by Angrist, Bettinger, Bloom, King and Kremer in the Dec. 2002 AER.

Using data from a randomized experiment, Angrist et al. estimate that attending private school increased the probability of finishing eighth grade by 13-15 percentage points or 25 percent. Test scores increased by .29 standard deviations which is equivalent to about an extra year’s worth of schooling which has been estimated to increase yearly wages by 10 percent. Other markers such as teen cohabitation also improved.

Is this just a case of dueling papers? No, first, unlike Hsieh and Urquiola (HU), the Angrist et al. results are consistent with results found elsewhere. See in particular those found for Catholic schooling in the United States . Second, Hsieh and Urquiola (HU) are good researchers, judging by their paper, but Angrist et al. have a much more convincing research design – results from a randomized trial beat econometric identification any day. Cheer up Brad!

I shouldn’t give the impression that the results are directly comparable, however, as HU are trying to get at the general equilibrium effect of a voucher experiment and Angrist et al. are after the partial equilibrium effect of private schooling. Given the large gains found in the partial equilibrium literature, however, the GE results from HU are not plausible in my view.

Now regarding the HU paper some information is in order. First, there were no vouchers in Chile. Instead, there was public funding of some private schools on a per-student basis. Parents could not apply their voucher to the tuition at a private school of their choice.

Second, HU do not test whether students who transferred to private schools did better than other students – they tested whether aggregate scores (public and private) increased over time as more students attended private schools. Their evidence seems consistent with a nationwide decline in public school quality over time. More generally, I would have liked to have seen some information in their paper on the power of their tests. Given the size of the private sector what sort of gains could would we have expected to see in the aggregate scores and is their technique powerful enough to pick up such gains?

Third, HU claim that “cream skimming” was extensive but I find this difficult to believe because there is no price difference between public and private (voucher-accepting) schools since each was paid the same per-student amount. There are some non-pecuniary barriers but no limits on entry that HU mention.

Fourth, why did private enrollment increase if parents did not perceive a quality improvement? HU mention “freshly painted walls” which I thought was a bit flip – we ought to take revealed preference more seriously.

I do think that the HU study of Chile provides useful information about designing a good voucher program and my priors would have been that the program instituted in Chile, even though not a true voucher program, would have produced a larger effect – thus I learned something from the paper.