Friday, January 8, 2010

Discouraged Workers or Motivated Students?

There's some data out on the age composition of labor force participation, as it might relate to unemployment and the "discouraged worker" effect. Turns out most of the people dropping out of the workforce are 16-24 years old. Seems to me like that's not "discouraged workers" but rather "going to school" or acquiring new skills in some way. At any rate, it seems like people in that age group are the most likely ones to be staying in, going back to, or refocusing their efforts on investing in education. It's a typical structural shift story. Then there's this guy:

Wednesday, January 6, 2010

Tabarrok, Samuelson, and Soviet Growth

So Alex Tabarrok at MR is (posthumously) on Paul Samuelson's case for saying that Russian growth during the 1960s & 1970s would lead to Russia overtaking and perhaps surpassing the US in GDP. Never mind the fact that Professor Tabarrok is taking full advantage of hindsight here. Few folks realized that the Russian economy (or military for that matter - does he chastise Ronald Reagan for overestimating the Soviet military threat?) looked a little more like this:

Monday, January 4, 2010

Non-Tariff Barriers on Poultry

Russia plans to ban all chlorine-treated poultry. If this happens, it will hurt Russian consumers, and may hurt US producers. One thing that is interesting about it is that it may drive the price of certain types of chicken products in the United States UP, not DOWN. Much of the poultry the US sends to Russia is dark meat, which Americans have grown to dislike. Therefore, a lot of US-made dark meat gets exported to Eastern Europe, and other countries where preferences are less responsive to variety.

Sunday, January 3, 2010

Market Madness Blame Game Bracket

Who's at fault for the crisis? Make your picks here! Results will be announced by the AEA Jan. 15.

Rare Terrorists and Bayes' Rule

Matt Yglesias says "Very Rare Terrorists are Very Hard to Find":
monitoring the UK’s 1.5 million Muslims is a lost cause. If you have a 99.9 percent accurate method of telling whether or not a given British Muslim is a dangerous terrorist, then apply it to all 1.5 million British Muslims, you’re going to find 1,500 dangerous terrorists in the UK. But nobody thinks there are anything like 1,500 dangerous terrorists in the UK. I’d be very surprised if there were as many as 15. And if there are 15, that means you’re 99.9 percent accurate method is going to get you a suspect pool that’s overwhelmingly composed of innocent people.
This is basically Bayes' Rule at work. A hypothetical 1.5 million-person pool of suspects in Great Britain, only 1/10,000 of whom are terrorists. An identification method that is 99.9% effective means that with probability 0.999 a Muslim will be identified as a terrorist when he is one, and a 0.001 probability that he will be identified as a terrorist when s/he is not. Thus, you will have about 1,500 identified as terrorists by the intelligence technique. Thus, the probability of someone is a terrorist given that he
has been identified as such by the method is just 0.01 (although this
is a marked improvement over 0.0001 obtained by profiling all Muslims)!
The good news is that you have almost certainly netted all 15 terrorists in that pool. The bad news is that you've arrested, and harassed 1,485 innocent British Muslims (about 99% of those identified as terrorists).

I've done a similar calculations for using torture and the so-called 1% doctrine. Here is a paper by Hugo Mialon, Sue Mialon and Maxwell Stinchcombe on the subject. They find that legalizing torture creates a disincentive for using other means of investigation, even in cases where there is low evidence of terrorist involvement.
HT: TC at MR