Used Barf Bags and Statistical Literacy

NYTimes Magazine Via Joshua Gans. Find the logical (statistical?) mistake:

As a last ditch effort, I grab an air sickness bag from out of the wall pocket. Using one of the rejected crayons I scrawl a face on the bottom of the bag. I reach inside, turn it into a hand-puppet and say the funniest thing I can think of: “Ooga booga.” The child stops crying. Then smiles. Then giggles.

“You like the puppet?” I ask. “MO PUPPA!” she says.
...
Then think to myself, “sure, one puppet is fine, but two puppets — now that’s a show!” I reach into the wall-pocket in front of my husband and take out his air sickness bag. I draw another face, this time taking a little more time and care with my creation. I give it curly hair, long eyelashes and glasses so that it looks a little bit like me. Nice touch.

I stick my hand inside. And then my world contracts.

Seems this air sickness bag has been used before, but not for a puppet show. No, it’s been used for the purpose that god intended.
....
Roughly two million people fly the friendly American skies every single day. How many of those travelers feel nauseated enough to reach for, and then use, an air-sickness bag? (I travel often and can count on one clean hand the number of times I’ve seen it happen.) And of those phantom pukers, how many would choose to tuck the vomit-filled vessel back into the wall-pocket? And then, what’s the likelihood that a cleaning crew would overlook the sack o’ sick? And finally, what are the odds that all of this would become the perfect set-up for one arrogant idiot who tries to make a hand-puppet out of a barf bag?!
...
Anyway, it’s possible that the occurrence of this mathematical improbability has created a statistical vortex by which we are virtually guaranteed that this plane will land safely.

Best Jobs

Mathematician #1, Statistician, #3, Economist, #11. Have no clue how historians and sociologists beat us out, but at least we beat "philosopher," or "stand-up philosopher" aka "bullshitter" (gotta love Mel Brooks).

College Selectivity and Student Mobility

Via TC @ MR: A recent study by Caroline Hoxby

shows that although the top ten percent of colleges are substantially more selective now than they were 5 decades ago, most colleges are not more selective. Moreover, at least 50 percent of colleges are substantially less selective now than they were then. ... [S]tudents used to attend a local college regardless of their abilities and its characteristics. Now, their choices are driven far less by distance and far more by a college's resources and student body. It is the consequent re-sorting of students among colleges that has, at once, caused selectivity to rise in a small number of colleges while simultaneously causing it to fall in other colleges.

I'm a bit puzzled. Though the results almost certainly document an overall decline in student quality for a large number of more remote colleges and universities, I'm not sure this proves that there has been a decline in "selectivity" on the part of those universities. Schools may not be lowering their standards; they may just be getting a more average applicant pool with fewer top-talent students. I would invoke the principle that people will find your results more believable if you interpret them conservatively.

Socialist Highways and When to Shut up and Pay your Taxes

I was just wondering what the average share of the highway budget most Americans would pay if it were divided according to the "benefits received" principle (i.e. how much you use it). Turns out, on average, if you mostly commute on federal roads (not a horrible assumption, but we could easily just assume that the per-mile cost is the same for federal roads as state and municipal roads and be OK) then it would be about $110, just for your daily commute to work.
According to the Department of Transportation there was about 43.5 billion allocated to federally-maintained highways in 2008. The total vehicle-miles traveled was about 3.03 trillion for the same year. The average commute (according to an ABCNews survey) is about 16 miles each way. So if you work 5 days a week about 48 weeks out of the year, and have an average commute, you'll travel about 7680 miles per year just to get to and from work, or 0.0000002535% of the total highway vehicle miles traveled. So if you paid that "share" of the transportation budget, that would come to about $110 per worker.
So you might say, "GREAT, PRIVATIZE THE ROADS OVER TO THE MARKET!" Not so fast! If we ran things according to the market, many of you suburban republicans would have a higher than average commute, especially you folks in big urban-sprawl areas like St. Louis or Dallas or Chicago. Plus, some people may not use roadways at all, or they may "use" them much more lightly. I travel 3 miles and ride a bike. Why the hell should my tax dollars subsidize some jerk with a full-size pickem up truck that does more road damage??? Some folks would call that downright un-Amuhrrican! Clearly some folks should pay more. Plus, whoever owned the roads would have a monopoly, so they'd be able to price-discriminate and charge double from 7-9am and 4:30-6:30pm, and make a tidy economic profit off the deal. So you'd probably pay at least 2 or 3 hundred a year to the private company. So, on average by privatizing certain things (or not having regulation) we probably end up saving 100 so that we can pay twice or thrice that, i.e. bending over a dollar to pick up a dime.

Political lobbying explained through the example of all-pay auctions

Sampling Bias and "Enthusiasm Gaps"

This is an interesting twist on sampling bias. Since robopolls are less able to coax you into staying on the line, they only grab the more enthusiastic likely voters. In New Jersey, human polls and robopolls are indicating leads to opposite candidates. Human polls favor Corzine, and robopolls favor Christie.

The Productive Nature of Whining

Don't let a VMI cadet see this.

More Rationale for Overoptimism

There is a simple way to get overoptimism (and hence bubbles): suggest that the agent's payoff is correlated with his guess. Here's another:

The observer’s beliefs are different from agent A’s.  They are drawn from the same distribution G but there is no reason that the observer’s beliefs are the same as agent A’s.  In fact, the action agent A took will only be the best one from the observer’s perspective by accident.  Actually, the observer’s beliefs will be the average of the distribution G which is lower than the belief of  agent A since agent A deliberately took the action which he thought was the best.  This implies that the agent A who took the action is “overoptimistic” relative to an arbitrary observer.

Economists Category on Jeopardy

They zip through world history and Shakespearian quotes, but a question about Adam Smith elicits blank stares. Priceless.

Brain Drain or Brain Gain?

This article in Foreign Policy confirms what economists have said about skilled migration for the last decade or so: It helps both the recipient and the source country. One of the ways they acknowledge emigration to help is through remittances.  However, the last point, "Just as fears about possible negative effects of brain drain are typically overblown, so is the hype over the ability of countries to tap their diaspora to set up trade and investment," is not consistent with recent research. There are a few papers out showing a strong positive link between skilled emigration and FDI flows in the other direction, including one that a couple of guys named Bang and MacDermott are trying to get published.

Tax Water?

Urban economists might think taxing land is the ideal way to manage urban growth; PK thinks it wouldn't raise enough $$. Should we tax water? Like a tax on land (not a tax on property, which would include the development of land), it would likely not distort investment. I'm concerned about the distributional consequences of a tax on a necessity that many people consume inelastically.

Rich people with civic responsibility

Rich Germans petition in protest of government tax rates!!! That's right, they think they're paying too little and they should be paying MORE!

Contrarian Spurrious Correlation of the Day

Murders and suicides seem to be negatively correlated according to shock-jock economists at freakonomics. Really? It seems Levitt should be able to look at this and find easy econometric techniques that would rule out any causal relationship. Right off the bat, it seems that higher suicides in Japan come from the fact that life insurance covers suicide. Problem is, he would have start once again caring more about doing real work and less about shocking the world for fun and profit.

Salience and Taxes

Are taxes distortionary when they're higher, or just when we think about them more. This paper by Amy Finkelstein of MIT (HT: Ian Ayres) seems to suggest that it's not the rate, but the "salience" (i.e. how much we think about taxes) that drive us crazy. It explains that using irrational numbers to calculate taxes might keep us from getting to wrapped around the axle over them. This might explain why small business owners are more crazed about taxes than others since they have to file and pay taxes using quarterly estimated tax forms instead of filing once at the end of the year. This year I had some weird "additional tax" thrown on by the state of VA (which has a really complicated filing) and had to spend over a month of phone calls and correspondence trying to get an explanation of what was going on with it. For some reason they claimed that I was supposed to have been filing estimated tax forms because the withholding was too low, which is nuts.
Anyway, I don't mind taxes. I think if I knew what I was paying and knew what I was left with at the end, and had to think less about "this part goes to tax" I probably wouldn't mind the taxes so much, and it wouldn't mess with my consumption choices as much. This is one thing that's always puzzled me about sales taxes here in the US. Why can't they just be included in the price? Why does something priced at a dollar have to come out to $1.06 or something?
This is also probably why we don't think too much about tariffs on imports. We never see how it impacts the prices, so we almost just assume that we're not really "paying" any of the burden (which of course is patently false). This might mean that the consumption distortions from trade restrictions are not as high, but it might mean that the production distortions are even higher.

Green Jobs are More than Broken windows

A number of bloggers (see here or here or here) in the econoblogoshpere have been relating green jobs to the parable of the broken window, by Frederic Bastiat:

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

It seems that the comparison of using stimulus dollars for green investments to broken windows is akin to making a type III error: giving the right answer to the wrong question. No, green investments by the public sector will not increase the long-run number of jobs, and they may have some unintended consequences if future harm is not priced with a tax or an auction. However, short-term public sector jobs will reduce the pain of the current recession by reducing overall employment in the short term. Then the question is what the best thing to do is, i.e. "are green jobs better than the next best alternative for public funds?" To many the answer is "yes." Investments made now to clean up the environment and improve our energy infrastructure will do a lot to increase welfare even if that welfare is not well measured by the metrics of GDP and employment. The "broken windows" analogy also frames the debate in a misleading way. If the analogy is apt, then it must be the case that the "windows" are already "broken" and the cleanup investments are just paying the tab for the vandalism of past generations.

Split or Steal

Lesson: Don't trust anyone who's been stabbed in the back before (especially if you're the one who did it).

Why 3d Graphs are usually misleading

Just because you can do it in Excel doesn't mean it's the right way to do it. Below, the author has made a graph of the number of Starbucks over time. The height of the cylindrical columns is increasing, but so is the width, making it seem (visually) as if the increase has been all the more gruesome.

Will and Krugman

Was fun to watch George Will & Paul Krugman bristle while trying not to interrupt the other on ABC this morning. Will was looking down and tapping his fingers nervously at Krugman, then Krugman looked like he was about to rip of his own beard while Will decried the possibility that the Chinese would own our debt. PK's argument was that that's not how they were going to pay for it. The bigger question is, if the Chinese buy US bonds to finance health care, for whom is that worse in the long run? If inflation shoots up and the dollar crashes (like GW himself has predicted) this would clearly ruin the Chinese!

Should OPEC be Compensated?

Economically, there is no argument for giving oil exporters a handout to compensate for our ability to reduce our own demand, thus driving down the price. Remember, they don't give us a kickback for all of their supply-reducing behavior that drives up the price. But, there might be some political reasons to make such a side-payment.

Carbon Tariffs

From Matt Yglesias a few days ago:

The EU, Canada, and Japan are in the aggregate much more significant trade
partners than China/Mexico/Brazil. And the case for them charging us carbon
tariffs seems about as good as the case for us charging the Chinese.

I think we're missing the bigger issue: Why a carbon tariff? Why not just a tax on carbon content for domestically and foreign produced goods? Why give domestic producers a "carbon subsidy?"