Thinking on the Margin

The Key to Science in 63 Seconds

2012-05-26T06:30:00.001-04:00

(HT Brain Pickings via Swissmiss)

How Reliable Are the Social Sciences?

2012-05-25T13:55:00.002-04:00

Gary Gutting shares some thoughts on this important question:

There is considerable distance between, say, the confidence we should place in astronomers’ calculations of eclipses and a small marketing study suggesting that consumers prefer laundry soap in blue boxes…

The core natural sciences (e.g., physics, chemistry, biology) are so well established that we readily accept their best-supported conclusions as definitive. (No one, for example, was concerned about the validity of the fundamental physics on which our space program was based.) Even the best-developed social sciences like economics have nothing like this status...

Social sciences may be surrounded by the “paraphernalia” of the natural sciences, such as technical terminology, mathematical equations, empirical data and even carefully designed experiments. But when it comes to generating reliable scientific knowledge, there is nothing more important than frequent and detailed predictions of future events. We may have a theory that explains all the known data, but that may be just the result of our having fitted the theory to that data. The strongest support for a theory comes from its ability to correctly predict data that it was not designed to explain.

While the physical sciences produce many detailed and precise predictions, the social sciences do not. The reason is that such predictions almost always require randomized controlled experiments, which are seldom possible when people are involved. For one thing, we are too complex: our behavior depends on an enormous number of tightly interconnected variables that are extraordinarily difficult to distinguish and study separately. Also, moral considerations forbid manipulating humans the way we do inanimate objects. As a result, most social science research falls far short of the natural sciences’ standard of controlled experiments.

Without a strong track record of experiments leading to successful predictions, there is seldom a basis for taking social scientific results as definitive…

Given the limited predictive success and the lack of consensus in social sciences, their conclusions can seldom be primary guides to setting policy. At best, they can supplement the general knowledge, practical experience, good sense and critical intelligence that we can only hope our political leaders will have.

I am sympathetic to many of the points Gutting makes in this article. However, there are also some important lessons from my own discipline of economics that are nearly indisputable that politicians often ignore. These include comparative advantage and gains from trade, the law of demand, supply and demand analysis and market equilibrium, etc. There are a number of policy issues that economists have strong agreement on. Policy makers who ignore these concepts may cause harm to the economy and the citizens of their countries.

Having said that, I think Gutting makes some great points and generally agree that the social sciences have far less predictive power than the physical sciences. This is not necessarily a weakness of the social sciences, but due more to the complexity of their object of study (humankind). People are remarkably complex actors and don't follow predictable behavior the way non-intelligent particles and chemical compounds do. This is what makes the social sciences so fascinating and so frustrating at times. That is a feature and not a bug of the field. The richness of humanity is that people are motivated by a myriad of incentives in their lives. If all of human behavior could be explained with the precision of a ball in motion, we would live in a far less interesting world.

Both academics and policy makers are often guilty of over-representing the predictive power of the social sciences. The social sciences have a lot to contribute to our understanding of human behavior, but the conclusions of their theories should be taken with a dose of humility and often a bit of skepticism. Generally speaking, the more sophisticated the statistics required to identify an effect, the more wary I am of the findings.

For more on the limits of what social sciences (and politicians) can actually know, read Hayek's The Use of Knowledge in Society (PDF). I cannot recommend this brilliant article highly enough.

See my previous post on Making Economics Relevant Again.

(HT Freakonomics)

Taxes Don't Kill Entrepreneurship, Crazy Licensing Rules Do

2012-05-24T11:44:00.000-04:00

Matt Yglesias on the economic impact of unnecessary occupational licensing requirements (emphasis mine):

To hear politicians tell it, the No. 1 barrier to small-business growth is taxes…

It turns out that, when surveyed, small-business owners place relatively little weight on tax issues... They’re much more concerned with something Washington rarely talks about: the country’s spreading thicket of licensing rules.

To be charged a high tax rate on your small-business profits, you need to be turning a tidy profit in the first place. Anyone in that position would surely prefer lower taxes but is fundamentally ahead of the game. The main barrier to entrepreneurship is not that you’ll pay taxes if you succeed—it’s that you might not make any money at all.

Licensing requirements, by contrast, are by far the best statistical predictor of business-friendliness, for those subjected to them. And unlike taxes or environmental rules, these have spread like kudzu, with little scrutiny and often scant policy rationale.

A recent comprehensive survey of state licensing practices by the Institute for Justice* reveals little consistency or coherent purpose behind most licensing. Nevada*, Louisiana, Florida, and the District of Columbia, for example, all require aspiring interior designers to undergo 2,190 hours of training and apprenticeship and pass an exam before practicing. In the other 47 states, meanwhile, there’s no legal training requirement. My friends and co-workers living in D.C.’s Virginia and Maryland suburbs appear to get on fine with unlicensed interior decorators, and all across America, amateurs have decorated their own homes without imperiling public safety.

Almost all states—though not Alabama* or the anarchic United Kingdom—require barbers to be licensed, but the specific requirements seem to vary arbitrarily. New York barbers need 884 days of education and apprenticeship. Across the river in New Jersey, it’s 280. But getting one’s hair cut in New Jersey (to say nothing of England) is hardly a life-threatening gamble...

These rules correlate strongly with burdensomeness in part for the same reason that they seem so random—they’re often imposed specifically in order to create a burden and stifle competition. Once a licensing regime is in place, existing license holders have an incentive to lobby to raise the bar for entry...

But a wide range of these rules could be done away with entirely at basically no risk. Regulation is needed when it would make sense for a firm to deliberately engage in malfeasance. Dumping harmful toxins into the air is highly profitable unless it’s prohibited. Financiers can draw huge bonuses by taking on too much risk, only to wreck the economy later. In other occupations, though, shoddy work brings its own punishments. An interior decorator who can’t get recommendations from satisfied customers probably won’t remain an interior decorator for long.

In these cases, licensing rules raise the prices the rest of us pay, make it difficult for successful entrepreneurs to expand their businesses, and are often a major barrier to employment for the most vulnerable populations.

See this interactive map for how friendly each state is to small business. I am very pleased to see my state of Virginia gets an "A".

I am a licensed attorney in the state of Virginia. While I understand that there is a reasonable rationale to requiring lawyers to have some type of license that shows minimum competence in their knowledge of the law, I do not understand why that should require three years of law school. I feel I learned far more about practical application of the law in my bar review course than I did in law school. Why not just allow anyone who is able to pass the bar to practice? And why have 50 different state bars? Does law in Maryland really operate that differently from the laws of Virginia? Even if you pass the bar in a given state, you still won't know most of the laws there. These licensing requirements do far more to limit competition and increase the wages of lawyers than they serve any rationale of public interest.

Below is a video from the Institute for Justice describing just how arbitrary and non-sensical many occupational licensing requirements are. Read a full report on this here.

See more coverage on the economics of licensing issues on Marginal Revolution.

(HT Alex Tabarrok)

Renting Prosperity

2012-05-23T15:55:00.000-04:00

I've long been a fan of the benefits of renting -- in terms of building wealth, increasing time, and increasing quality of life by living in more ideal locations. Economist Daniel Gross seems to agree. In his recent WSJ article, Gross explains why he thinks renting will lead to the next boom in American economic efficiency (emphasis mine):

Americans are getting over the idea of owning the American dream; increasingly, they're OK with renting it. Homeownership is on the decline, and home rentership is on the rise. But the trend isn't limited to the housing market. Across the board—for goods ranging from cars to books to clothes—Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency that could fuel the next boom...

For an increasing number of Americans, though, it simply makes more sense to rent these days. According to Moody's, by late 2011 it was cheaper to rent than to own in 72% of American metropolitan areas, up from 54% a decade ago. And the more people who do it, the more socially acceptable and desirable it becomes. The decline in the ownership rate means that about three million more households rent today than did at the height of the bubble.

It's tempting to view the rise of rentership as an economic step backward. Renters can't build up equity, and they have less control over their living standards than owners. Renting is generally seen as something you do when you've failed as a homeowner or are not yet ready to be one. But I'd argue the rise of rentership is a sign of a system adapting—albeit too slowly—to new realities.

The U.S. economy needs the dynamism that renting enables as much as—if not more than—it needs the stability that ownership engenders. In the current economy, there are vast gulfs between the employment pictures in different regions and states, from 12% unemployment in Nevada to 3% unemployment in North Dakota. But a steelworker in Buffalo, or an underemployed construction worker in Las Vegas, can't easily take his skills to where they are needed in North Dakota or Wyoming if he's underwater on his mortgage. Economists, in fact, have found that there is frequently a correlation between persistently high local unemployment rates and high levels of homeownership...

The renting is not just taking hold in housing. Gross goes on to describe how the renting business model is taking hold in markets for cars, textbooks, and fashion as well. Services like Netflix and Rhapsody allow average consumers access to video and music library that rival the largest collects in the world. Renting could have substantial impacts on economic productivity through more efficient allocation of resources, fewer unnecessary redundancy of goods in the economy, and allowing producers and consumers of these goods to take advantage of economies of scale. In my own neighborhood of Arlington, VA and around Washington, DC, the idea of renting has even come to bicycles in a brilliant way.

Given that renting is more common in urban areas, if Americans increasingly adopt a renting lifestyle, there could be additional gains in economic efficiency due to lower transportation costs, reduced energy consumption in smaller homes, and additional economies of scale that are enabled by individuals living in areas with higher population density. Harvard economist, Ed Glaeser, argues that people living in cities are healthier, wealthier, and living greener lifestyles than those in less urban environments. Additional gains from the Rentership Society?

(See Glaeser's new book, Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. It is currently near the top of my reading list.)

On a personal note, being a lifelong renter has yielded enormous benefits for me. The flexibility has helped give me opportunities to travel the world, save a substantial portion of my income in my 401k in my 20s, quit my job to pursue my JD and PhD full-time, take risks that allowed me to rapidly increase my income early in my career, keep my commute down to about 10-minutes for most of my adult life, and shift careers into a job that I thoroughly love, and live in an exercise friendly community that helped me in the best shape of my life. Could I have done all of this if I owned a home? Maybe. But each of these would have been a lot more costly and entailed much greater risks.

Finally, perhaps, Americans are absorbing a piece of wisdom not from Gatsby, but from Thoreau: "And when the farmer has got his house, he may not be the richer but the poorer for it, and it be the house that has got him."

If Daniel Gross is right (and I think he is), we may be in for some significant improvement in quality of life in the near future.

Rentership Society? Bring it on!

(HT Life Edited)

Why Do American Women Work More Than Europeans?

2012-05-23T13:21:00.000-04:00

According to economists Indraneel Chakraborty, Hans Holter, and Serhiy Stepanchuck, the answer lies in differences in divorce rates:

[W]e find a strong positive correlation between divorce rates and hours worked by women, whereas male hours and divorce rates are completely unrelated…

Why would the likelihood of divorce affect the decision of females to work?

We believe this is because marriage provides an implicit social insurance since the spouses are able to share their income. However, if divorce rates are higher in a society, women have a higher incentive to obtain work experience in case they find themselves alone in the future. The reason the incentive is higher is because in our data, women happen to be the second earner in the household more often than men. European women anticipate not getting divorced as often and hence find less reason to insure themselves by working as much as American women…

We find that stable marriages lead to a reduction in labour supply. Both in the data and in the model the effect is on the extensive margin, i.e. whether women will choose to work or not.

According to their research differences in tax rates also play a significant roll.

In our counterfactual economy, if just marriage stability in US were the same as in the European countries, it explains 24% of the cross-country variation in hours worked for females. When we also introduce European taxes, we are able to explain 43% of the variation in female work hours across the continents.

If this theory is correct, does that imply lower hours worked by American women who are at lower risk of divorce than the general population? (Such as weekly church attenders and highly educated women.)

(HT Freakonomics)

Where in the World Are the Christians?

2012-05-23T12:46:00.000-04:00

A Pew report on the size and distribution of the world's Christian population:

The number of Christians around the world has nearly quadrupled in the last 100 years, from about 600 million in 1910 to more than 2 billion in 2010. But the world’s overall population also has risen rapidly, from an estimated 1.8 billion in 1910 to 6.9 billion in 2010. As a result, Christians make up about the same portion of the world’s population today (32%) as they did a century ago (35%).

This apparent stability, however, masks a momentous shift. Although Europe and the Americas still are home to a majority of the world’s Christians (63%), that share is much lower than it was in 1910 (93%). And the proportion of Europeans and Americans who are Christian has dropped from 95% in 1910 to 76% in 2010 in Europe as a whole, and from 96% to 86% in the Americas as a whole.

At the same time, Christianity has grown enormously in sub-Saharan Africa and the Asia-Pacific region, where there were relatively few Christians at the beginning of the 20th century. The share of the population that is Christian in sub-Saharan Africa climbed from 9% in 1910 to 63% in 2010, while in the Asia-Pacific region it rose from 3% to 7%. Christianity today – unlike a century ago – is truly a global faith.

One of the many interesting statistics in this report is that China is currently has the 7th largest Christian population in the world. With the current growth of Christianity in China, this is likely to increase further in the near future, with many commentators speculating China will have the world's largest Christian population in the near future.

Read the whole thing.

P.S. -- Here is John Micklewait, editor of the Economist, on Christianity in China:

More on the growth of Christianity in China from PBS and NPR. And a deeper look into Christianity in China by the Pew Forum.

"Life is 10% What Happens to Me and 90% How I React to It"

2012-01-17T06:53:00.002-05:00

One of my all time favorite quotes, by Chuck Swindol:

The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, the education, the money, than circumstances, than failure, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. It will make or break a company...a church...a home. The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past...we cannot change the fact that people will act in a certain way. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude. I am convinced that life is 10% what happens to me and 90% of how I react to it. And so it is with you. We are in charge of our attitudes.

Questions: How might differences in our attitude affect the cognitive costs of dealing with difficult issues in life? How do they affect our gratitude, which in turn affects our happiness? Our openness to new experiences? Our overall contentment? How can studying economics help our attitude?

(Photo and quote via Lifehacker)

Why You Should Study Statistics

2012-01-16T22:45:00.000-05:00

(via Dilbert.com)

Tenure Track at Marymount University!

2012-01-15T15:32:00.000-05:00

I just accepted a full-time tenure-track position as an Assistant Professor of Economics at Marymount University here in Arlington, VA. Got my office this past week and classes start on Tuesday. As part of my responsibilities, I will be director of Marymount's Economics in Society undergraduate program. It seems a perfect match on many levels.

The position is heavily oriented toward teaching. To make this position even sweeter, the university is a 10-minute walk from home. The Economics in Society program also seems a perfect match to my academic training and research interests in economics of religion, law and economics, and public choice.

This first semester, I will also continue to adjunct at Catholic University -- teaching two courses at Marymount (Principles of Macroeconomics and Business and Economics of Sports) and two courses at Catholic (Principles of Microeconomics and Quantitative Methods for Decision Making). I expect it to be a busy and wonderful semester.

Getting this position at Marymount in many ways a dream come true for me. This is exactly the type of job I was hoping for when I entered GMU's PhD program in the exact location I hoped to stay in. I am deeply grateful and profoundly elated.

Merry Christmas!

2011-12-25T20:10:00.000-05:00

Wishing all my readers a very Merry Christmas and a Happy New Year!

Rest In Peace, Steve Jobs

2011-10-05T22:37:00.001-04:00

“No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”

- Steve Jobs at the Stanford University commencement address in 2005 (via Cult of Mac)

Below is the video of Jobs giving the speech where these quotes come from. (Highly recommended viewing.)

And another video tribute remembering some of Jobs' greatest presentations:

More of Steve Jobs in his own words:

“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don’t settle.”

“When I was 17, I read a quote that went something like: “If you live each day as if it was your last, someday you’ll most certainly be right.” It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: “If today were the last day of my life, would I want to do what I am about to do today?” And whenever the answer has been “No” for too many days in a row, I know I need to change something.

“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”

Additional quotes after the link.

Below is a roundup of obituaries from around the web:

WSJ: Apple’s Steve Jobs is Dead
Bloomberg: Steve Jobs, Who Built World’s Most Valuable Technology Company, Dies at 56
Reuters: A world without Steve Jobs
AP: The World-Changer: Steve Jobs knew what he wanted
ThisIsMyNext: Steve Jobs: 1955-2011
Los Angeles Times: Steve Jobs dies; Apple’s co-founder transformed computers and culture
BoingBoing: Steve Jobs has died
People: Steve Jobs, Apple’s Visionary, Dies
The Guardian: Steve Jobs obituary
The New York Times: Steve Jobs, Apple’s Visionary, Dies at 56
The Financial Times: Apple: Jobs done but magic lingers
PCWorld: Apple Chairman Steve Jobs Dead at 56
The Economist: Steve Jobs

Steve Jobs, you sought to "put a dent in the universe" and you succeeded. You will be missed.

Weighing In: One Year Later

2011-09-19T11:53:00.000-04:00

September 16th marked my one year anniversary of starting my self-experiment to lose weight. I hit my heaviest weight ever at 193 pounds after studying for the Virginia Bar last summer and decided it was time to do something about it. I began using the LoseIt app for the iPhone to keep track of my net calories and successfully lost 25 pounds in 3 months, without any special food or exercise. I then maintained my weight without exercise for 3 months and kept it steady for another 3 months while training for my first triathlon ever. My latest feat has been to lose another 5 pounds after the triathlon, making a total of 30 pounds lost over this past year.

Needless to say, I am quite pleased with these results. For anyone sincerely desiring to lose weight, I can't recommend the LoseIt app and/or keeping track of calories highly enough.

(NOTE: I couldn't post this on the 16th this year because I was at the beach in New Jersey and away from a scale. I weighed in at 162.2 on the 15th and 162.8 today.)

Human Flying Squirrel

2011-09-07T14:45:00.000-04:00

This looks like so much fun:

Our friend Annitra Morrison sent in this video the other day, and I’ve watched it at least a dozen times. It’s by professional BASE jumper, wingsuit flyer, and all around crazy person Jeb Corliss, whom you might remember from 2006, when he was arrested on the observation deck of the Empire State Building, restrained by the NYPD before he could BASE jump off of it. My question after watching this video is: how many physics calculations did Corliss and Co. do before he took the giant leap? And also, considering how close he comes (watch at the 1:19 mark, don’t worry you’ll get a few looks at it) was he correct?

Jumping off Sky Tower in Auckland, New Zealand is the closest I've come to anything like this.

A Thank You to Steve Jobs

2011-08-25T15:18:00.001-04:00

The news is full of people opining about Steve Jobs' resignation as the CEO of Apple. Of them, I think Russ Roberts has one of the best:

The headlines say he remade industries. The articles talk about how he gave consumers what they wanted. But he famously didn’t give consumers what they wanted. He imagined what they might enjoy wanting and then he gave it to them. Yes, he remade industries. But he did more than that. He changed the way we interact with information and music, the way we consume information and music, and the way we create it. It is hard to think of anyone who changed the fabric of so many lives in such a positive way. I say that as I write these words on a MacBook Pro, listening to Irish music via iTunes, my iPhone in my pocket. And of course his influence extends beyond the Apple products created under his leadership. Those products influenced the products of Apple’s competitors.

His success illustrates the sterility of the mainstream approach in economics to corporate strategy and the theory of the firm. The theory of the firm in neoclassical theory focuses on how much the firm should produce and optimal capacity. Game theory looks at strategic issues arising under various payoffs. Neither approach captures the nature of innovation, the trial and error risk-taking of the visionary entrepreneur or the power of creative destruction to enrich our lives. These ideas are at the heart of the Austrian approach to the firm, an approach that has made even less headway in mainstream academic circles than Austrian business cycle theory. I don’t know much about it other than its flavor. I’m going to read some more.

I hope Steve Jobs can overcome this latest health setback. In the meanwhile, thank you, Steve.

Jobs' brilliance was indeed imagining what consumers might want and giving it to them. In my lifetime, I can't think of anyone else who comes close in their ability to do this. Jobs will most certainly and deservedly go down as a legend among CEO's.

As an example of the impact Jobs had, here are five industries he helped change forever, how he changed Apple, and some of his best quotes over the years.

While I'm less of a fan of the patent wars Apple often engages in to squash their competition, there's no question they have been a lead innovator and hold a remarkable array of patents.

Perhaps the best tribute to Steve Jobs I can give is the fact that I not only have an iPad and iPhone sitting on the table as I type this in a coffee shop in DC, but also that in the past week I sold the best computer I've ever owned to buy an even better one.

Thanks for all the great products and the great markets you helped create, Steve. You helped transform the world. I wish you well with your health. You will be missed.

Would You Give Up The Internet For Life For $1 Million?

2011-07-08T00:25:00.003-04:00

If not, and the Internet's worth that much to you, you might be richer than you think. As the video says, in some ways we may all already be millionaires.

(HT Russ Roberts)

My First Triathlon: Running Towards the Finish Line

2011-06-20T23:25:00.002-04:00

I'm happy to report my first triathlon was a success. Above is a photo of me on the last leg, running toward the finish line. (Courtesy of my dad.)

Exhausted by the end, but a huge sense of accomplishment. Still pondering what my next challenge will be.

Operation TriBri: My First Triathlon -- Tomorrow!

2011-06-18T17:13:00.006-04:00

Tomorrow morning, I will compete in my first ever sprint triathlon in the DC Triathlon. Our race distances are an 800m swim, 20k bike, and 7.5k run -- finishing up running along the National Mall.

What makes this a particularly challenging achievement for me is that when I began training on March 19th, three months ago tomorrow, I couldn't jog for more than 60 seconds without getting out of breath, had never swam freestyle, and couldn't hold my form swimming once across the pool. I am now going on 5-mile runs and can swim for a mile non-stop in the pool. (Biking wasn't too much of a problem when I started, so my training on that has been minimal so far.)

Like when I lost 25 pounds in three months late last year, this has been accomplished by rapid incremental progress combined with tracking and training with some clever iPhone apps. (See my article on using technology to train for my first triathlon on Geardiary.com for more on this.) While I can't say I've enjoyed every minute of the process of training, I have thoroughly enjoyed my progress. I plan to continue explore new levels of fitness in some capacity after the race.

Combined with my lost weight, I am by far in the best shape of my life. If you are thinking about losing weight or getting in shape, what are you waiting for? Download those apps and get moving!

See you at the finish line!

Weighing In: Nine Months Later

2011-06-16T14:46:00.002-04:00

Nine months ago to the day, I started a self-experiment to lose weight. In three months to the day after starting, I had dropped from 193 to 168 pounds without any special exercise. For the last six months, I’ve been trying to hold my weight constant, including through the last three months of triathlon training.

Target weight = 168.0. Actual weight as of this morning = 167.6.

Useless Research and the Signaling of Economists

2011-05-15T10:47:00.006-04:00

Have economics professors failed to learn from the financial crisis? If so, is it because they care more about doing useless research than being relevant to the world? Seth Roberts thinks so:

I like this essay by Brad DeLong about the failure of economics professors. They didn’t just fail to predict the recent economics crisis but they have failed, as far as he can tell, to learn from it. If you are naive, of course this is astonishing — but DeLong is not naive. Yet he is “astonished”. That’s interesting.

It’s hard to imagine DeLong doesn’t know what I am about to say. I imagine anybody with any academic sophistication is aware of it — especially economists. As Thorstein Veblen (an economist) pointed out in The Theory of the Leisure Class (1899), a great deal of what professors do, including economics professors, is about signaling high status. In economics, this is done by being highly mathematical. (Same in statistics. In art history, it is done by using big words. In engineering it is done by being theoretical. In many areas of science, it is done by using expensive equipment and having a large lab. In many fields it is done by being useless — e.g., preferring “pure” research over “applied” research.) This is no mystery. Economists think a lot about signaling. Michael Spence wrote an influential paper (which included Veblen’s phrase “conspicuous consumption”) and book about it, for example, for which he won a Nobel Prize. (More examples from economics.) But DeLong ignores the signaling of economists. Let me propose why economists haven’t taken the steps DeLong is astonished they haven’t taken: Because it would make them more useful and less mathematical. Thereby signaling lower status.

Why is signaling so common? It is basic biology, yes. But it is also convenient. Here is what Veblen didn’t say: It is so much easier to signal than to make progress. Among animals, it is much easier to signal you will win a fight than to actually win one. Among professors, it is easier to use big words than to write clearly. DeLong wants economists to choose progress over signaling. Shouldn’t an economist not be astonished when the lower-priced option is chosen?

I wanted to study economics after learning about it from reading popular books and studying it in business school. I thought there were a lot of cool applications for economics in both business and life. (And there are!) Unfortunately, I have been underwhelmed by how much practical value most contemporary research seems to have. And positively alarmed by how few academics seem to care.

Is it simply a matter of signaling or an aspect of diminishing marginal returns to research? Or am I wrong in my perspective?

See my previous post on making economics relevant again.

Was the Obesity Epidemic Caused by Cars?

2011-05-12T11:38:00.000-04:00

If so, removing Twinkies and Coca-Cola from schools probably won't change things much.

Junk food, video games and a lack of exercise all have received their fair share of blame for the spiraling epidemic of obesity in the U.S. But according to a University of Illinois researcher, public health enemy No. 1 for our supersized nation may very well be the one staple of modern life most Americans can't seem to live without one (or more) of: the automobile...

After analyzing data from national statistics measured between 1985 and 2007, Jacobson discovered vehicle use correlated "in the 99-percent range" with national annual obesity rates.

"If we drive more, we become heavier as a nation, and the cumulative lack of activity may eventually lead to, at the aggregate level, obesity," he said.

This makes me wonder how this correlates across income ranges? My understanding is that the poor are more likely to be obese and less likely to own a car. This might be obscured by simply looking at national statistics.

Obesity is rising across all income brackets (in the US). It could be that obesity is positively correlated across national income levels (the richer a country gets, the greater percentage of their population becomes obese) and negatively correlated across individual income levels (the poorer a person is within a given (developed) country, the more likely they are to be obese).

As national incomes rise, you would expect more food to be consumed and more cars to be purchased per capita. Is increased automobile usage the cause of obesity or greater income? Or both?

(HT Barking Up the Wrong Tree)

Lego-Style Apartment Transforms Into Infinite Spaces

2011-05-12T11:25:00.001-04:00

Readers of this blog will know I'm a big fan of small space living. (Influenced from all my trips to Japan and traveling the world with very little.) While I'm not sure I'd want to constantly rearrange my apartment, this Barcelona flat is pretty cool.

Here are more examples of small space living from Apartment Therapy's Small/Cool 2011 contest.

(HT MinimalMac)

Libertarian Paradise?

2011-05-10T10:26:00.000-04:00

(HT Greg Mankiw)

Dilbert on Opportunity Cost

2011-05-03T10:36:00.002-04:00

(HT Josh Wright)

Fight of the Century: Keynes vs. Hayek Round Two

2011-04-28T10:36:00.006-04:00

Another great econ rap video from Russ Roberts. Especially fun seeing Mike Munger do a phenomenal job playing the security guard at the beginning.

See the first Keynes vs. Hayek rap video here.

Fantastic!

The Daily Dozen

2011-04-20T10:48:00.000-04:00

What health insurance does cover, and doesn't.
What techniques do police use to get suspects to confess?
The joy of not cooking. Megan McArdle takes a look at the difference in how easy it is for her to cook compared to her grandmother.
Nature vs. nurture, as seen by economists.
Seth Godin on accepting false limits.
The sad, beautiful fact that we're all going to miss almost everything. (HT Tyler Cowen)
Angry Birds meets Star Wars.
A free book well worth your time: For those interested in the topic, click here to obtain a free download of Policy and Choice: Public Finance through the Lens of Behavioral Economics by William J. Congdon, Jeffrey R. Kling, and Sendhil Mullainathan.
Upper income people still don't realize they're upper income.
Can business be taught?
Privilege: How society's elites are made.
A look at iPad users: Apple still trouncing Android.