Economics and similar, for the sleep-deprived

A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?

Update: seemingly not

Update: Oh yeah!


Friday, December 23, 2005

 
Bizarro World update

I pass on without comment the fact that Mr Oliver Kamm has written the following paragraph by way of a defence of his book against charges of having a "college debating style":

Perhaps I could provide for your readers a summary of the thesis that Heartfield declines to divulge. My aim in the book is to defend the Blair-Bush strategy of promoting global democracy, trace its antecedents in left-wing debates about foreign policy, and identify the distinctive contribution that progressives can make to an internationalist coalition. Heartfield maintains that the case for liberal interventionism founders on "all the repulsive details of waging war". Understandably, given that his argument has so obvious and comprehensive a historical refutation (but let us return to Bosnia later), he quickly resorts to the non sequitur of disputing my leftist credentials. He is so determined on this conclusion (and, given the paucity of his other material, tied to it), that he flagrantly misrepresents my argument in order to derive it.

If you like this paragraph he has more. Ho ho ho, god bless us all, but particularly me.
0 comments this item posted by the management 12/23/2005 03:13:00 AM
 
Bizarre policy discussions I have on a surprisingly regular basis

(here and here for example, though more frequently in real life).

DD: I see you are shooting your gob off about bringing back grammar schools.
Straw Man Opponent[1]: Yes I am.
DD: How strange; previously I had heard you claim you were a socialist.
SMO: Grammar schools are a profoundly egalitarian policy and only the middle classes oppose them.
DD: Do go on ...
SMO: Well, if we don't have grammar schools then the best education goes to rich kids, either through private education or because of selection by house prices. That means that bright kids from the working class end up in sink schools and can't go to Oxford.
DD: There are a number of empirical claims there which I don't necessarily agree with but do go on.
SMO: Whereas if we brought back the 11 plus, there would be loads of grammar schools which could compete with the private schools and the bright kids with poor parents would get a really great education.
DD: What about the other kids? Specifically, what about those kids with poor parents who would not be able to pass the 11 plus. Tt would at least appear at first glance that this group, in which I suspect there would be quite a few members of the working class, would be getting a somewhat worse education than they do today under your proposal.
SMO: The thickies? Fuck 'em.

I really don't feel the need to read Michael Young's "The Rise of the Meritocracy". I've been living it for the last fifteen years.

[1] Although Nick Cohen actually believes all of this (or at least he writes that he does in his Evening Standard column; there must be at least a weak relationship).

Update: oh yeh, happy Christmas.
0 comments this item posted by the management 12/23/2005 01:04:00 AM

Saturday, December 17, 2005

 
Not me, guv

The "Daniel Davies" who has a letter in the Weekend Guardian talking smack about the Zoe Williams column isn't me. I don't think it's the journalist on the Western Mail or Danimal either. There must be a fourth one. To be honest neither "Daniel" nor "Davies" are particularly uncommon names so this sort of thing is bound to happen from time to time.

Btw, if you are on the lookout for a heavy metal drummer, I've got Danimal's demo CD and in my opinion it is distinctly better than workmanlike. I am not particularly a fan of that big double-bass-drum Lars Ulrich style but Danimal pulls it off better than most. Daniel Davies' feature articles for the Western Mail are pretty good too although probably not worth buying the paper for specially if you don't live in Wales.
1 comments this item posted by the management 12/17/2005 04:53:00 PM

Tuesday, December 13, 2005

 
Just Your Neighbourhood PC on the beat
Oh yeh, comments repository. Here I am, defending the gauleiters of Political Correctness in their attempt to censor Lynette Burrows on Radio Five Live (official D^2D position statement: Q: Are the fascists trying to silence radio phone ins? A: Not nearly hard enough). At Stumbling & Mumbling and at the Tim Worstall site (where I also throw in an unrelated dig at the theory of law enforcement which holds that everything the police do is a waste of time unless they are walking round in circles).
0 comments this item posted by the management 12/13/2005 09:47:00 AM
 
I'll be on the streets of Tottenham with my penis out tonight

Apparently future historians will not, after all, be dating the inevitable decline of Harry's Place/Little Green Soccer Balls into something worse than parody from the day that they banned me. For one thing, I have apparently been unbanned (for the next five minutes anyway).

For another, they have posted this, which I have to admit is going to make a much more obvious starting point. I think it marks the precise crossover point at which the site becomes an embarrassment to the comments boxes rather than (as it always was historically) vice versa.
0 comments this item posted by the management 12/13/2005 09:13:00 AM

Monday, December 12, 2005

 
Oop, and another one

Also if you're writing about the optimistic prospects for Iraq this week, the phrase "Concorde Fallacy" might come in handy. It has two meanings.

One is just an evocative name for the sunk cost fallacy; the idea that already having spent a lot of money on a bad idea is a good reason for spending even more.

The other is the sense that I prefer to use, although Google reveals that it is less popular. In my mind, the "Concorde Fallacy" was the strange beatific feeling that one used to get while lying on the grass on a summer's day, watching the beautiful shape of Concorde flying overhead, and creating a bright clear space of about a millisecond in which you could almost believe that it wasn't a horrendous waste of money. I suspect that as we see the dawn of Iraqi democracy next week there will be a fair few Concorde moments.
0 comments this item posted by the management 12/12/2005 05:01:00 AM
 
Assorted Iraq pre-elections talking points

As a service to my friends in the journalistic community, a selection of half-baked ideas that could probably be spun out to half an opinion column. If you steal one, send me an email. Posted here rather than on Crooked Timber because I have a cold and can't be bothered writing it properly.

Four days ahead of the elections, there is decent reason for optimism from the Oxford Research International poll of Iraqi opinion. I'm sure that much will be made of the fact that the poll was nearly called off because of security problems, but I don't think this is a valid criticism to make of the survey � the fact that it was difficult to do doesn't change its findings and ORI are too reputable to put their name to a poll if the security problems had seriously compromised its validity. And the results are not too bad; Iraq is still not a place where I personally would choose to live but 76% of Iraqis expect a stable government to arise from the elections 57% are broadly in favour of democratic government and a bare majority (53%) are "confident" in the existing national government. This isn't the sort of thing you'd expect from a country heading for meltdown and thus it is my opinion that Iraq won't. Below, a few comments on my interpretation of what this might mean for the future, and for an assessment of the costs and benefits of the whole exercise. They don't appear to have published the full poll results yet, so these numbers are scrounged together from newspaper reports.

It is a bit worrying that so many Iraqis want a "strong leader", because a military coup d'etat (de jure or de facto) is always a risk in an unstable country. I've always said that the real problem for the coalition forces in training the army is that it needs to be strong enough to do its job, but not strong enough to be a political power and there is a risk that this balance won't have been achieved. The Army has 67% confidence versus 53% for the government, although I doubt that one would get a particularly different figure for the USA.

The Kurds are the big beneficiaries of the invasion. They have a pretty good position in the federal government, as shown by the fact that in the regional breakdowns, the region "North" is the most optimistic of the lot about everything. On the possibility of seccession, reality has begun to strike home with regard to the possibility of their being allowed to ethnically cleanse the Sunnis out of Kirkuk. In any case, the idea of creating an independent Kurdistan out of Northern Iraq is unlikely to seem attractive unless Turkey could be induced to give up some of its Kurdish areas and it can't. So the status quo is going to seem like the best alternative, with (by and large) the PUK in government and (by and large) the PKK continuing low-level terrorist activity.

It seems pretty clear that the centre of Iraq - the belt across Anbar and Salah-ed-Din governorates containing Fallujah, Samarra and Ramadi � is bandit country. The Iraqi government has far, far less effective control over this part of the country than the UK government had over South Armagh in the 1970s and 1980s, and as a result it will continue to be a hideout and training ground for local terrorists and visiting Al-Quaeda jihadis. Note that the Northern Ireland analogy suggests that whatever success or failure the Iraqi "security forces" have it is unlikely to make a difference to the hospitality of Anbar to terrorists. Even if the Iraqi government manage to train up their security forces to the standards of the Special Air Service, see how much good that did the UK in Northern Ireland. So one key rationale for invading � that the bringing of democracy to Iraq would make us safer � appears to have been falsified. In order to bring democracy to Iraq, we first had to turn it into a completely failed state, and a consequence of that is that we have created a terrorist heartland which is no less convenient to jihadis than Taliban-era Afghanistan and which it will be very politically difficult for us to bomb because to do so would be to admit that the Iraqi government is not actually in control of its territory[1]. I would surmise that the big divide that the survey found between Shia and Sunni views of life in Iraq is being driven to a great degree by Anbar governorate � apparently, although a majority of Iraqis (53%) think that the invasion was "not a good thing for Iraq", this rises to 99% in Anbar province. If we're hoping to build on our one per cent support there, by the way, we've got an uphill struggle; confidence in the occupying troops is zero per cent in Anbar.

The overall optimism of the Iraqis and their trust in the government as an institution (although not its politicians) is a good thing. It suggests that there isn't very much genuine support for the insurgents. Obviously the insurgents must have some popular support because otherwise they wouldn't operate, but if the bulk of the Iraqi population isn't on their side even now, with widely disliked foreign troops on the ground, their support will most likely melt away once the troops leave. In particular, it seems unlikely to me that the insurgents will be able to carry out carbombings and suicide bombings in and around Baghdad; I would guess that the hard-core jihadis will retreat to Anbar and Salah-ed-Din to help train foreigners for terrorist attacks outside Iraq, while the criminal element will hang around kidnapping people for money on the Colombian model, and most likely sending some of the proceeds to fund the terrorists.

It also looks very much as if Basrah, Missan and Dhi Quar governorates (the "Shia South") are being effectively Finlandised by Iran. It's not too much of an exaggeration to say that the net result of coalition policy in these regions has been to make Iraq safe for burqas and stonings. I don't believe that these regions are going to fall directly under the sway of Iran in the same way that Lebanon was occupied by Syria, because there is too much of a nationalist element to the Sadrist movement. But they are unlikely to agree to anything which interferes with the ability of the Shia militias to enforce sharia law (with or without the help of the legal system), and they are likely to be partisans of Iranian influence in the Iraqi government because anything which works for a strong Iran, in the near term at least, is good for them.

On the other hand, for the population of the remainder of Iraq (which includes Baghdad so it's not at all insignificant), there is some prospect of real democracy, which should not be ignored (like the real improvements that there have been in Afghanistan). They will have the opportunity to take part in something approaching normal political life, and the electrical shortages, raised infant death rates and other factors which are currently causing them to say that life is worse than it was under Saddam (which I don't actually believe) will pass. There doesn't look like being enough genuine ethnic tension to fuel a civil war (caveat; there never does �), so my guess is that withdrawing the troops soonish would be a net benefit rather than a net cost.

So, it looks like the end result of our invasion will be; we have brought freedom to about a third of the Iraqi population, at ludicrous cost in terms of money and innocent lives. We have liberated the Kurds (the Iraqi Kurds that is) and created a near-permanent training camp for terrorists. We have made ourselves much less safe and increased the number of people in the world who live under sharia law. The Henry Jackson Society apparently believe that we will make ourselves safe in the global war on Islamic totalitarianism by carrying out similar escapades all over the Middle East; I have to say that currently my question to them is What do you think of the show so far?


[1] I suppose we could engineer it so that they "requested" our support in bombing terrorist bases, but this itself is hardly likely to be completely straightforward and risk-free.
0 comments this item posted by the management 12/12/2005 04:58:00 AM

Friday, December 09, 2005

 
If this is normal science I want my old job back

This also "not part of the proper Steven Levitt series", although it anticipates a couple of things from Part 3. It's basically an expanded version of this comment on the Brad DeLong site. Basically, I do not at all like what Levitt is doing on the issue of the challenge to the "More Abortions, Less Crime" thesis in chapter 4 of Freakonomics, and the controversy which has erupted over it since the Foote and Goetz working paper discussed below.

Basically, Levitt has a response up now. He goes hands-up on the programming error, but fights back by making a number of corrections to the underlying abortion data series and says that the key result is still there if you make these corrections. Brad Delong describes this as "normal science", presumably in the Kuhnian sense, but I think it's something a bit worse. Yes, thanks, I am aware that by entering the lists in this way I have become an ally of Steven Sailer, the noted film critic and race nut, but there you go. Here are my specific comments in ascending order of seriousness:

1. I think that the decision to use an instrumental variables approach to allow for measurement error in the Alan Gutmacher Institute abortion survey data is possibly wrong and underjustified (I had to look this up because my recollection of the way you use IV to deal with measurement error is just pathetic; thanks to Ragout in Tim Lambert's comments for helping me out. God this is turning into an incestuous blog project, it reminds me of the Lancet study community). The issue is that if there are measurement errors in the AG data, then the residuals in the regression will be correlated with one of the regressors (because the left hand side is determined by the true relationship, so big residuals will be correlated with big measurement errors on the right-hand side variable). This tends to bias down your estimates of the regression coefficients, so making you more likely to find things not to be significant when they are.[1].

On the other hand, if you're using IV estimation (whereby you replace the series with measurement error by a proxy constructed from other series; this tends to inflate the residuals but takes away the correlation with the right hand side), then the series you use to construct your instrument mustn't be themselves correlated with the measurement error on the original series. If they are, then you're going to introduce a negative correlation and your will tend to bias your estimates in the opposite direction, making you more likely to find things to be significant when they are not.[2]. It might be the case that there is good reason to believe that Levitt's proxy for the AG data from a similar series compiled by the CDC has measurement errors which are not correlated with the measurement errors on the AG data but this ought to have been discussed. I don't like it when people bring in IV estimation with no discussion of why they're sure that their instrument is valid. This is a venial rather than a mortal sin, but Levitt has a chronic case of it; a lot of his work seems to rely on a kind of "gee whiz what an original idea" when coming up with off-the-wall ideas to find measurable proxies for things, rather than explaining in detail why the proxy is valid.

2. On a simple point of fact, the fourth column of row three of the table displaying Levitt's revised results does not show a significant effect. This is the column using the correctly programmed interaction effects and IV estimation (I think it's also using the processed data series but it might not be), so in a sense it's the end of the "improvement" process that's been carried out. This isn't mentioned in the text summarizing the table; again a presentational matter rather than anything else, but irksome.

3. Finally and most importantly, this is about as far from a double blind trial as you can get. I've written in the past about the perils of data mining in econometrics, and to be honest, all that is lacking in the series of changes to the data and the model that the Freakonomics blog presents is a phalanx of dwarves singing "Hi Ho, Hi Ho, It's Off To Data-Mine We Go". What has happened here is that Levitt and his research assistant have sat down in the knowledge that a perturbation to their model doesn't deliver their result, and decided to have a think about what kinds of alterations to the data ought to be made.

You don't need to suggest any intentional dishonesty to say that it is somewhat unsurprising that the outcome of the brainstorming session on "What sort of changes ought one to make to this data, in an ideal world?" was a dataset and model in which the result that Levitt is famous for was present. Even if Levitt and Ethan Lieber had sat down at a table with no computer on it, starting with a blank sheet to discuss the changes to make and not touching the model until they had finished, I would still guess that it would be the easiest thing in the world for someone who was intimately familiar with the dataset to subconsciously put his thumb on the scales. And I don't think this is what they did; colour me cynical but I would bet quids that lots and lots of iterations of different possible changes to the data were tried. I note once more that there is no accusation of intentionally cooking the books here; medical science certainly doesn't insist on double blind trials to protect them from unscrupulous doctors.

I think that there's a general issue here which is endemic to the territory that Levitt chooses to operate in. By their nature, political debates are debates. One side produces arguments, the other side produces counterarguments and so on, so iteratively. This is an environment which is absolutely poisonous to datasets. By the time you've been through two or three iterations of a "controversy" like this it's more or less impossible to pick a model without failing even the most homeopathically weak version imaginable of a double blind criterion. This is why I now say that we're simply never going to know the truth (by which I mean, even the simple statistical truth about the existence of a comovement, much less the truth about the underlying causal hypothesis) about abortion and crime in the period 1976-2000. Stick a fork in this dataset, it's done.

I think it's bad for economics and statistics as a science to start acquiring the habits of thought that are prevalent in these debates (more, much more, on this in the long awaited Part Three). I also think it's bad for politics to have one side of any debate trying to give their case the imprimateur of objective science in exactly the way that Freakonomics does all the time with its "morality is concerned with what should be the case; economics is concerned with what actually is the case" schtick[3]. When your response to a measured, polite working paper is to nip off to the data mines with your research assistant and write a blog post entitled "Back to the drawing board for our latest critics�and also the Wall Street Journal and (Oops!) the Economist.", then what you're doing isn't "normal science". It's normal politics.


[1] By the way, there is nothing wrong with the English phrases "making you more likely to find things not to be significant than they are" or "making you more likely to find things to be significant when they are not", so can we just give up on trying to remember which is a Type I and which is a Type II error, pretty please?
[2] As I say, my recollection of this stuff is terrible. When you do IV estimation in econometrics you are usually doing so because of a different problem (endogeneity) and I have never in my life taken seriously the possibility of measurement error in the series I was using (professional deformation). What I am saying here is that this bit might be wrong, I am staking about a farthing's worth of credibility on it being right and if you want to correct me go for it in the comments.
[3] By this I mean something quite different from claiming that political debates shouldn't be informed by scientific facts, or that social scientists shouldn't get involved in doing work on important topics that they care about; my defence of the Lancet Report on Iraq would look pretty odd if this was what I believed. It's something close to the Humean point about reason being the slave of the passions; scientists ought to be (when they are acting as scientists that is; they can do what they like when they take part in the debate as citizens) simply bringing their best estimate of the facts of the case before the people who decide what to do about those facts. And scientists shouldn't data-dredge, either, of course.
0 comments this item posted by the management 12/09/2005 09:30:00 AM

Wednesday, December 07, 2005

 
In which, the benighted Davies attempts to explain feminism to women and they thank him for it

A thought that has been on my mind (look, you might as well get used to it. I'm never going to do that fucking Steven Levitt series. I have even thought of another thing that I have to do after this one before I get back to it. Sorry and all that). I was reading a few newspaper articles about Ariel Levy's new book about "Female Chauvinist Pigs" (all about how despite what they say in press releases, the makers of the "Girls Gone Wild" series of videos care less than they say they do about the empowerment of female sexuality). I've been thinking about the question of "sex positive feminism" for a while (here are a couple of my contributions to the "LBO-talk Sex Positive Feminism Wars", as if you give a shit). My thoughts were kind of crystallized by the rather excellent "Bitch Lab" blog, which I will add to my small but exclusive link list some time in the near future.

Anyway, I've sort of changed my mind. If you look at the links above, you'll see that my default position is that I have historically regarded "sex positive feminism" as basically a joke; a bad-faith attempt to bring the cause of women's liberation into the service of supporting planning applications for strip clubs. I still think that there is a lot of this sort of thing out there; enough that any particular piece of "pro-sex, porn-friendly feminist" literature ought not to be given the benefit of the doubt. But on the other hand (and it is always a good idea to change hands once in a while), a historical analogy convinces me that there is probably more to it than that.

I think it was Evelyn Waugh, but it might have been someone else who raised an interesting question about the decline of dueling. In the eighteenth century, if someone challenged you to a duel, it was a deadly serious matter; you might try to get out of fighting the duel, and dueling was certainly illegal, but duels of honour were in general taken very seriously. By the twentieth century, if someone tried to challenge you to a duel, you would laugh it off; some people might still be trying to fight duels of honour (I think that there are some German secret societies that still do) but it was basically a concept that had gone into abeyance.

Waugh's point was that this meant that for much of the nineteenth century, the institution of dueling must have been in a strange sort of limbo; that if someone challenged you to a duel you wouldn't necessarily have been certain what the deal was; whether this was a highly serious thing which had to be met on the field of honour, or whether someone was just being an arse.

I think something similar is going on in human sexuality, in what we might for want of a better term refer to as the "sexual revolution" (there should probably be some capitals there but I find it sufficiently embarrassing to type the phrase in lowercase, thanks). We know that, at some point in the past, there was all sorts of taboos about sexuality, particularly female sexuality and they were taken very, very seriously indeed. We can also reasonably expect that there will be some future state in which there are no such taboos, that terms like "slut" will be regarded as basically meaningless archaisms, and that all forms of interaction between the sexes, including commercial transactions involving sexual intercourse, will be dealt with in a matter-of-fact, adult way between equals. Many people (at least partly including me) might think that in this future state something will have been lost in terms of mystery and romance, but many people no doubt felt the same about dueling and it didn't do much to save dueling. It's as well not to be too sentimental about these things.

So that's my new view. I still think that there are a lot of actually existing sex-positive feminists who are either acting in bad faith, kidding themselves or just showing off for the sake of it, but as a movement it's clearly on the right side of history. And if you don't agree, then you can slap me in the face with a glove and see what happens.
1 comments this item posted by the management 12/07/2005 08:28:00 AM

Monday, December 05, 2005

 
Tomorrow's headlines today

A chance to read a small book token prize! As you might or might not know, the kind of British political commentator who can see nothing good in state schools, has been all over the recent report recommending the teaching of synthetic phonics, and nothing but synthetic phonics in our schools.

I am quite prepared to believe that if the research says so, then synthetic phonics is quite likely the best way of teaching children who cannot read to read[1]. However, lots of children can read by the time they rock up at primary school at the age of 5. I could and I'm not unusual. (By the way; I learned how to read from the Janet and John books, which I suspect were not based on synthetic phonics[2]).

Now there are an awful lot of very stupid people in primary education, and they do stupid things. In particular, I would bet decent money that at least one or two infants teachers in the UK, once this synthetic phonics program has been rolled out nationwide, who will be daft enough to insist that the kids who can already read to a perfectly decent standard[3], have to sit along with the rest of the class and learn phonics. Furthermore, since there is a sizeable minority of primary school teachers who are bloody-minded and nasty as well as being stupid (email me for a list of names), I would bet decent money that there will be a fair few who are prepared to actually confiscate Janet & John books and forbid their owners from reading them, in order to make them concentrate on their synthetic phonics.

Therefore, the book token prize goes to the first reader who spots a story in the Telegraph castigating the political correctness gone mad of the trendy lefty teachers who are obsessed with forcing socialist modern synthetic phonics down kids throats when every fule kno that the best way to teach kids to read is with the good old fashioned Janet and John books. I doubt you will have to wait more than a year or two to claim the prize.

[1] or at least, to teach children who cannot read, to identify lists of words, which is not actually the same thing as "reading" and I have seen enough of the business school literature on perverse metrics to suspect that the difference might be important.
[2]good luck teaching your kid to read the phrase "synthetic phonics", by the way, whatever method you use
[3] by the way there is no evidence at all that they gain any long term educational advantage from doing so
0 comments this item posted by the management 12/05/2005 08:09:00 AM

Friday, December 02, 2005

 
Not part of the proper Freakonomics series

But, casting my eye over the Freakonomics blog, I see Levitt's defence of his abortions 'n' crime piece. I have to say that there is quite a lot in it that looks very weaselly indeed. In particular this para which is Levitt's main response to date:

3) Only when you make other changes to the specification that Foote and Goetz think are appropriate, do the results weaken further and in some cases disappear. The part of the paper that Foote and Goetz focus on is one that is incredibly demanding of the data. For those of you who are technically minded, our results survive if you include state*age interactions, year*age interactions, and state*year interactions. (We can include all these interactions because we have arrest data by state and single year of age.) Given how imperfect the abortion data are, I think most economists would be shocked that our results stand up to removing all of this variation, not that when you go even further in terms of demands on the data things get very weak.

Foote and Goetz's main point in their paper is that Levitt & Donohue's abortions 'n' crime study did not use per capita arrest data, and thus that the abortion-influenced cohorts had a lower number of arrests simply because they were smaller. This is not a technical criticism, it doesn't have anything to do with interaction effects and it's not "demanding on the data" (it's demanding of good data on state-level population, which is a problem, but that's a different issue)

I have to say that the actual substance of Foote and Goetz's criticism is not at all well summarised by that paragraph. I always get a sinking feeling when I see someone trying to concentrate attention on tangential points.
1 comments this item posted by the management 12/02/2005 09:06:00 AM

Wednesday, November 30, 2005

 
The long awaited Freakonomics post

This is the first in a series of posts with which I hope to present a critical assessment of "Freakonomics", a book which I have now read (I didn't take part in the original Crooked Timber seminar due to lack of time)[1] and which I humbly assess to be a really bad book. It's reasonably topical apparently because there is a bit of a kerfuffle about his work on abortion and crime, but I won't be addressing that here. In this first post (and readers beware; I have a lot of previous form when it comes to starting these series and never completing them), I'm mainly taking a look at the chapter entitled "Why Do Drug Dealers Still Live With Their Moms?", which largely summarises Levitt's work with Sudhir Venkatesh on a crack-dealing gang in Chicago. I'll note at this stage that I have not read the underlying research papers on which Freakonomics is based; normally I would regard this as necessary, but in this case I don't think I should have to bother. I'm not, for the most part, reviewing his academic work or trying to establish the truth or falsity of the claims he makes; I'm trying to establish a particular point about the book Freakonomics, which is that it's not a good book. Levitt and Dubner placed this thing into the public sphere, they were not shy with their activity in publicizing it and they have not, at any point which I'm aware of, tried to make it clear that the book cannot possibly stand alone or that its conclusions are tentative and subject to very many or important caveats discussed elsewhere in the literature. So as far as I'm concerned, the book is an entity in and of itself, and can be discussed, debated and reviewed as such, just as if it were written by Thomas Friedman, James Surowiecki or any of the other occupants of the neighbouring bookshelves to the ones from which Freakonomics is sold. So with those caveats out of the way, I'll begin with a few motivating remarks about why I don't think much to the methodology of this book (a subject to which I'll return in part 3), followed by a close look at one of its chapters to try and convince you guys that these shortcomings lead to real and practical problems. So here goes:




Chapter One: Introduction and Crack Gangs

Malcolm Gladwell is a seriously clever bastard.

I mean, one of the indications of Noel Coward's genius is that he came up with a way of being honest about a friend's play to their face when you didn't like it (he'd say "darling, good was notthe word!" or "well, you did it again!"). But Gladwell has taken it to a new level he's managed to pull the same trick, but so subtly that the authors of Freakonomics have actually put it on the back cover blurb of their book. Gladwell is quoted as saying:

"Steve Levitt has the most interesting mind in America, and reading Freakonomics is like going for a leisurely walk with him on a sunny summer day as he waves his fingers in the air and turns everything you once thought to be true inside out. Prepare to be dazzled"

And Gladwell is right; the waving of the fingers in the air is indeed the main argumentative and rhetorical technique by which this book attempts to establish its conclusions.

There are a number of things I don't like about Levitt's approach, but the biggest problem I have with him is his[2] habit of saying (in various forms of words) "whichever way you look at the numbers, XYZ" when he means "whichever way I look at the numbers, XYZ". On a lot of these subjects (by far the most obvious example is abortion/crime, but it is an issue in all of them to a greater or lesser degree), Levitt is looking at quite large, clearly multicausal issues where any model is likely to be partial and all manner of conflicting theories can claim support from the data. "Freakonomics" absolutely does not recognize this fundamental truth of econometrics; it might be because the authors don't have the statistical chops to understand it but I think it is much more likely that they are just trying to copy the monolithic tone of voice adopted by social reformers and similar blowhards who hand out their assertions with no data at all. In all honesty, I think that theL&D approach is a retrograde step; it's easy for the untrained reader to spot when someone has no empirical support at all for his position, but much more difficult to deal with someone who systematically overstates the empirical support that he does have. This is at least 90% of what makes John Lott so pernicious, and it seems to me that L&D are involved at least partly in the same sort of game.

It's the game of pretending that difficult social questions have easy non-sociological answers. There are lots of people in this space, and not all of it is by any means bad. Any look at a difficult question is going to be either hopelessly oversimplified or hopelessly unreadable, and I would certainly prefer it if people erred in the first direction. There's also a decent Hayekian (or indeed Bayesian) point to be made here that if you're entering into the marketplace of ideas to try and extract the truth from a number of differing viewpoints, then you want everyone to give you their idea, not to caveat it all about with bits and pieces of other people's ideas. That's why I'm prepared to give a (limited) free pass to Malcolm Gladwell or James Surowiecki when they write books like this which, in my view, present absurdly oversimplified views of the world, because I understand what they're trying to do; to present their view on a question, not to give the final indisputable answer.

The problem comes in when someone attempts to present their view of a question as if it is the final indisputable answer. A lot of the things in Freakonomics are things that I wouldn't make too much of a fuss about if the authors were just advancing them as their view of one way of explaining the facts. But they don't do that; at key points in the book, they keep claiming that they're reporting the facts when they're clearly (to me at least) reporting a particular spin on the facts. This is the pop-science approach to social questions, because it's trying to combine the authority of a scientific investigation with the unequivocal certainty of a theoretical pronouncement. What Levitt and Dubner are doing is exactly the same thing that Thomas Friedman does; telling a bunch of stories and then explaining how these stories fit into their view of the world. However, in the case of Friedman it's always obvious that someone else could tell entirely different stories about the same kinds of people and events and fit them into an entirely different worldview. Because of the way that Freakonomics has pitched itself at the pop-science crowd (constantly banging on about Levitt's John Bates Clark medal and referring to all the statistical analyses; for fans of cringeworthy exegesis, page 161 of the American edition contains what I strongly believe to be the worst description of the linear regression model ever committed to print), however, they are always either implying or outright saying that their stories are the only ones consistent with the facts, so we can either fit their stylized facts into our own worldview or (preferably) drop ours and buy theirs. As you can tell, I don't like this.

The pop-science approach to economics is dangerous and irritating in itself (Krugman's "Pop Internationalism" refers). But when combined with the panache of a seasoned magazine journalist, it becomes downright sloppy. What actually set me off on this trail � the initial clue that there was something very wrong about Freakonomics was a throwaway remark, presumably inserted by Dubner and certainly unsupported by any of Levitt's work, to the effect that "the typical prostitute earns more than the typical architect". This remark is asinine. What on earth are they talking about? There is probably a reasonable working definition of a "typical architect" (though I can think of about five different types of architect off the top of my head), but what is a "typical prostitute"? Do they mean per hour or on an average annual earnings basis? Is there any data to back this up (the only study I could find put average earnings for street prostitutes in Los Angeles, who are about as "typical" as any other prostitutes at $23485 in 1991, which seems low for an architect)? Fair enough, this is really just a throwaway remark aimed at illustrating a point about labour market theory, but surely the whole freakonomicsing selling point of this book was meant to be that the authors didn't make lazy assumptions and throwaway remarks but checked things against the data. I'm sorry, but if a bloke says "of course, prostitutes make a mint, they do, they earn much more than you or I", then in my estimation it is going to count very much against his subsequent claim to never take things on trust or to tirelessly question conventional wisdom. And once you start looking at Freakonomics with a critical eye and the view that some of the facts in it might not have been checked all that well, you find a lot of other things start shimmering and vibrating with the temper of a fact at bay.

The factoid about swimming pools and guns on page 150, for example, is really troubling to me. As presented in the book, the argument is obviously wrong. Levitt divides the number of child deaths caused by guns by the number of guns, then divides the number of child deaths caused by swimming pools by the number of swimming pools, compares the two numbers and says "if you have a gun in your house and a swimming pool, the pool is more likely to kill your child than the gun". Which might or might not be true, but this calculation can't possibly be the right way to prove it. Riddle me this; what proportion of the guns in the USA are held in households with no children in them? What proportion of the swimming pools in the US are owned by households with no children in them? Is there perhaps a pretty good reason to believe that households which differ in their gun ownership and swimming-pool ownership will also differ in other potentially relevant ways? Is there a good reason to believe that the fact that a house has a child in it will be informative about the relative likelihood of gun ownership and pool ownership? Now, Levitt might, for all I know, have actually done the more rigorous analytic work which would support his claim here. But if he did, I bet he did it in a proper journal where he stated the claim with the proper caveats and was totally clear about the degree of confidence that could be placed in it. But that's not what he does in "Freakonomics". He just a) puts the factoid straight in front of the reader with no qualifications at all and b) backs it up with a calculation that is clearly flat out wrong. He's simultaneously teaching the lay reader to make definitive statements without acknowledging estimation problems, and to ignore correlations between explanatory variables. How on earth can this not be worsening the overall level of debate?

So we've got two central problems here; first, the admixture of empirical evidence and extrapolated conclusions, and second the curious mixture of carefully checked scientific work and completely unrigorous off the cuff assertions. We can find both of these problems hard at work in the chapter of the book where it is discussed what insights neoclassical economics can bring to understanding criminal gangs. From now on in, I'm going to assume that you have read the relevant chapter of Freakonomics; to be honest if you haven't you can probably work out what I'm talking about and it will help you to later pretend to have read the book at dinner parties[3].

The first thing I have to note in expounding an alternative theory of the criminal firm is that there is only a loose requirement on me to be consistent with the contents of the spiral notebooks which contained the "accounts" of the gang and which form the centerpiece of the chapter. With due respect to the risks Venkatesh took in the name of science in getting them, I think that by treating these notebooks as "data" on a par with the output of the BLS, Levitt is behaving in an extremely na�ve fashion. In particular, one of the things that (presumably) Dubner's attempts to make the overall narrative swing along doesn't fully conceal is that in Chapter 1 of the book, Levitt and Dubner are telling us that high school teachers cheat and misreport numbers all the time because there is an incentive for them to do so. However, when it comes to looking at the unaudited self-reported incomes of street crack dealers to a nominal boss who exercises next to no direct supervision over them, this cynicism is gone and we are meant to assume that what the numbers say is what happened. I simply don't buy this. Because of police busts if nothing else (and the street dealer's policy of swallowing the drugs he has on him if he even suspects a bust, after which operation the crack is no longer resaleable), the shrinkage in crack dealing must be at least as bad as in other forms of retailing. The opportunity for the street dealer to under-report sales, over-report losses and skim profits is very obvious and in the absence of either audit or supervision I would expect that this would happen all the time. If JT were to attempt to have an IPO of the Disciples, I would certainly not buy shares in it on the basis of the spiral notebooks[4].

They do present some anecdotal evidence that the gangsters were not well paid that doesn't depend on the notebooks, but it's if anything even weaker. The simple fact that someone lives with his mother is not actually knockdown proof that he is strapped for cash; something like thirty per cent of young Italian men do it for the simple reason that it's better than cooking and cleaning for yourself. I also think it's quite na�ve to assume that when the gang members (who were, we shall remember, full-time drug dealers) asked Venkatesh to try and get them a janitorial job at the university, this showed that anything, even cleaning toilets on minimum wage, was a better life than the Gangster Disciples. I am hardly the most streetwise guy around, but even I can work out a couple of other possible reasons why a full time drug dealer might want a job which allowed him to wander round a university campus more or less at will. Students buy drugs[5].

Furthermore, even if we take the numbers in the notebooks as reliable, we are faced with the observable fact that crack dealers (even street soldiers) have expensive tastes and hobbies. Even leaving aside the question of trainers and jewellery (on which I have no hard data about ownership to argue against Levitt), it is an undeniable fact that even the most junior members of the Gangster Disciples were able to engage in the hobby of pistol shooting, a popular but expensive middle-class pastime which I would consider to normally be beyond the means of a burger-flipper at McDonalds. The non-salary compensation of JT's street dealers might be really quite high; access to guns, free admission to nightclubs, favourable deals on stolen goods and clothing, regular social events with local rappers, it all adds up and compares really quite well to the fast food trade, and as far as I can see the informal healthcare plan was also quite generous compared to most mainstream employers in that it covered family members and had substantial death-in-service benefits which would have been worth quite a lot in a neighbourhood that was not exactly Hampstead even for non-gang members. I find the seeming absence of any analysis of the non-salary component of compensation quite strange, particularly since the underlying work was done working with a sociologist who would at least have some analytical framework which one might use to measure the value of the benefit to the gang member of being in a gang and thus having some degree of status in a community where status mattered.

Once more, I'm not saying here that my own interpretation of the evidence is the right one, just that Levitt and Dubner are in the business of telling stories here (as opposed to adding up numbers), that other stories can be told, and that in my opinion the authors of Freakonomics try much too hard to give the impression that they are reporting facts when they are actually just telling stories. So anyway, on to the two central claims of the Freakonomics crack gang chapter. These are 1) that a criminal gang is reasonably similar to a capitalist business and 2) that a criminal gang is usefully modeled as a "tournament" reward structure where people are prepared to accept a very low initial reward and/or very unsatisfactory conditions because there is a small chance of rising to a level where there is a very high reward.

I'll deal with the second claim first; Levitt & Dubner describe the economics of a tournament as I have described above. It is about at this point that they make the silly claim about prostitutes and architects, and then go on to say that "cheerleaders from Nebraska" are prepared to move to Hollywood and accept low wages as waitresses (unless, I suppose, they choose to become prostitutes, given that this is apparently Adam Smith rewritten as Letters to Penthouse) because they dream of getting a big break as movie starlets.

Fair enough, but this implies a whole host of rather shaky looking empirically testable propositions. In general, do organized crime gangs recruit youngsters by promising them that if they knuckle down and perform well, they might end up being the top man? In existing organized crime gangs, is the whole thing set up so as to reward young chaps who want to rise to the very top and take over (was The Godfather completely deceitful on this point?) Subjectively as reported, do street-level crack dealers aspire to being gang bosses themselves? There is no evidence in the book at all from the gangsters themselves that they do (as opposed to Levitt and Dubner attributing this motivation to them in circumstances where other motivations are entirely possible).

There are a few organizational predictions that would normally drop out of this theoretical framework too, none of which look all that attractive. In most companies which operate "tournament" reward structures (paradigmatically, law firms structured as partnerships), there is a clear culture of "up or out". Employees are encouraged to leave if they are not making progress up the hierarchy. This doesn't seem particularly like the culture of a criminal gang at all; gangs don't like people leaving them. In fact, if you read between the lines of the description of the gang in Freakonomics, it seems pretty clear that JT spent a lot of time and effort on keeping his street-level soldiers contented with their lot. There's really no sense in there that the Gangster Disciples were all aware that life as a low-level gangster was meant to be rough and that it wouldn't be worth living unless they could get to the top. Quite the opposite, in fact.

In any case, there's a more fundamental oddity in the reward structure that Levitt & Dubner describe, and that's that according to Freakonomics, the street dealers of the Black Disciples were paid a wage by their leader (which went up or down depending on how dangerous the streets were), and didn't make any material part of their income from sales commissionThis is an extremely weird way to structure the remuneration of a sales force (actually, if I had my own Freakonomics hat on, I would almost say that it's so weird that it calls into question the credibility of all of the other claims made about the economic organization of the crack gang). It might be that Levitt & Dubner are speaking loosely and when they say "wages" they mean "total compensation including sales-related commission", but if they are, it's unforgivably sloppy; if there's one distinction that an economist ought to be persnickety about, this is it, so I think they aren't. If it really is true that the Disciples paid their gang members purely on the basis of hard work and/or bravery rather than revenue productivity, then this means that the "tournament" if tournament it is, is a pretty strange one. It's made clear at numerous points during the chapter that sales performance is almost irrelevant to this "tournament"; not only is there no commission, but promotion to the upper ranks is dependent on intangibles like "personality" and "leadership", coupled with actively counterproductive behaviour like starting turf wars and killing customers. Even Tyco didn't have an executive incentive scheme this warped.

But given that the organization doesn't reward behaviours which contributed to the economic success of the business, what's to make anyone think that the individuals in the organization valued economic success above anything else? If the Black Gangster Disciple Nation was prepared to reward and promote people who systematically undermined its main business activity by starting turf wars and killing for honour, then might this not be taken as good evidence that the Black Gangster Disciples cared more about turf and honour than they did about money? And if that's the case, then why do we assume that people joined the gang with the main objective of enjoying the lifestyle of its top members?

I am now shading into my critique of the other main assertion of the chapter on the Disciples, however; the claim that there is any meaningful analogy between a criminal gang and the neoclassical theory of the firm. I think that there isn't, but this argument merits a separate post (coming soon), in which I will attempt to see if other economic traditions can do any better and develop "The Heterodox Economic Theory Of The Criminal Firm". So long for now.


[1] Just to make it clear, the reason that I'm posting this here is that the quality of content on D2D has been right down the toilet recently, rather than anything more sinister with respect to Crooked Timber.

[2] (possibly Dubner's, but it is a figure of speech that I think sounds more like an economist than a journalist). In general I'm going to say "Levitt" as if he was the only author of the book; I will explain why I am following this policy in a future post.

[3] I of course mean by "you can pretend to have read the book at dinner parties" that when you are at parties you can pretend to have read the book, not that you can pretend to be the kind of person who goes to a party and sits in the corner reading Freakonomics.

[4]Actually, the fact that they are specifically referred to as "spiral notebooks" is not just a minor detail of stationary which gives descriptive colour to the story, and if Venkatesh had gone to the business school rather than the economics department to find a co-author someone might have tipped him off. If you get a job doing audit work at Deloittes, try going round writing things on a spiral pad and see how long it takes for someone to give you a bollocking. Spiral pads are not acceptable stationary for scientific lab-books or for auditing, precisely because it is easy to rip pages out of them. I don't have any evidence that this happened with respect to the notebooks in question, but it's the sort of thing that needs to be taken into consideration.

[5] As well as the fact that students buy drugs, there are other good reasons why drug dealers would want to have minimum wage jobs other than to supplement their meager incomes. The police are in general much more difficult to deal with if they believe that you are a "career criminal", so it makes sense to have at least a token stab at gainful employment; obviously you would out of preference want something with little or no supervision and hours that did not conflict with your criminal business. In his autobiography, the British celebrity villain "Dodgy Dave" Courtney mentions having been given this advice in the 1960s and getting a job as a binman as a result, and I suspect that gangsters in Chicago would have worked it out too.
1 comments this item posted by the management 11/30/2005 08:16:00 AM


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