...at least for a grad student.
Why? Any time I move, I have to pay to transport them. Shipping fees aren't cheap, plus packing and carrying books is a lot of work. Given that I will definitely be leaving Fairfax after graduating (cost of living is too high to stay permanently) and will likely end up moving several times after that before settling down, that's a lot of money and effort that might go into lugging paper around with me.
At first, I was hesitant about e-books. The feel of a good book in the hands is hard to replace. But, a Kindle (or other e-reader) with a cheap cover is a decent imitation, and a lot more convenient. The only real downside is inability to re-sell the book when I'm done reading.
Basically, it's time to go digital.
My new policy is to only buy paper books when (a) there's a chance I might be able to sell it later for a decent amount of cash, as is the case with a textbook or (b) the paper copy is much, much cheaper than the electronic version.
It'll be a few years before I'm moving again, but there's no time like the present to start downsizing (just don't take me out of context on that line). Right now I have around a hundred books and several years worth of National Geographic magazine. It's a paltry collection compared to some of my professors, but still more than the average person needs.
The punchline: if you want any of my books, I'll sell them cheap. Check out My Bookcase and make an offer. Even if it's low, I won't be insulted - cover the cost of shipping plus a little bit more and I'm satisfied. If you're already settled in and won't be moving soon, or don't find hauling paper to be as much of a hassle as me, then an exchange can make us both happy!
Friday, January 13, 2012
Thursday, January 12, 2012
Liberal Arts Degrees as Social Signaling
The model of education as signaling for the labor marketing has been thoroughly developed by Bryan Caplan; for some examples, see here, here, and here. I think the argument is pretty convincing, but it leaves a few details unexplained. Namely, some majors - especially liberal arts - are not even very good as signals!
The highest unemployment rates for college graduates are found among architecture, art, and humanities majors. Especially given the relatively low salaries for jobs in these "industries" why go into serious debt to get a degree, when the signal is likely to be weak or even totally ineffective? While the number of liberal arts colleges has been declining over the last 20 years and business is the most popular major for under-graduates (chosen by 20% of students) the liberal arts curriculum is far from disappearing.
It could be that these students are maximizing with regard to something other than wealth, such as social status. This may accrue to either the college student or that student's parents, who get to brag about how their son/daughter will be a progressive hero and "save the world one day." Parents have incomplete control over what major their child picks, but at least some power to encourage or discourage certain fields of study.
Thinking of education as a status symbol helps to explain variation in choice of majors across countries. In the United States, the poor and middle-class can get luxury items like fancy cars, jewelry, nice TVs, smartphones etc. by using credit (Robert Kiyosaki's "Rich Dad Poor Dad" observes that this is a big reason why they do not ascend to the capitalist upper-class). Seeing someone with nice jewelry or the latest tech is no longer a good indicator of high status in America; in fact, it is often a signal of the opposite! A liberal arts degree then becomes a new status symbol, a way of displaying "yes I can spend four years doing nothing productive, and rack up debts while doing it, because money isn't important to me."
In China, by comparison, most of the affluent or middle-class people have attained that status within the last one or two generations. The rich in China display their wealth through luxury items, but parents still often discourage or frown upon liberal arts degrees (or so I'm told by someone with personal experience). Based on the social signaling theory sketched out above, one would expect that as the middle-class in China grows and expensive items are no longer limited to the nouveau riche, more will go get liberal arts degrees, instead of the focus on STEM (science, technology, engineering, and math) which is the stereotypical image of Chinese students currently.
If this model is accurate, it just further reinforces Dr. Caplan's point that we should not be subsidizing higher education as much as we are now.
The highest unemployment rates for college graduates are found among architecture, art, and humanities majors. Especially given the relatively low salaries for jobs in these "industries" why go into serious debt to get a degree, when the signal is likely to be weak or even totally ineffective? While the number of liberal arts colleges has been declining over the last 20 years and business is the most popular major for under-graduates (chosen by 20% of students) the liberal arts curriculum is far from disappearing.
It could be that these students are maximizing with regard to something other than wealth, such as social status. This may accrue to either the college student or that student's parents, who get to brag about how their son/daughter will be a progressive hero and "save the world one day." Parents have incomplete control over what major their child picks, but at least some power to encourage or discourage certain fields of study.
Thinking of education as a status symbol helps to explain variation in choice of majors across countries. In the United States, the poor and middle-class can get luxury items like fancy cars, jewelry, nice TVs, smartphones etc. by using credit (Robert Kiyosaki's "Rich Dad Poor Dad" observes that this is a big reason why they do not ascend to the capitalist upper-class). Seeing someone with nice jewelry or the latest tech is no longer a good indicator of high status in America; in fact, it is often a signal of the opposite! A liberal arts degree then becomes a new status symbol, a way of displaying "yes I can spend four years doing nothing productive, and rack up debts while doing it, because money isn't important to me."
In China, by comparison, most of the affluent or middle-class people have attained that status within the last one or two generations. The rich in China display their wealth through luxury items, but parents still often discourage or frown upon liberal arts degrees (or so I'm told by someone with personal experience). Based on the social signaling theory sketched out above, one would expect that as the middle-class in China grows and expensive items are no longer limited to the nouveau riche, more will go get liberal arts degrees, instead of the focus on STEM (science, technology, engineering, and math) which is the stereotypical image of Chinese students currently.
If this model is accurate, it just further reinforces Dr. Caplan's point that we should not be subsidizing higher education as much as we are now.
Wednesday, January 11, 2012
Female Infanticide Isn't a Women's Issue. It's a Human Issue.
A news article today, Female Heads of State Discuss How 'Climate Change'--But Not Sex-Selective Abortions--Hurt Women, highlights how female leaders are declining to discuss the issue of female infanticide in a current summit. When asked for a comment on the issue by CNS News, they were told
Putting aside the ethical issues surrounding abortion (I don't plan to open that can of worms) an undeniable effect is that the fetus never experiences life outside the womb. The "victims" of female infanticide never see the male-dominated world which they would be born into, so they really can't be said to suffer as a result of it. The group who really loses out are young men, many of whom by sheer arithmetic certainty will never be able to marry or start a family of their own.
In fact, sex-selective abortion may even increase the bargaining power available to women living now or born in the future. When single women become a scarce commodity, their bargaining position relative to men improves. Women can demand better conditions and treatment under marriage, because if the wife leaves her (ex-)husband will have less chance at remarriage. Paradoxically, the female infanticide which occurs under a male-dominated system may actually become that system's undoing!
Some would say that sex-selective abortion causes an increase in prostitution, which may be true. However, one would still expect prostitutes to benefit from increased bargaining power as well, when demand for their services increases. While this is probably less desirable than a world in which no women turn to the sex trade, it is also probably better than sex workers living in desperate poverty.
If CNS News had worked through the economic implications of female infanticide more thoroughly, they might have been less outraged by its omission in favor of discussing climate change. Sex-selective abortion has many negative social effects, but from a purely selfish standpoint it should really be the men who are most concerned about it - not women.
“I think the council is unlikely to take that kind of a stand,” Mary Robinson, former president of Ireland and president of the Mary Robinson Foundation – Climate Justice, responded.” It’s not that kind of a body.”Some feminists are probably outraged by this omission, but I am actually sympathetic to Mrs. Robinson's view here. While sex-selective abortion is targeted at young girls in China and India, it may be the men of those societies who are losing the most, not the women.
‘Women who have joined the council because they qualify as a former president, prime minister, or the ministerial level that Margot (Wallstrom, special representative to the United Nations Secretary General on sexual violence) chairs to empower, to support, to make visible and to listen to the voices of women.”
“And so that issue [abortion of female babies] would be more appropriate to some other kind of activist group,” Robinson said.
Robinson also said “the nearest I can come to it” is her work to combat child marriage, including the fact that “religion and tradition are often distorted to subjugate women.”
According to an Oct. 4, 2011 report by CQ Global Researcher, an estimated 160 million female babies have been killed by abortion or were killed or left to die after they were born in India, China and other Asian countries in the past 30 years.
Putting aside the ethical issues surrounding abortion (I don't plan to open that can of worms) an undeniable effect is that the fetus never experiences life outside the womb. The "victims" of female infanticide never see the male-dominated world which they would be born into, so they really can't be said to suffer as a result of it. The group who really loses out are young men, many of whom by sheer arithmetic certainty will never be able to marry or start a family of their own.
In fact, sex-selective abortion may even increase the bargaining power available to women living now or born in the future. When single women become a scarce commodity, their bargaining position relative to men improves. Women can demand better conditions and treatment under marriage, because if the wife leaves her (ex-)husband will have less chance at remarriage. Paradoxically, the female infanticide which occurs under a male-dominated system may actually become that system's undoing!
Some would say that sex-selective abortion causes an increase in prostitution, which may be true. However, one would still expect prostitutes to benefit from increased bargaining power as well, when demand for their services increases. While this is probably less desirable than a world in which no women turn to the sex trade, it is also probably better than sex workers living in desperate poverty.
If CNS News had worked through the economic implications of female infanticide more thoroughly, they might have been less outraged by its omission in favor of discussing climate change. Sex-selective abortion has many negative social effects, but from a purely selfish standpoint it should really be the men who are most concerned about it - not women.
Tuesday, January 3, 2012
Do higher tax rates spur more charity? I doubt it.
A few days ago I was talking with my mother about the state of the economy, income inequality, and social obligations... Typical evening conversation on any New Years, I'm sure. From life experience and observations on a (privileged) extended family, her opinion was that more charity occurred when tax rates were higher. I disagreed, and offered to present a mathematical demonstration on why that was the case. After that effort, I wanted to show the Internets the fruits of my labor.
Charitable giving is a very personal decision and the tax law surrounding it is complicated and arcane, so I start with some simplifying assumptions to make the problem more approachable. These are:
Now imagine a tax rate of 0% (and if you're a libertarian, try not to faint with excitement). An individual earns $100,000 and keeps all of it, earns $10,000 in interest before the second period, makes another $100,000 then dies and gives all of it away. Total charity given is $210,000.
One could argue that this result emerges just from the assumptions made, which is partially true. However, as long as individuals can earn a higher return on investment than the government (which is not a controversial claim) and all money is transferred upon death (a de facto necessity) then the result, qualitatively, will still be the same. If you make the example more realistic, and envision a person making money then saving and investing it for more than just two years, the difference between the two tax rates becomes even more apparent.
Charitable giving is a very personal decision and the tax law surrounding it is complicated and arcane, so I start with some simplifying assumptions to make the problem more approachable. These are:
- Money given to charity is 100% tax-deductible.
- Each person lives for two periods, then dies, and their entire stock of wealth is donated after death.
- An individual's money earns 10% interest.
- To make the problem concrete, I'll imagine a person earning $100,000 in each period, and two different tax regimes: one with a 0% tax rate, and another with 50%.
Now imagine a tax rate of 0% (and if you're a libertarian, try not to faint with excitement). An individual earns $100,000 and keeps all of it, earns $10,000 in interest before the second period, makes another $100,000 then dies and gives all of it away. Total charity given is $210,000.
One could argue that this result emerges just from the assumptions made, which is partially true. However, as long as individuals can earn a higher return on investment than the government (which is not a controversial claim) and all money is transferred upon death (a de facto necessity) then the result, qualitatively, will still be the same. If you make the example more realistic, and envision a person making money then saving and investing it for more than just two years, the difference between the two tax rates becomes even more apparent.
Of course, someone might say there are
distributional issues this exercise neglects. Maybe needy recipients of charity
are more sympathetic than the undeserving heirs of some wealthy person. Aside
from that, the general point still stands: when government takes money through
taxes, the overall social "pie" becomes smaller. When individuals can
invest it, they put money into productive activities which can generate more
wealth, making the "pie" bigger. Even if higher tax rates drive some
people to give more money to charity than they otherwise would, society in the
aggregate is better off if that money can be productively invested by
individuals instead. Charity is then a pleasant side-benefit of greater social
wealth.
Sunday, January 1, 2012
I Have No New Years Resolutions.
The New Year is a nice time, symbolically, to make a big change in life but practically it almost never works out that way. From a Boston Globe article, I learned that 80% of New Years resolutions are broken. Frankly, I'm surprised that as many as 20% are accomplished! People don't change much on the eve of December 31 to the morning of January 1 (perhaps except for the addition of a hangover) so I suspect much of the 20% accomplished are trivial ("remember to call my mom on her birthday this year") and require single actions, not sustained effort.
Resolutions are puzzling from both an economic and psychological perspective. To an economist, there's no reason why one day should be intrinsically more favorable than another to make a positive life change. If drinking less or exercising more would be a good idea, why wait until January 1st to start doing it? On the other hand, a psychologist might wonder why people set themselves up for failure so often. If 80% of resolutions ultimately amount to lying to yourself, why persist in encouraging such a mentally unhealthy activity?
The real question: if most resolutions would be good things to accomplish, why are people so bad at keeping them? It's easy to just dismiss New Years resolutions as "cheap talk" which people utter in order to sound socially acceptable and make themselves feel better, with no intent of actually following through. But, I think there's a little bit more to it than that.
In their book, Willpower: Rediscovering the Greatest Human Strength, Roy Baumeister and John Tierney offer a pretty good explanation for why New Years resolutions have such a short shelf-life. When someone creates a list of challenging self-improvement tasks, they are probably very optimistic about their future state of mind. But, realistically, we only have so much willpower to divide between different goals that require self-control. Willpower, in this regard, is somewhat like a muscle: when it is used lots in a short span of time it becomes fatigued, so later acts of self-control are more difficult. Creating a list of resolutions is like weight-lifting beyond the mind's capacity; it can't dedicate enough mental power to accomplish all the goals at once, so in the end none of them are met. As a result, creating a big list of dramatic changes is one of the least effective ways to actually modify your own behavior.
A better strategy is to choose one area that seems most important and focus on moderate improvements. Also like a muscle, willpower can become stronger when exercised. Picking reasonable goals gives a sense of accomplishment when they are completed, making it easier to stick with other changes in the future. In other words, build up capacity slowly to avoid a painful sprain of the willpower muscle (although if I stretch this analogy much further, I might suffer a tear in my credibility). Introducing the concept of willpower to economic thinking means we don't have to dismiss failed self-improvement projects as mere cheap talk, and can instead look more realistically at the human mind and its practical limitations.
Resolutions are puzzling from both an economic and psychological perspective. To an economist, there's no reason why one day should be intrinsically more favorable than another to make a positive life change. If drinking less or exercising more would be a good idea, why wait until January 1st to start doing it? On the other hand, a psychologist might wonder why people set themselves up for failure so often. If 80% of resolutions ultimately amount to lying to yourself, why persist in encouraging such a mentally unhealthy activity?
The real question: if most resolutions would be good things to accomplish, why are people so bad at keeping them? It's easy to just dismiss New Years resolutions as "cheap talk" which people utter in order to sound socially acceptable and make themselves feel better, with no intent of actually following through. But, I think there's a little bit more to it than that.
In their book, Willpower: Rediscovering the Greatest Human Strength, Roy Baumeister and John Tierney offer a pretty good explanation for why New Years resolutions have such a short shelf-life. When someone creates a list of challenging self-improvement tasks, they are probably very optimistic about their future state of mind. But, realistically, we only have so much willpower to divide between different goals that require self-control. Willpower, in this regard, is somewhat like a muscle: when it is used lots in a short span of time it becomes fatigued, so later acts of self-control are more difficult. Creating a list of resolutions is like weight-lifting beyond the mind's capacity; it can't dedicate enough mental power to accomplish all the goals at once, so in the end none of them are met. As a result, creating a big list of dramatic changes is one of the least effective ways to actually modify your own behavior.
A better strategy is to choose one area that seems most important and focus on moderate improvements. Also like a muscle, willpower can become stronger when exercised. Picking reasonable goals gives a sense of accomplishment when they are completed, making it easier to stick with other changes in the future. In other words, build up capacity slowly to avoid a painful sprain of the willpower muscle (although if I stretch this analogy much further, I might suffer a tear in my credibility). Introducing the concept of willpower to economic thinking means we don't have to dismiss failed self-improvement projects as mere cheap talk, and can instead look more realistically at the human mind and its practical limitations.
Saturday, December 31, 2011
Ultimate Cakeoff, Econometrics, and Causality Questions
For reality television and competitive cooking enthusiasts the show Ultimate Cakeoff, produced by TLC, is a real tour de force. The premise: top cake artists and decorators are brought together to compete in creating a cake for some high-profile event. The judges evaluate their efforts based on technical difficulty, adherence to the theme, and aesthetic value, then choose a winning team to receive the $10,000 prize.
Each team has nine hours to produce their ultimate cake. In order to keep the competition interesting and generate some much-needed drama, each episode is broken up by one or two smaller challenges designed to test the team leader's technical skill and speed at a particular cake-related task (such as piping, decorating, carving, etc.) The winner of each mini-challenge can choose one of the other two teams to sit out for thirty minutes.
Nine hours is already a short timeframe to create an award-winning cake - many wedding cakes can take up to a week to construct - so it would seem like losing 30 minutes to an hour would be a serious disadvantage. But, after watching two seasons of Ultimate Cakeoff (a dirty job, but someone had to do it) I noticed something strange: teams forced to sit out didn't seem to lose with any greater frequency. In fact, they often went on to win the competition!
This counter-intuitive trend sparked my curiosity, so I decided to put the question to a statistics program. After collecting data on every episode to find the characteristics of each team, who was forced to sit out, and who won each competition, I was able to find some results. The first regression found that being forced to sit out due to a challenge would increase the chance of winning by about 24%, a statistically significant result. After controlling for the individual attributes of of each participant the statistical significance vanished, and being forced to sit out had no measurable impact on the chance of winning at all (Click here to view the regressions performed, in STATA output format).
What might explain these findings? It would seem that less working time would result in a lower-quality cake, that was less likely to take the prize. Discovering the opposite result is somewhat surprising.
Of course, cake artists forced to sit out were not chosen randomly. The most common reason when choosing who to give a penalty was some variation of "(s)he looks way ahead! Take a break and slow down!" Apparently, cake artists are pretty good at judging each others' progress, and the team that is ahead partway through the competition is often the most talented. Trying to stall them with a penalty may even the field slightly, but not enough to overcome superior cake skills and design.
Admittedly, this is a pretty trivial application for a powerful statistics program. But, there may be some broader lessons for social scientists generally. When human choice is involved few events are truly random, which would be the ideal in an experimental setting. Economists can find some clever ways to mimic a true experiment, but perfect success in that regard still remains elusive. Examining how the data are collected and what selection effects are present is crucial to interpreting statistical results... Otherwise one might be inclined to believe that a shorter work-time makes a better wedding cake!
Each team has nine hours to produce their ultimate cake. In order to keep the competition interesting and generate some much-needed drama, each episode is broken up by one or two smaller challenges designed to test the team leader's technical skill and speed at a particular cake-related task (such as piping, decorating, carving, etc.) The winner of each mini-challenge can choose one of the other two teams to sit out for thirty minutes.
Nine hours is already a short timeframe to create an award-winning cake - many wedding cakes can take up to a week to construct - so it would seem like losing 30 minutes to an hour would be a serious disadvantage. But, after watching two seasons of Ultimate Cakeoff (a dirty job, but someone had to do it) I noticed something strange: teams forced to sit out didn't seem to lose with any greater frequency. In fact, they often went on to win the competition!
This counter-intuitive trend sparked my curiosity, so I decided to put the question to a statistics program. After collecting data on every episode to find the characteristics of each team, who was forced to sit out, and who won each competition, I was able to find some results. The first regression found that being forced to sit out due to a challenge would increase the chance of winning by about 24%, a statistically significant result. After controlling for the individual attributes of of each participant the statistical significance vanished, and being forced to sit out had no measurable impact on the chance of winning at all (Click here to view the regressions performed, in STATA output format).
What might explain these findings? It would seem that less working time would result in a lower-quality cake, that was less likely to take the prize. Discovering the opposite result is somewhat surprising.
Of course, cake artists forced to sit out were not chosen randomly. The most common reason when choosing who to give a penalty was some variation of "(s)he looks way ahead! Take a break and slow down!" Apparently, cake artists are pretty good at judging each others' progress, and the team that is ahead partway through the competition is often the most talented. Trying to stall them with a penalty may even the field slightly, but not enough to overcome superior cake skills and design.
Admittedly, this is a pretty trivial application for a powerful statistics program. But, there may be some broader lessons for social scientists generally. When human choice is involved few events are truly random, which would be the ideal in an experimental setting. Economists can find some clever ways to mimic a true experiment, but perfect success in that regard still remains elusive. Examining how the data are collected and what selection effects are present is crucial to interpreting statistical results... Otherwise one might be inclined to believe that a shorter work-time makes a better wedding cake!
Saturday, December 24, 2011
Fuzzy Economics and Legal Fees
The New York Times has published several articles in the last two months targeting the American Bar Association. In October, Clifford Winston questioned the need for bar exams and professional licensing. Last week, David Segal wrote "For Law Schools, a Price to Play the A.B.A.’s Way" which blames the ABA's control over law school accreditation for overly high legal fees.In that article, he writes
Even if the ABA does drive up the cost of law school tuition, that alone can't explain why legal fees are so high. I'd hypothesize that clients pay lawyers a premium wage in order to ensure a high level of effort. As it is hard to monitor an attorney's effort directly, better wages are used as an incentive to keep on the job instead of slacking. In the economics literature, this is referred to as an efficiency wage; the concept has been used to explain why wages remain rigid during periods of high unemployment. That seems to apply quite easily to the legal industry.
I'm sympathetic to the argument for lowering entry barriers to practicing law, but there are other factors at work too which cause lawyer wages to be high. Otherwise, competition in the legal industry would have already driven down prices and serviced the unmet needs in low- and middle-income communities.
...The lack of affordable law school options, scholars say, helps explain why so many Americans don’t hire lawyers.This reasoning doesn't make sense to me. It may be true that lawyers are driven to make more money in order to pay off student loans. But, high fees are not the only way to make lots of cash; there is also the low-cost, high-volume strategy (think Walmart). If so much unmet demand for legal services exists, it could be more profitable to charge a lower hourly rate and just work faster or put a little less effort into each case. This wouldn't be practical if the supply of lawyers is artificially restricted, but given the 45,000 new lawyers every year as well as reportedly high numbers of unemployed or idle lawyers, a shortage seems to be unlikely.
“People like to say there are too many lawyers,” says Prof. Andrew Morriss of the University of Alabama School of Law. “There are too many lawyers who charge $300 an hour. There aren’t too many lawyers who will handle a divorce at a reasonable rate, or handle a bankruptcy at a reasonable rate. But there is no way to be that lawyer and service $150,000 worth of debt.”
This helps explain a paradox: the United States churns out roughly 45,000 lawyers a year, but survey after survey finds enormous unmet need for legal services, particularly in low- and middle-income communities...
Even if the ABA does drive up the cost of law school tuition, that alone can't explain why legal fees are so high. I'd hypothesize that clients pay lawyers a premium wage in order to ensure a high level of effort. As it is hard to monitor an attorney's effort directly, better wages are used as an incentive to keep on the job instead of slacking. In the economics literature, this is referred to as an efficiency wage; the concept has been used to explain why wages remain rigid during periods of high unemployment. That seems to apply quite easily to the legal industry.
I'm sympathetic to the argument for lowering entry barriers to practicing law, but there are other factors at work too which cause lawyer wages to be high. Otherwise, competition in the legal industry would have already driven down prices and serviced the unmet needs in low- and middle-income communities.
Monday, November 28, 2011
One subsidy I can get behind: Public Defenders
Interpreted at the most literal (or cynical) level, public defenders can seen as a subsidy for criminals because society pays for their legal fees. Of course, not everyone who is arrested is guilty of a crime, but if police are doing their job correctly, most people who are arrested will be guilty of something.
To quote a former police officer: "I don't want to put anyone that's innocent in jail. But, I try not to bring anyone into the interview room that's innocent."
Free legal counsel reduces the cost of being arrested, increasing the net "payoff" to a life of crime. In an anarcho-capitalist system (which some of my classmates at GMU think would be just swell) there'd be no public defenders, the accused would pay the cost of legal representation, and in theory this would provide an additional deterrent to criminal activity.
That's all very well and good, as far as it goes. Ideally, the criminal justice system should take criminals off the streets, and also deter potential criminals with the threat of punishment.
But, there's also a very serious negative externality to the justice system when it puts innocent people in jail. This takes several forms: harm to the person imprisoned and their family and friends, but also society as a whole. People in jail become burdens on the taxpayer and produce nothing (except maybe license plates). The justice system loses credibility when it convicts the innocent. Finally, for each person wrongfully imprisoned there is a criminal walking the streets with impunity, out committing more crimes.
Economists are often skeptical of externality justifications for government subsidies. But, I'd submit that the harm of imprisoning innocent people is so great, that money spent on public defenders is well worth it. Even if career criminals benefit slightly as well, that's a tradeoff worth making (80% of people in jail confess anyway, according to the police officer quoted above, so the harm of that cross-subsidy is pretty minimal in my view).
A last tidbit for thought: being convicted in a criminal trial requires evidence "beyond a reasonable doubt" which amounts to 98% or 99% certainty from a jury. There are a little over 2 million people incarcerated in the U.S. currently. If 99% certainty means being wrong 1% of the time, that's 20,000 people sitting in jail for crimes they didn't commit, at the minimum. Combined with the over-confidence effect (people are lousy at estimating confidence intervals around what they are certain of) it's likely to be much more. A tragic situation, and one which might be made even worse without access to public defenders.
To quote a former police officer: "I don't want to put anyone that's innocent in jail. But, I try not to bring anyone into the interview room that's innocent."
Free legal counsel reduces the cost of being arrested, increasing the net "payoff" to a life of crime. In an anarcho-capitalist system (which some of my classmates at GMU think would be just swell) there'd be no public defenders, the accused would pay the cost of legal representation, and in theory this would provide an additional deterrent to criminal activity.
That's all very well and good, as far as it goes. Ideally, the criminal justice system should take criminals off the streets, and also deter potential criminals with the threat of punishment.
But, there's also a very serious negative externality to the justice system when it puts innocent people in jail. This takes several forms: harm to the person imprisoned and their family and friends, but also society as a whole. People in jail become burdens on the taxpayer and produce nothing (except maybe license plates). The justice system loses credibility when it convicts the innocent. Finally, for each person wrongfully imprisoned there is a criminal walking the streets with impunity, out committing more crimes.
Economists are often skeptical of externality justifications for government subsidies. But, I'd submit that the harm of imprisoning innocent people is so great, that money spent on public defenders is well worth it. Even if career criminals benefit slightly as well, that's a tradeoff worth making (80% of people in jail confess anyway, according to the police officer quoted above, so the harm of that cross-subsidy is pretty minimal in my view).
A last tidbit for thought: being convicted in a criminal trial requires evidence "beyond a reasonable doubt" which amounts to 98% or 99% certainty from a jury. There are a little over 2 million people incarcerated in the U.S. currently. If 99% certainty means being wrong 1% of the time, that's 20,000 people sitting in jail for crimes they didn't commit, at the minimum. Combined with the over-confidence effect (people are lousy at estimating confidence intervals around what they are certain of) it's likely to be much more. A tragic situation, and one which might be made even worse without access to public defenders.
Thursday, November 17, 2011
Statistical Fallacy #176: Ignoring Selection Effects
I stumbled on a post at a credit-related blog. It starts off with the bombastic first line
Facts:
Do some division, and you'll find that the average adult consumer has $4261.73 in credit card debt. That's about $25,000 less than the Credit Karma estimate!
What went wrong? My guess: selection effects. Members of a site specializing in credit advice are not a random sample of the population. People who join are probably concerned about their credit... and people who are concerned about their credit probably have a lot of debt.
Nothing personal against the writers for that site, as it would be an easy mistake to make (and they were very nice, even in response to my snarky comment pointing this out). But still, they should have been more careful. A quick test, by multiplying their estimate of average debt by the number of consumers, finds that the U.S. has a total of $7,035,878,570,865 in student loans outstanding, about seven times the real figure. If it were true, that would be about 11% of the entire world GDP owed by American students!
The lesson: look out for non-random sampling due to self-selection, or your numbers will be nonsense.
"The average consumer is saddled with $29,985 in student loan debt..."Wow! That's a lot of debt! It's true that the U.S. population has a giant amount of student loan debt -- even more so than the amount of credit card debt. Last year, I wrote about the subject. But, the figure above is pretty high. That statistic is drawn from "262,887 CreditKarma.com user scores." Sounds pretty robust. But, some simple math reveals there's more to the story.
Facts:
- Total student loan debt in the U.S. is about $1 trillion (~$1,000,000,000,000).
- The U.S. population is 308,745,538. Of that, 24% are under 18, leaving 234,646,609 adult consumers.
Do some division, and you'll find that the average adult consumer has $4261.73 in credit card debt. That's about $25,000 less than the Credit Karma estimate!
What went wrong? My guess: selection effects. Members of a site specializing in credit advice are not a random sample of the population. People who join are probably concerned about their credit... and people who are concerned about their credit probably have a lot of debt.
Nothing personal against the writers for that site, as it would be an easy mistake to make (and they were very nice, even in response to my snarky comment pointing this out). But still, they should have been more careful. A quick test, by multiplying their estimate of average debt by the number of consumers, finds that the U.S. has a total of $7,035,878,570,865 in student loans outstanding, about seven times the real figure. If it were true, that would be about 11% of the entire world GDP owed by American students!
The lesson: look out for non-random sampling due to self-selection, or your numbers will be nonsense.
Sunday, November 6, 2011
Fun Facts about Microsoft Co.
Why would anyone bother reading shareholder reports? They're dry, long-winded, and functionally outdated by the time of arrival, so there's no way to profit from the information. Reasons for reading would have to include boredom, duress, or idle curiosity. It was the latter which led me to the Microsoft Annual Report for 2011. A few interesting facts pulled from that document:
What, if anything, does this say about the corporation and its future? Microsoft's product focus is split between entertainment/gaming and business services, while the company's prior breadwinner - bundling software with new PCs - is taking a back seat. As stated in a note from their CEO, Steven Ballmer: "increasingly, we will view ourselves as a devices and services company." It sounds closer to Mattel than the Evil Empire. Regardless, Microsoft's diverse selection of both patents and products provides a foothold to compete against intimidating rivals like Google, Apple, and Salesforce.com.
- Microsoft is divided into five segments. The Windows & Windows Live Division gets 75% of its revenue from selling Windows to computer manufacturers, to be pre-installed for end users. The remaining 25% comes from sale of miscellaneous hardware products and online advertising on Windows Live.
- In the Windows Division, most growth over the last year was business sales (+11%) while consumer purchases went down (-1%). A substantial part of the drop in consumer PC sales was from netbooks (-32%).
- Employee severance expenses were $59 million in 2010 and $330 million in 2009. Why the huge change? Microsoft: "In January 2009, we announced and implemented a resource management program to reduce discretionary operating expenses, employee headcount, and capital expenditures."
- Research and Development costs took up 15% of Microsoft's revenue, or $9.0 billion, in 2011. That investment is well-protected -- by 26,000 U.S. and international patents, and another 36,000 pending.
- Kinect for Xbox 360 is the fastest-selling consumer electronics device; confirmed by Guinness World Records.
- If you'd bought $100 of Microsoft stock in June 2006, six years later it would be worth $122.71 (compare to $115.61 for the S&P Index, or $157.48 for the Nasdaq Computer Index).
What, if anything, does this say about the corporation and its future? Microsoft's product focus is split between entertainment/gaming and business services, while the company's prior breadwinner - bundling software with new PCs - is taking a back seat. As stated in a note from their CEO, Steven Ballmer: "increasingly, we will view ourselves as a devices and services company." It sounds closer to Mattel than the Evil Empire. Regardless, Microsoft's diverse selection of both patents and products provides a foothold to compete against intimidating rivals like Google, Apple, and Salesforce.com.
Wednesday, October 26, 2011
How to judge campus safety?
A few days ago I was emailed a pdf document: the 2011 Annual Security Report for George Mason University. As mandated by the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (yeah I hadn't heard of it before either) it provides a breakdown of all criminal activity which occurred on campus, by year, and with special columns for "Hate Crimes." The picture I attached has the numbers for Fairfax. This is the most interesting part of the document to me because it contains some raw figures on different offenses committed in the campus I attend. Statistics for the other George Mason campuses (Arlington, Prince William, Loudoun, etc.) are also available but are a lot less edifying, because the columns have just a bunch of zeroes. Coincidentally, Fairfax also happens to be the only campus with attached undergraduate housing -- make of it what you will.
This report is obviously intended to increase public awareness about crime rates on campus, allowing potential students and their parents to make an informed decision when comparing different universities. What I wonder is, how does someone look at this report and get any sense of the probability that they themselves will be victimized? This blog post is a rough attempt at answering that question.
Some useful figures to get started with:
 |
| The most exciting table I've seen since breakfast. |
Some useful figures to get started with:
- Roughly 30,000 students attend GMU, 7,000 of them on living on campus.
- From the BJS, around 35% of property crimes and 45% of violent crimes are reported to the police.
Thursday, October 6, 2011
Shirking, Malingering, and other Unpopular Terms regarding the American labor force
So, the title might be overly sensational.
For an outside observer, finding measures of low conscientiousness on the job (shirking) or active deception to evade work (malingering) is a bit of a challenge, because workers have an incentive to conceal that sort of activity.
This rough study addresses worker injury on the job and attempts to determine whether outside incentives motivate changes in sick time and injury rates. Using some unsophisticated econometric techniques, surprising results are found. Surprising if you think unemployment levels and interest rates will not influence worker absences, anyway.
The paper:
For an outside observer, finding measures of low conscientiousness on the job (shirking) or active deception to evade work (malingering) is a bit of a challenge, because workers have an incentive to conceal that sort of activity.
This rough study addresses worker injury on the job and attempts to determine whether outside incentives motivate changes in sick time and injury rates. Using some unsophisticated econometric techniques, surprising results are found. Surprising if you think unemployment levels and interest rates will not influence worker absences, anyway.
The paper:
Subscribe to:
Posts (Atom)