Social science humor

Via Monkey Cage, a selection of humorous quotes on Social Science, “all collected or concocted by the irrepressible A. Wuffle. If you like this sort of thing, then stay tuned for the soon-to-be-released Wit and Humor of Political Science (Sigelman, Newton, Meier, and Grofman, eds., which is slated for publication in January)”:

Thou shalt not commit a Social Science. — W. H. Auden

God gave all the easy problems to the physicists. – James March

In the social sciences, waiting for Newton is like waiting for Godot. — Lee Cronbach and Philip Converse

To avoid the problem of scientific validity, three strategies are commonly followed in the social sciences: (a) eschewing falsifiable statements; (b) denying the possibility of objective truth, and (c) writing in French or German. The combination of these three strategies has been shown to be virtually irresistible, even to strong minds. Statements which on the face of it are unintelligible gibberish can always be blamed on a bad translation. — A Wuffle

An economist is one who observes something that works in practice and wonders if it will work in theory. — As told to Bernard Nelson by Victor Fuchs

If you put all the economists in the country end to end, they’d still point in different directions. — Harry S. Truman

The Economist’s Motto: To err is human, to be paid for it divine. — Victor Fuchs

Those who do not know the past are condemned to repeat History 101. — Anon.

I dropped out of American Studies after the first exam, when I found out that the correct answer to all four questions was “hegemony.” — Emily Polsby

If you can understand an article in the APSR then something must have gone wrong in the refereeing process. – A Wuffle

Sociology is the branch of science with the most methods and the least results. – Henri Poincare, circa 1909-10

The economic point of view

By accident, I ran into a commencement address by Chicago Economist Kevin M. Murphy: “Seeing the World through the Economic Lens” (June 11, 2006).  It’s not about poetic remarks but about equilibrium, incentives and cost-benefit analysis. These are the final paragraphs of the address:

“So don’t forget the concepts of equilibrium, such as there’s no free lunch. And if it looks too good to be true, it probably is. But that doesn’t mean you shouldn’t push forward. Just be cautious and be humble, because most likely you are going to turn out to be wrong.

On the incentives side, remember that incentives matter. You give people incentives to do good things, and they will do good things. You give people incentives to do bad things, and they will do bad things. And remember incentives apply in all contexts. So, for example, a common response to a public policy problem is to say that the solution is to get the government to do it. But does the government have the incentive to do it right? What incentive do they have? Their incentives often are not to do it right. Their incentive is to do it with a lot of people at a lot of expense, because that’s how they define success in their business. So it’s not that the people in government are bad or evil but rather that they are subject to the same incentives as you and me. You just have to recognize what those incentives are. And when faced with a problem, use the principles of cost-benefit analysis. Think about the true goals, identify the goals, and, most importantly, identify the options and make comparisons between benefits and costs of one option versus another.”

In the same year, Austan Goolsbee gave a very entertaining address: “Why People Hate Economists (and Why We Don’t Care)“:

(Economics is) about a way of thinking about the world. It starts from the basic theory that, for the most part, people try to do better for themselves. If this is true, they will respond to incentives so that, in most cases, competition will drive them to be more efficient. That theory then says: Let’s get the data and think hard about causality, because we don’t have much in the way of controlled experiments. And let’s see how far that will take us.

But that simplicity of purpose is quite a large part of why people hate us. We really don’t deal with the loftiest ideals of humanity. We deal with humans at their most mundane. We aren’t about narratives and inspiration or how people would behave in their finest hours. We are about how people behave in the everyday marketplace. I think we are especially hated because of the nagging fear on the part of idealists that we might be right about people.

(…) But that’s the problem with economics. It’s always taking the fun out of everything. As I like to say, economics is frequently hated but seldom wrong.

Also related, a previous post on Nirvana fallacies, according to Harold Demsetz; and another one on Economic Imperialism, according to Ed Lazear.  So, yes, this maybe a favorite or recurring topic of mine :-).  This is from Ed Lazear:

It is the ability to abstract that allows us to answer questions about a complicated world. As economists, however, we believe in comparative advantage. I have argued elsewhere that the strength of economic theory is that it is rigorous and analytic. But the weakness of economics is that to be rigorous simplifying assumptions must be made that constrain the analysis and narrow the focus of the researcher. It is for this reason that the broader thinking sociologists, anthropologists and perhaps psychologists may be better at identifying issues, but worse at providing answers. Our narrowness allows us to provide concrete solutions, but sometimes prevents us from thinking about the larger features of the problem. This specialization is not a flaw; much can be learned from other social scientists who observe phenomena that we often overlook. But the parsimony of our method and ability to provide specific, well-reasoned answers gives us a major advantage in analysis.

Seasons matter

The Wall Street Journal reports on an important paper:

Children born in the winter months already have a few strikes against them. Study after study has shown that they test poorly, don’t get as far in school, earn less, are less healthy, and don’t live as long as children born at other times of year. Researchers have spent years documenting the effect and trying to understand it. But economists Kasey Buckles and Daniel Hungerman at the University of Notre Dame may have uncovered an overlooked explanation for why season of birth matters.

This is the paper and abstract:

Season of Birth and Later Outcomes: Old Questions, New Answers
Kasey Buckles and Daniel M. Hungerman (University of Notre Dame).
NBER Working Paper No. 14573 / December 2008

Research has found that season of birth is associated with later health and professional outcomes; what drives this association remains unclear. In this paper we consider a new explanation: that children born at different times in the year are conceived by women with different socioeconomic characteristics. We document large seasonal changes in the characteristics of women giving birth throughout the year in the United States. Children born in the winter are disproportionally born to women who are more likely to be teenagers and less likely to be married or have a high school degree.

We show that controls for family background characteristics can explain up to half of the relationship between season of birth and adult outcomes. We then discuss the implications of this result for using season of birth as an instrumental variable; our findings suggest that, though popular, season-of-birth instruments may produce inconsistent estimates. Finally, we find that some of the seasonality in maternal characteristics is due to summer weather differentially affecting fertility patterns across socioeconomic groups.

And this is what the evidence looks like:

SeasonalBirths

Política industrial y crecimiento económico

Esta semana el Banco Mundial organizó un panel sobre “Política industrial y el papel del estado en la promoción del crecimiento económico“.  Los papers de Harrison y Lin no tienen desperdicio alguno y son lectura recomendada para todos aquellos en busca de “modelos alternativos de desarrollo”. 

Bill Easterly resume la discusión aquí y ofrece su propio bottomline:  “Does a poor country government have a comparative advantage in discovering a poor country’s comparative advantage? A corrupt, low-skilled, poorly-funded government does not have a comparative advantage in finding the country’s comparative advantage.”

Por su lado, el paper de Harrison y Rodriguez sugiere que:

While the literature on trade and growth linkages faces many challenging problems, we suggest two general lessons that may be drawn from the voluminous evidence. First, there was no signicant relationship in the second half of the twentieth century between average protection levels and growth. Second, there is a positive association between trade volumes and growth. We interpret the lack of a signicant association between average tariffs and growth, combined with the strong relationship between trade shares and growth, to suggest that any successful Industrial Policy strategy must ultimately increase the share of international trade in GDP. The fact that so many countries have been unsuccessful in o¤setting the anti-trade bias of their interventions may explain why so many have failed to succeed at Industrial Policy.

Industrial Policy and The Role of the State in Promoting Growth

William Easterly- New York University and NBER
Ann Harrison – Research Manager, Development Research Group, The World Bank
Justin Yifu Lin – Chief Economist and Senior Vice President, The World Bank

The papers are available as one file in zip format, or here:

El paquete fiscal 2010

El pasado jueves 10 de septiembre de 2009 tuve una entrevista con Javier Solórzano, en Radio Trece, sobre el paquete económico y fiscal para 2010 en México, presentado esta semana por el Secretario de Hacienda ante el Congreso.  Este tema merece una más detallada atención, pero pueden escuchar mis primeras reacciones aquí.

Como antecedente, el 8 de enero de 2009 tuve otra entrevista con Javier Solórzano sobre el llamado “plan anticrisis” que anunció Felipe Calderón al inicio del año. Pueden escucharla aquí.

En las próximas semanas escucharemos mucho sobre este tema. La Ley de Ingresos para 2010 debe ser aprobada por ambas Cámaras, mientras que el Presupuesto de Egresos solamente requiere la aprobación de la Cámara de Diputados. Esto es importante porque el PAN puede sostener un veto presidencial en el Senado pero, dado el resultado electoral de julio pasado, no podría hacerlo en la cámara baja.

Are economists evil?

This is Paul Krugman in the New York Times Magazine (september 6, 2009):

How Did Economists Get It So Wrong?

I. MISTAKING BEAUTY FOR TRUTH

It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts.

And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration’s stimulus plans are “schlock economics,” and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.

What happened to the economics profession? And where does it go from here?

You can read the whole thing here.   These are other viewpoints on the same question:

A quick and perhaps defensive reaction: and are there any non-economists who got it right?  Did any politician/historian/philospher got it right? Who should we turn now for financial and economic advice? In my view, if this debate boils down to reloaded Keynesians vs. neo-neoclassicals, it seems like the economics profession remains mostly unchallenged (for better or worse).

Who pays for health care?

Very basic ideas that journalists, pundits and politicians often misunderstand…  There is no free lunch because: 1. Everybody is a consumer.  2. Sooner or later, consumers pay for “everything”.

Who Really Pays for Health Care?: The Myth of “Shared Responsibility”
Ezekiel J. Emanuel, MD, PhD (Department of Bioethics, Clinical Center, National Institutes of Health); Victor R. Fuchs, PhD (Department of Economics, Stanford University). 
Journal of the American Medical Association. 2008; vol. 299: 1057-1059.

When asked who pays for health care in the United States, the usual answer is “employers, government, and individuals.” Most Americans believe that employers pay the bulk of workers’ premiums and that governments pay for Medicare, Medicaid, the State Children’sHealth Insurance Program (SCHIP), and other programs.

However, this is incorrect. Employers do not bear the cost of employment-based insurance; workers and households pay for health insurance through lower wages and higher prices. Moreover, government has no source of funds other than taxes or borrowing to pay for health care.

Failure to understand that individuals and households actually foot the entire health care bill perpetuates the idea that people can get great health benefits paid for by someone else. It leads to perverse and counterproductive ideas regarding health care reform.

This argument is also true in Mexico where the quality of IMSS/ISSSTE is so low that some employers resort to secondary or additional health care insurance from private providers.  If an employee ends up paying both the  public and private insurance premiums, the distortion on labor markets is even larger.  This is because public insurance (IMSS or ISSSTE fees) is mandatory in formal jobs: an employee cannot opt out of it if she chooses a secondary private option.

Solicitud de Visa para Canadá

Como mucho sabrán, desde julio de este año el gobierno canadiense requiere que los mexicanos solicitemos visa (como turistas, estudiantes, etc.)  El website de la embajada canadiense provee la información necesaria en cuanto a los documentos que hay que presentar.  La solicitud es de suyo bastante engorrosa: Una parte se puede llenar en computadora pero el resto tiene que llenarse a mano (prepárense para declarar donde han vivido, trabajado o estudiado toda su vida, por ejemplo).

Pero hay dos trabucos más –el cheque de caja y la guía de envío prepagada– que no dependen tanto de la embajada y que pueden ser complicados para quienes vienen hasta la Ciudad de México solamente para hacer este trámite o quienes, como yo, no saben moverse muy bien en esta ciudad.  Si ya cuentan con todos los formatos y documentación necesaria para la aplicación, he aquí algunos tips para el día en que entreguen su solicitud:

  1. La embajada canadiense está en Schiller #529 y Tres Picos, entre Campos Eliseos y Reforma (justo detrás del Museo Nacional de Antropología), en Polanco.
  2. Hay un Banamex en Presidente Masaryk y Newton. El cheque de caja cuesta entre 180 y 240 pesos en ese banco, dependiendo de si eres cuentahabiente o no. En Masaryk están muchos otros bancos pero algunos, como Banorte, NO venden cheques de caja.  Otros, sólo los venden a “sus cuentahabientes”.
  3. La guía de envío prepagada se consigue fácilmente en DHL.  Hay un DHL en la calle de Taine, entre Homero y Horacio (es pequeño, pero bien que está allí).  Sobre Masaryk también están Estafeta y Multipack pero sorprendentemente ellos NO venden guías prepagadas (quizá no han descubierto que la embajada canadiense está allí a la vuelta mandando clientes a DHL).
  4. De plano, si necesitan fotocopias o fotos tamaño pasaporte de último minuto, busquen sobre Horacio, cerca del Metro Polanco.

Todo esto está a distancia caminable una vez que se encuentran en Polanco. He aquí un mapita con las coordenadas principales (está es la liga de google maps si desean un mayor detalle):

Embajada Canadiense en México

Hoy intenté solicitar mi visa, pero descubrir todo lo anterior me llevó más de 2 horas y no llegué a tiempo a la embajada.  Luego de hacer rabietas sobre los costos de toda esta odiosa transacción se me ocurrió hacer este “pequeño servicio a la comunidad”. De nada. 

UPDATE: Tan sólo una semana después de entregar mis papeles, la visa llegó a mi casa :-).

You could file this entry under “transaction cost economics”: in a more efficient economy, there would be a DHL or Banamex stand right there on the embassy charging premium prices for the added convenience.  In a more efficient political system, the Canadian Embassy would have figured out a simpler way for visa applicants–how about ONE single pdf form, or longer service hours?–so that Mexican tourism would not fall as much as it will now.

Pobreza por ingresos en México

CONEVAL acaba de hacer público un detallado reporte con las cifras de pobreza por ingresos para 2008, estimadas con base en la ENIGH.  Los datos que mayor impacto han tenido en los medios son dos:

  • Entre 2006 y 2008, el porcentaje de personas en condición de pobreza alimentaria a nivel nacional aumentó de 13.8% a 18.2% (de 14.4 a 19.5 millones de personas).

  • Entre 2006 y 2008, el porcentaje de personas en condición de pobreza de patrimonio en el país se incrementó de 42.6% a 47.4% (de 44.7 a 50.6 millones de personas).

Sin embargo, el reporte de CONEVAL contiene datos (con gran nivel de detalle, por cierto) desde 1992 hasta 2008.  Al parecer, el lento avance observado entre 1996 y 2006, ha tenido un revés: los niveles de pobreza de 2008 son similares a los de 2005.  ¿Hasta donde retrocederemos en 2009?  ¿Retrocederemos tanto como entre 1994 y 1996? 

Evolución de la pobreza por ingresos en México

Función de utilidad

Todos los que hemos impartido algún curso de microeconomía sabemos el reto que implica dibujar o transmitir la noción de que las curvas de indiferencia no son más que curvas de nivel de una función de utilidad que aumenta conforme aumenta el consumo de dos bienes.  He aquí una gráfica de una función de utilidad “bien comportada” entre ocio y consumo:

U = (ocio^0.5) (consumo^0.5)

Funcion de utilidad

Funcion de utilidad

Y esta es otra perspectiva de una función de utilidad:

Noten cómo la curva de indiferencia IC1 corresponde a un mayor nivel de utilidad que la curva IC0: U1 > U0. MRS se refiere a la tasa marginal de sustitución entre el bien X y el bien Y.  DU se refiere a la diferencial total de la función de utilidad, U.

Si necesitan mayor información sobre estos conceptos, pueden consultar las notas de mi curso de Principios de Microeconomía, impartido en 2007.  Estas notas han sido preparadas con base en: Varian, Hal.  Intermediate Microeconomics, 5ª ed., así como de otras fuentes selectas.

Lecturas sugeridas:

Estas son las notas de clase de mi curso de microeconomía, impartido por última vez en 2007: Parte 1. Parte 2.

Mankiw on health care reform in the US

The Pitfalls of the Public Option, by N. Gregory Mankiw
The New York Times, June 28, 2009

In the debate over health care reform, one issue looms large: whether to have a public option. Should all Americans have the opportunity to sign up for government-run health insurance?

President Obama has made his own preferences clear. In a letter to Senators Edward M. Kennedy of Massachusetts and Max Baucus of Montana, the chairmen of two key Senate committees, he wrote: “I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest.”

Even if one accepts the president’s broader goals of wider access to health care and cost containment, his economic logic regarding the public option is hard to follow. Consumer choice and honest competition are indeed the foundation of a successful market system, but they are usually achieved without a public provider. We don’t need government-run grocery stores or government-run gas stations to ensure that Americans can buy food and fuel at reasonable prices.

An important question about any public provider of health insurance is whether it would have access to taxpayer funds. If not, the public plan would have to stand on its own financially, as private plans do, covering all expenses with premiums from those who signed up for it.

But if such a plan were desirable and feasible, nothing would stop someone from setting it up right now. In essence, a public plan without taxpayer support would be yet another nonprofit company offering health insurance. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”

In practice, however, if a public option is available, it will probably enjoy taxpayer subsidies. Indeed, even if the initial legislation rejected them, such subsidies would be hard to avoid in the long run. Fannie Mae and Freddie Mac, the mortgage giants created by federal law, were once private companies. Yet many investors believed — correctly, as it turned out — that the federal government would stand behind Fannie’s and Freddie’s debts, and this perception gave these companies access to cheap credit. Similarly, a public health insurance plan would enjoy the presumption of a government backstop.

Such explicit or implicit subsidies would prevent a public plan from providing honest competition for private suppliers of health insurance. Instead, the public plan would likely undercut private firms and get an undue share of the market.

President Obama might not be disappointed if that turned out to be the case. During the presidential campaign, he said, “If I were designing a system from scratch, I would probably go ahead with a single-payer system.”

Of course, we are not starting from scratch. Because many Americans are happy with their current health care, moving immediately to a single-payer system is too radical a change to be politically tenable. But for those who see single-payer as the ideal, a public option that uses taxpayer funds to tilt the playing field may be an attractive second best. If the subsidies are big enough, over time more and more consumers will be induced to switch.

Which raises the question: Would the existence of a dominant government provider of health insurance be good or bad?

It is natural to be skeptical. The largest existing public health programs — Medicare and Medicaid — are the main reason that the government’s long-term finances are in shambles. True, Medicare’s administrative costs are low, but it is easy to keep those costs contained when a system merely writes checks without expending the resources to control wasteful medical spending.

A dominant government insurer, however, could potentially keep costs down by squeezing the suppliers of health care. This cost control works not by fostering honest competition but by thwarting it.

Recall a basic lesson of economics: A market participant with a dominant position can influence prices in a way that a small, competitive player cannot. A monopoly — a seller without competitors — can profitably raise the price of its product above the competitive level by reducing the quantity it supplies to the market. Similarly, a monopsony — a buyer without competitors — can reduce the price it pays below the competitive level by reducing the quantity it demands.

This lesson applies directly to the market for health care. If the government has a dominant role in buying the services of doctors and other health care providers, it can force prices down. Once the government is virtually the only game in town, health care providers will have little choice but to take whatever they can get. It is no wonder that the American Medical Association opposes the public option.

To be sure, squeezing suppliers would have unpleasant side effects. Over time, society would end up with fewer doctors and other health care workers. The reduced quantity of services would somehow need to be rationed among competing demands. Such rationing is unlikely to work well.

FAIRNESS is in the eye of the beholder, but nothing about a government-run health care system strikes me as fair. Squeezing providers would save the rest of us money, but so would a special tax levied only on health care workers, and that is manifestly inequitable.

In the end, it would be a mistake to expect too much from health insurance reform. A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices.  The health care of the future won’t come cheap, but a public option won’t make it better.

 

Homo economicus strikes back

Is Behavioral Economics Doomed? The ordinary versus the extraordinary
By David K. Levine

“… behavioral economics is all the rage these days. The casual reader might have the impression that the rational homo economicus has died a sad death and the economics profession has moved on to recognize the true irrationality of humankind. Nothing could be further from the truth. Criticism of homo economicus is not a newtopic. In 1898 Thorstein Veblen wrote sarcastically described rational economic man as”a lightning calculator of pleasures and pains, who oscillates like a homogenous globule of desire of happiness under the impulse of stimuli.” This description had little to do with economics as it was practiced then – and even less now. Indeed, for a long period of time during the 60s and 70s, irrational economic man dominated economics. The much criticized theory of rational expectations was a reaction to the fact that irrational economic man is a no better description of us than that of a “lightning calculator of pleasures and pains.” In many ways the rational expectations model was a reaction to”[t]he implicit presumption in these … models … that people could be fooled over andover again,” as Robert Lucas wrote in 1995.

The modern paradigmatic man (or more often these days woman) in modern economics is that of a decision-maker beset on all sides by uncertainty. Our central interest is in how successful we are in coming to grips with that uncertainty. My goal in this lecture is to detail not the theory as it exists in the minds of critics who are unfamiliar with it, but as it exists in the minds of working economists. The theory is far more successful than is widely imagined – but is not without weaknesses that behavioral economics has the potential to remedy.”

You can read the whole thing here.

New books for a new year

I spent the holidays in the U.S. so I had time to update my bookshelves with some volumes I wanted to get for a while…
 
POLITICAL ECONOMY
 
 
I will be using the Oxford Handbook as one of the main sources for my political economy class this spring term–taking the place of Mueller’s previous compilation: its several chapters provide an up to date survey on what has become a quite large literature.  Besley and Acemoglu/Robinson will only be suggested readings–these two volumes comprise something like the most current theoretical framework for political/institutional economics.
 
ECONOMETRICS
 
Microeconometrics: Methods and Applications By: A. Colin Cameron, Pravin K. Trivedi
 
Quoting from the authors’ website:
“Distinguishing features include emphasis on nonlinear models and robust inference, as well as chapter-length treatments of GMM estimation, nonparametric regression, simulation-based estimation, bootstrap methods, Bayesian methods, stratified and clustered samples, treatment evaluation, measurement error, and missing data.”
 
This volume has very nice supplement materials available on the web:
 
GENERAL INTEREST
 
Stumbling on Happiness By: Daniel Gilbert
 
ECONOMIC THOUGHT