Earlier today, at this weekend’s Liberty Fund colloquium, we were discussing cash hand outs versus make work programs. Someone suggested that the recipients, at least during the Great Depression, preferred make work programs to simple cash handouts. I mentioned that there exists a literature on this, which argues that the American moral framework places a stigma on welfare and charity. Welfare recipients are characterized as lazy and unproductive, and so there is a natural inclination to prefer welfare programs where you earn an income in return for your labor. I couldn’t remember the authors of a particular essay I had in mind (I incorrectly cited Baubcöck), but just in case anybody at the colloquium reads this blog the article is: Nancy Fraser and Linda Gordon, “Contract versus Charity.”
I think I got into Deep Purple before high school. My dad bought me one of their best of compilations at what used be called Price Club (today’s Costco). But, I didn’t know about this song until one day, in Spain, I was at my friend Dacio’s house. He owned another best of compilation of Deep Purple, which El Pais was distributing for free to subscribers. He played this song, and something about it made me fall in love with it immediately.
By now, you’ve most likely heard of the election of Jorge Bergoglio as pope of the Roman Catholic Church. I don’t know Church politics well enough to comment on the merits of Bergoglio, who has chosen to go by the name of Francis. I told my family that the new pope would either be Latin American or African, and I was right. On the one hand, opting for an Argentine does a lot to cater to Catholics outside of Europe. On the other, in this case choosing an Argentine allows a step forward, but in other ways the Church seems to be taking a step back. Francis’ positions on various moral issues don’t really bother me — we’re all entitled to our opinions — and since I’m no believer (a.k.a. I don’t know what I’m talking about) I really don’t know how much room for an “open mind” the Catholic faith has. How can you promote homosexuality if your Bible forbids it?
Anyways, there are a number of issues that do invite the support of the church. That a Latin American was chosen points to the severe inequality — not just economic, but also, and much more importantly, political — those nations suffer from. There’s also the uphill battle for basic human rights throughout the developing work. There’s enough issues to occupy Pope Francis for a long time to come.
In any case, as I was reading Fernando Cardoso’s memoirs, I coincidentally (this was a day after Bergoglio’s election was announced, I think) came across his experiences in Poland during the closing years of the cold war. His reaction to Pope John Paul II’s active participation in the Polish political emancipation from the Soviet Union speaks to the Church’s influence,
There was no point in looking at dull research, however, when social change was taking place in real life, right there outside the palace doors. Poland was swept up in the height of the Solidarity movement. The selection of Karol Wojtyla as Pope John Paul II had emboldened the church as an agent for democratic change in Poland. Enraptued, we watched on television as the Polish cardinal addressed the nation. We didn’t understand what he was saying, of course, but we understood the symbolism. This was the first time that the Polish government had ever dared to allow the cardinal such a large forum.
— Fernando Henrique Cardoso, The Accidental President of Brazil (New York: Public Affairs, 2006), p. 141.
Then again, publicly opposing Communism is probably easier for the Church than taking a progressive stance on the various issues of our days.
N.B.: Some people might find the humor distasteful.
I used to consider myself a good writer. I’m taking a course on economic literacy and I’ve begun to realize that I’m actually a rather poor writer. A lot of it probably has to do with the fact that I restrict my reading mostly to academic, or close to it, writing. This is likely the reason I know words that many of my peers don’t. They don’t seem “advanced” to me (or probably to anybody else who knows them), but I’ve found that economic writers like using words you don’t find in everyday speech. These words, I’ve found in peer reviews, can be off putting. (Ironically, Kahneman warns against using big words, but every once in a while he uses words I have to look up.)
This brings me to my writing on this blog. There’s an additional obstacle to good writing when it comes to my blogging. I don’t really think about what I’m going to write too deeply immediately before writing — if I do, what I end up writing tends to be somewhat different anyways —, and usually I start going into stream of consciousness mode. You can probably tell when I go off on slight tangents, and then I have to bring the discussion back to my original point. This can be solved by using the first post as a draft and then re-writing it, but I don’t have the time to do that with my blog posts and, besides, I’ve never trained myself to put in the effort to do that. So, my blog writing is probably worse than it ought to be, but at the same time I feel that the flexibility of thinking on the spot helps me be creative.
Sometimes rigor and clearness are preferable, but this is a blog — a sandbox, where I can make mistakes and put out whatever comes across my mind — and I find my style optimal given the time available and the utility, to me, of having this blog. I wonder, though, if sacrificing revision and a more structured approach is harming my writing. At the same time, I try to incorporate what I learn about good writing as much as possible, as I learn it.
…[T]he statistician David Freedman used to say that if the topic of regression comes up in a criminal or civil trial, the side that must explain regression to the jury will lose the case. Why is it so hard? The main reason for the difficulty is a recurrent theme of this book: our mind is strongly biased toward causal explanations and does not deal well with “mere statistics.” When our attention is called to an event, associative memory will look for its cause — more precisely, activation will automatically spread to any cause that is already stored in the memory. Causal explanations will be evoked when regression is detected, but they will be wrong because the truth is that regression to the mean has an explanation but does not have a cause.
— Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus, and Giroux, 2011), p. 182.
Much of the book talks about our aversion to statistics. It’s not that we dislike statistics, rather our brain is programed to make causal explanations based on what we know. And these explanations can be quite convincing. Where I see this the most, including in myself, is in sports. For example, F.C. Barcelona, widely considered to be one of the best European teams, has been going on a losing spree as of late. Sports new commentators try to provide causal explanations — order has broken down since their manager went into surgery, their best players are going through periods of low form, et cetera —, but the fact is that the explanation is probably mostly statistical.
Kahneman puts it like this. Build a formula for success: skill + luck. The mean, given a large enough sample size, should be more-or-less equal to “skill.” In games, however, the luck factor can make it so that a team can have a particularly good day or a particularly bad one. A team that is lucky in one instance has a relatively high probability of being unlucky the next. In Barcelona’s case, we know that in the beginning of the season they played without losing a single game, and then losing only a couple here and there. This was mostly ascribed to their skill, but this is only partly correct. The rest of the answer is that they were also highly fortunate, and this fortune has reversed as statistics would predict.
I’m a die-hard fan of Atlético de Madrid, having followed them since as long as I can remember (I recently just dug up a commerative plate of their ’95–96 league–domestic cup double, during which time I was ~8 — I actually remember the fireworks a local “peña” launched in celebration when the team won the league title that season). Having gone through a rough patch since then, including relegation, in 2006 Javier Aguirre took the reigns and was able to get us into the Champions League two years in a row. After a good start to the 2008 season, where we were ahead of city rivals Real Madrid after the winter break, Aguirre’s team went through a low point, failing to win a single game during the opening month of 2009. He was sacked before the season’s end and replaced with, in my opinion, with a manager of much, much less (or lesser?) quality (Abel Resino). News sources and fans ascribed to the event a number of causal explanations, but the truth is that much the explanation lies in statistics: the team was regressing to its mean. Currently, I’m wondering if the team’s current success is mostly luck, or due to an increase in skill — the answer is probably both.
Last year, when Real Madrid won the league title, their manager, Jose Mourihno, argued that this title is the most important because it’s won through consistency. This is a great point, but it’s probably more accurate to say that because of the larger sample size (38 games in a 20 team league) the ultimate point count is going to reflect the skill of the team much more than its luck. It’s still early — 26 games played —, but notice how Barcelona is 11 points ahead of second-placed Atlético and 13 points ahead of third-placed Real Madrid. This result is probably more indicative of their skill than the recent results, two losses against Real Madrid (one of them in a cup match) and a loss against A.C. Milan (in the first leg to their continental cup match), and it shows their overwhelming superiority over their rivals. The same is true with Real Madrid, who suffered more losses than expected early on, but is returning as a strong team during the second half of La Liga. And I expect Atlético de Madrid to regress as the league ends, no matter how many causal explanations I can concoct to argue the opposite.
In economics, the subject that comes to mind — probably because it’s the example Kahneman uses — is entrepreneurship. Investment has much to do with luck, much more than skill. In the book, Kahneman cites a correlative figure of .3 for the relationship between skill and outcome in entrepreneurship. Usually though, when we talk about success or failure in this field we glorify what entrepreneurs did right and focus too much on what they did wrong. The truth is that there’s a lot of luck in entrepreneurship, including the outcomes of events out of the agent’s control (the success of competing entrepreneurs, unforeseen setbacks, et cetera). We tend to underestimate these, and in the case of success we tend to ignore them outright. That’s why people spend money on books written by successful entrepreneurs, even though they’re unlikely to help all that much. Even a large jump in skill will impact the probability of success mildly.
In older Austrian literature, I get the sense that entrepreneurial success is ascribed to it a causal explanation. It’s not explicit, but it’s implicit in the discussion of profit and loss. Profit rewards good entrepreneurship and loss punishes bad entrepreneurship, distributing capital to those who preform better than their peers. I sense that the implication is that some entrepreneurs are better than the others and this matters greatly in economics. But, if the statistics are right this conclusion is wrong. The truth is that entrepreneurial success is mostly about luck. Profit and loss is still relevant and an incredibly important part of the institution of the market, but the truth is that it doesn’t improve entrepreneurial success after the distribution. The entrepreneur who gains has, more-or-less, the same probability of failing/succeeding in her next venture as the one who failed in the last one. This is why I’ve stressed that competition is just as important (minimizing the impact of loss and increasing the probability of success), largely influenced by Ludwig Lachmann.
Regression to the mean is one of those things which are unsurprising when you first hear about them, but then when you realize just how little you consider statistical base rates when making decisions or prediction it hits you how little you acknowledge regression as important. It’s not our fault really, our brains just work causally.
On Monday, Tom Woods reproduced an email a reader had sent him, asking if he should take the contrarian position at the risk of a worse grade. This is a common fear amongst students, but for some reason non-students continue to perpetuate the myth. The fact is, most professors don’t grade those who disagree any worse than those who agree. They grade on quality of argument. The student who agrees with the professor can borrow from the lectures and the reading — the substance of the paper is developed in class. The student who disagrees has to either develop his position on his own or read material outside of the class. Consequently, students who take contrarian positions tend to have worse argued papers. But, the problem is the quality of the argument not the subject matter.
Here’s my advice. Let’s say that you’ve read an article on the civil war written by Tom Woods or Tom DiLorenzo and you’re convinced. But, this is pretty much the only literature you’ve read and your knowledge is generally limited. I don’t suggest you write a paper defending this position, largely because the scope of knowledge determines the quality of the argument. Now, if you’re one of those students who gets extremely involved with a topic and explores it in relatively more depth than your peers, then go ahead and write the contrarian paper. Note, none of this presupposes truth. One side or the other could be wrong, or both sides could be wrong, yet they both can advance good arguments.
If, for some reason, your professor gives you a worse mark than the one you expected, then stop by his/her office hours. If the professor included margin notes and you disagree with his judgment (of your argument) more likely than not that professor will be willing to discuss it with you. I took a womens’ studies course as an upper division elective once and I got a C or a B on a paper. I approached my professor after class and pleaded my case: she bumped my grade to an A.
The point is, very, very few professors will fail a student for taking an unpopular position. If you do poorly in a paper or an exam where you take such a position it’s probably due to problems in your argument and writing, not a problem with the position you decided to defend (assuming the position is relevant to the prompt, of course).