Economics

A week of links

Links this week:

  1. Why idiots succeed.
  2. Rory Sutherland on social norms.
  3. Economics incentives versus nudge (pdf). Don’t forget that basic economic mechanisms can work.
  4. We’re related to our friends.
  5. Are there really trillion dollar bills on the sidewalk?
  6. A bash of the Myers-Briggs test. Personally, I’m a fan of the big five plus g. On g, the heritability of chimp IQ.
  7. Talent versus practice. Talent wins this one.
  8. Throwing away money on brain science.

The wisdom of crowds of people who don’t believe in the wisdom of crowds

MIT Technology reports new research on the “wisdom of the confident”:

It turns out that if a crowd offers a wide range of independent estimates, then it is more likely to be wise. But if members of the crowd are influenced in the same way, for example by each other or by some external factor, then they tend to converge on a biased estimate. In this case, the crowd is likely to be stupid.

Today, Gabriel Madirolas and Gonzalo De Polavieja at the Cajal Institute in Madrid, Spain, say they found a way to analyze the answers from a crowd which allows them to remove this kind of bias and so settle on a wiser answer.

… Their idea is that some people are more strongly influenced by additional information than others who are confident in their own opinion. So identifying these more strongly influenced people and separating them from the independent thinkers creates two different groups. The group of independent thinkers is then more likely to give a wise estimate. Or put another way, ignore the wisdom of the crowd in favor of the wisdom of the confident.

To test this result, they eliminated those who updated their estimates based on that of the crowd:

Madirolas and De Polavieja began by studying the data from an earlier set of experiments in which groups of people were given tasks such as to estimate the length of the border between Switzerland and Italy, the correct answer being 734 kilometers.

After one task, some groups were shown the combined estimates of other groups before beginning their second task. These experiments clearly showed how this information biased the answers from these groups in their second tasks. …

That allows them to divide the groups into independent thinkers and biased thinkers. Taking the collective opinion of the independent thinkers then gives a much more accurate estimate of the length of the border.

The funny thing about this research is that anyone who believes in the wisdom of crowds and updates their belief based on that collective wisdom is then excluded from the collective estimate. The wisdom of crowds needs someone who trusts their own opinion more than that of the crowd. It is similar to the efficient markets hypothesis relying on those who don’t believe in it – if everyone believed markets were efficient, no one would invest effort in finding and acting on information that might affect market prices. That effort is what allows prices to reflect this information.

So who are the confident people who form this more accurate estimate? The Dunning-Kruger effect tells us that the unskilled will be overconfident as they don’t have the cognitive skills to recognise their ineptitude. But despite this effect, the more skilled do tend to be more confident than the unskilled – just not by as much as the skill gap warrants. As a result, eliminating the less confident can still cut the least skilled.

MSiX: Marketing Science Ideas Xchange

For those in or near Sydney at the end of July, there’s an interesting conference in the works – the Marketing Science Ideas Exchange. From the blurb:

The Marketing Science Ideas Xchange (MSiX) is the first event of its type in Australia dedicated to the interface between behavioural science and marketing. The conference will demonstrate why behavioural sciences in general, and behavioural economics in particular, is making such strong headways into advertising. The conference promises to be a mix of theory and practical examples, all housed within a fun and interactive ideas exchange environment.

It will be interesting to go to a behavioural insights conference full of marketers, rather than the usual economists. Marketers have had to be willing to embrace a relatively realistic understanding of human behaviour and, obviously, have been exploiting decision-making biases for years. But I get the sense that they could be more systematic in their approach and adopt a much richer understanding of human nature.

Headlining the conference is Rory Sutherland, the best friend of behavioural science in the ad world (although Rory is happy to keep using the term ‘behavioural economics‘). Watch the video below for a taste of what is on offer. I endorse Rory’s fast train strategy, and recommend googling around for some of this other presentations.

There are some other interesting speakers in the lineup. I recently saw Alex Gyani from the UK’s Behavioural Insights Team (now seconded in the NSW Department of Premier and Cabinet) speak on the need for evidence based policy, and expect he’ll be continuing that theme. The rest of the program is here.

A week of links

Links this week (or closer to a month):

  1. It’s reigning men. How our convict past explains our glass ceiling.
  2. Rory Sutherland on measurebation.
  3. The genetics of investment biases (ungated version). HT: Tyler Cowen.  Basically another confirmation of the three laws of behaviour genetics.
  4. Rats regret bad decisions.
  5. Matt Ridley on fat.
  6. Pulling apart the research on the destructiveness of female hurricanes – Paul Frijters and Andrew Gelman.
  7. Sendhil Mullainathan on the limits to big data.

Genes and socioeconomic aggregates

In April, a Conference on Genetics and Behaviour was held by the Human Capital and Economic Opportunity Global Working Group at the University of Chicago.

The videos for the conference are now up, so as I watch through them, I’ll post links and some brief thoughts. The first session, with videos linked below, was on Genes and Socioeconomic Aggregates. The video and audio are average at times, and you might want to get the slides (links provided where available) as they are hard to read in the video at times. However, there are some good bits in all of the presentations.

Gregory Cochran: Genetics and Society (slides)

Cochran laid out some ideas that should be in the minds of economists, although he does not focus much attention on selling the ideas. Unfortunately, the questions at the end got derailed by epigenetics (my views approximate Cochran’s). One interesting argument by Cochran is that human environments tend be variable, as, in a Malthusian world, good times (when people breed like mad) tend to be followed by bad (too many people) which tend to be followed by good (people died in the bad). As a result, epigenetic transmission based on the current environment may be a poor strategy.

When Cochran posted this video on his blog, some interesting discussion followed in the comments – they are worth checking out.

Enrico Spolaore: Ancestry and the Diffusion of Economic Development: Facts and Questions (slides)

Spolaore touches on his work concerning genetic distance and the diffusion of development (I have posted about it here, here and here). He is extending this work to look at the diffusion of fertility reduction from France (where the demographic transition first occurred), and is getting similar results.

Steven Durlauf: Two Remarks on the Inference of “Macro” Genetic Effects (slides)

I did not get much from Durlauf’s presentation, although some of the questions were interesting. Steve Hsu deflates the “it’s all too hard” message when he points out that animal breeding is now using genetic data.

Henry Harpending: Some Quantitative Genetics Approaches

Harpending discusses his work on how assortative mating can mimic strong selection. I sense this presentation might be difficult to follow if you aren’t familiar with his work (a link to that is here). Not much value in the question session, which gets derailed by issues concerning scaling when estimating heritability.

Aldo Rustichini: Determinants of Inequality and Intergenerational Mobility (slides)

A tough presentation to follow – you need to use the slides to have a chance of getting across it – and not recommended for those not mathematically inclined. The highlight is Greg Cochran trying not to jump out of his chair between the 7 and 8 minute mark due to some comments about heritability. Cochran also deflates the idea that there is a high level of false paternity in humans – for more on that, check out this post by Razib Khan.

Is poverty genetic?

Quamrul Ashraf has pointed me to an episode of Through the Wormhole with Morgan Freeman titled “Is Poverty Genetic?”

The official version of the video is below (payment required?), although it is blocked in Australia (Australians lead the world in digital piracy, despite being willing to pay for content. This sort of thing is why). Below that is another version I managed to find on YouTube – so go for it.

The good: The coverage of Ashraf’s work with Oded Galor on genetic diversity and economic development (my posts on their work are here), experiments on capuchin monkeys’ sense of fairness, and our sense of shame.

The so-so: The opening piece on Eric Turkheimer’s research on the heritability of IQ was OK, but when tied into the next section on differences in brain development, it goes a bit awry. A few concepts that would have helped – IQ heritability increases with age, differences that emerge after birth can be genetic, and genes shape their environment.

The not so good: Kin selection being spun as sacrifice for the benefit of the species. The overall conclusion.

Not sure: The econophysics of poverty.

A week of links

Links this week:

  1. Some economist bashing – first from Mark Buchanan, who wonders why economists wheel out “whacky” versions of what they know in public debate, and second, from Tim Harford, on an astonishing record of complete failure.
  2. Herb Gintis reviews Complexity and the Art of Public Policy: Solving Society’s Problems from the Bottom Up (HT: Arnold Kling)
  3. We can’t ignore the evidence: genes affect social mobility.
  4. The costs of climate change – some corrections.
  5. Steven Pinker on writing.

A week of links

Links this week:

  1. A conversation with Rory Sutherland. Many good pieces, but my favourite line:

Certainly there’s a problem with numbers in that there are sophisticated things in life that we all understand perfectly well when verbally described. Should psychology be constrained by math? I mean, who has the better understanding of human behavior—Shakespeare or Eugene Fama? If you make mathematical expression a barrier to entry, to any kind of theory, you are undoubtedly limiting yourselves.

  1. Another article taking a shot at the idea that “all calories are equal”.
  2. A not so glowing review of the latest book in the Freakonomics franchise – Think Like a Freak. Noah Smith also takes a shot.
  3. H. Allen Orr reviews Nicholas Wade’s A Troublesome Inheritance: Genes, Race and Human History.
  4. Two good pieces on the mess that is copyright protection – an extended riff on barriers to innovation and the ridiculous length of copyright terms.

Doubling down

First, from Andrew Leigh, discussing Gregory Clark’s work showing that low social mobility persists across countries and policy environments:

How do we break the pattern? Part of the answer must lie in a fair tax system, a targeted social welfare system, effective early childhood programs, and getting great teachers in front of disadvantaged classrooms. We need banks willing to take a chance on funding an outsider, and it doesn’t hurt to maintain a healthy Aussie scepticism about inherited privilege.

As an aside, it appears Leigh (with Mike Pottenger) is finding the same low mobility in Australia as Clark has found elsewhere.

In contrast, from Arnold Kling:

For libertarians, the implications of Clark’s finding of strong heritability of social status are ambiguous. On the one hand, his findings argue against extensive efforts at social engineering that try to achieve parity across groups. … Attempts to engineer different outcomes tend to produce perverse results. …

On the other hand, his findings argue against the need to create strong incentives to succeed. If some people are genetically oriented toward success, then they do not need lower tax rates to spur them on. Such people would be expected to succeed regardless. The ideal society implicit in Clark’s view is one in which the role of government is to ameliorate, rather than attempt to fix, the unequal distribution of incomes.

Kling’s approach to Clark’s argument seems preferable to doubling down on measures that don’t appear to increase social mobility. That is, of course, if increased social mobility is what we should be chasing.

A week of links

Links this week:

  1. There are plenty of reviews of Nicholas Wade’s new book, A Troublesome Inheritance: Genes, Race and Human HistoryRobert VerBruggen‘s is one of the more interesting. We’ll be throwing a lot of social science under the bus if we apply Andrew Gelman’s filter more generally. Greg Cochran points to some errors and Razib offers a perspective.
  2. Gelman again, this time on poor research in evolutionary psychology. I agree with both him and Pinker here.
  3. A review of Think Like a Freak. From the excerpts I have seen, it seems that Levitt and Dubner are running into the same problem as a lot of the behavioural economics literature – there are only so many “funky” stories to go around.
  4. Can a single gene explain 3 per cent of the variation in IQ? I don’t think so, but interesting none the less.