I Told You My TV Watching Habits Extend Past Law And Order…

Ok, something you should know about my family…they *love* Jeopardy! No seriously, my parents have basically watched it every day for…well, ever. And they’re pretty good at it- I think the fact that my dad has read the entire 1988 World Book Encyclopedia (which they got me as a gift, sigh) at least once…and in order, not “I feel like looking up penguins today.” I’m ok at it I guess, but I doubt I could do well enough on the online test to actually make it on the show. In contrast, some of you may have met Jarret- he helped me with research stuff and at conferences for a while:

Anyway, he won money whereas I sat at home yelling “how can you not know what a spinnaker is” at the television.

Given this background, it’s not particularly surprising to get the following from mom:

She’s right in that yep, there was an economics category a few days ago (and yes there is a comprehensive online archive you’re welcome), though looking at the questions I’m not sure how much I specifically had to do with my parents’ success. (I swear I don’t just lecture them about economics at family dinners. Well, not always.) I was curious to see how the players did, however, since there’s a great video that seems to no longer be available where, after the first clue in an economics category, the players just stared at the board and didn’t answer correctly for the rest of the category. (I think it was this game, but the visual was so much better.) This episode was also pretty good:

(I don’t understand how people who are perfectly fine with memorizing almanacs are scared of a silly little econ category.) I’ll let you just look through the clues, but let me just say that it started pretty much the way I expected, given the other instance I was familiar with. It’s actually pretty interesting to see the clues for a field that you know well, since it gives good insight into how the clues are constructed and chosen. In related news, I’m curious how many economics-related clues ended up in here:

I assume this is also what my advisor did with paper proposals he didn’t find interesting.

How Not to Sound Like an Idiot About the Trade Deficit, Part 1

Today (I guess technically yesterday) in “I just can’t”…

So, uh, we gotta talk, because that’s not even remotely close to how it works. Here’s me talking a bit:

How Not to Sound Like an Idiot About the Trade Deficit, Part 1

How Not to Sound Like an Idiot About the Trade Deficit, Part 1

Ok, we need to talk about the trade balance…not so much whether trade deficits are bad, since I fear that we’re not even ready for that…

Source: medium.com/@jodiecongirl/how-not-to-sound-like-an-idiot-about-the-trade-deficit-part-1-746f2fbee376

Economic Consulting, Or “Why If You Think You Can Make $750 An Hour Cleaning Data You Will Be Very Disappointed”…

If you’ve been following the news, you’ve likely noticed that there’s a pending lawsuit against Harvard University regarding discrimination against Asian-American students in the admissions process. I’m going to do a post on the substance of the case soon, but for now I want to talk a bit about the case logistics. (If you’re going to read about the case, take my usual disclaimer of “the media is not always great at reporting scientific findings properly” with you.)

More specifically, people in my circles are discussing David Card’s $750 billing rate, so let’s talk about “economic consulting.” (note: this has a particular meaning and is different from “economist who happens to be acting as a consultant”) “Economic consulting” most often translates to “litigation support”- damages calculations for product liability cases, impact reports for M&A, etc. Most of the time this involves putting an expert in the courtroom, and it’s thought to be helpful if they sound fancy, so they work with high-profile academics and such to be the actual experts. In fact, the first part of the expert reports is usually a pretty salesy bio of the expert, followed by how much the expert is getting paid- hence the knowledge of the $750 figure. (Expert reports generally aren’t made easily publicly available, but Card posted his in this instance, which is why people are aware of the number.)

It’s important to know that Card is not sitting there getting paid $750 an hour to clean data, run regressions, and whatever other tasks are involved in producing expert testimony. Instead, Card is affiliated with an economic consulting firm called Cornerstone Research, so they were probably involved in much of this work. (I’m pretty sure this has been acknowledged publicly in the expert report and/or other.) The expert billing rate is specific to the expert, however, so it’s likely not the case that the client is paying $750 an hour for most of the work done. ($750 also doesn’t seem unreasonable for Card’s level of fancy- one of the experts I worked for in grad school wasn’t nearly as fancy as Card and billed at $675.) That said, Card’s contract with the firm could take a number of forms (eg. does he get a percent of billings) and generally depends crucially on whether he brought the business to the firm or vice versa.

The “client,” in most cases, is one of parties in the lawsuit, meaning that the expert isn’t sought out or assigned by the judge in the case. As such, there are generally two experts for a given case, and each expert’s mandate is to make a case for their side. (This is similar to the principle that it’s not a lawyer’s job to make the opposition’s case for them, but it’s a little more awkward if they think the opposition is right than it would be for a lawyer.) Here’s another fun part- technically speaking, only what the expert knows is “discoverable” in court, so technically the consultants could do all of the analysis and just not share results that are inconvenient to the case with the expert. I would hope this doesn’t happen very often just on principle, but I don’t have good data. Also, this leads to some interesting questions as to at what point in the process the actual expert is brought in, since it’s not really possible to know beforehand what the answer is going to look like when the question involves actual data.

Speaking as one of the economic consultants that supported the experts, the tasks can be really boring or pretty interesting- for example, how would you try to show that banks knew about Enron’s troubles and kept lending to them anyway? (My contention is that it involves interest-rate spreads. Oh, and a PSA: if you ever take such a job, make sure you are familiar with how to run a Hausman test.) Some tasks are just, well, weird…one time I had to call a phone sex line to try to reverse engineer how its automated cell center technologies function- for the record, I was not mad about the task so much as I was about the fact that we were representing a huge patent troll.

Here’s an interesting article about one such economic consulting firm…I’m not endorsing the tone per se, but there’s a lot of detail here on the history of the industry and whatnot:

These Professors Make More Than a Thousand Bucks an Hour Peddling Mega-Mergers — ProPublica

These Professors Make More Than a Thousand Bucks an Hour Peddling Mega-Mergers — ProPublica

The economists are leveraging their academic prestige with secret reports justifying corporate concentration. Their predictions are often wrong and consumers pay the price.

Source: www.propublica.org/article/these-professors-make-more-than-thousand-bucks-hour-peddling-mega-mergers

Lastly, and perhaps most hilariously, remember when I said that what the expert doesn’t see generally isn’t discoverable to the opposing side? Well, the reverse is also true- all relevant work product must be provided to opposing counsel upon request. But…you know those episodes of Law and Order where Michael Cutter requests a document and gets 30 boxes in response along with a flippant “well it’s in there somewhere”? That practice has a nerd equivalent, and it’s pretty amazing (click for the full thread):

I’ll state for the record that I didn’t do any of this, but I guess that’s partly because I didn’t think of it. Also, there really should be a Law and Order spinoff that focuses on the economic consultants, right after we get CSI: Regression Analysis off the ground.

Adventures In Misleading Data, Housing Markets Edition…

So there’s a new study out that apparently has a good PR team, since I saw all sort of articles with such headlines today:

Well that’s alarming…except it’s likely not true, unless you define “afford” as “can’t rent a place that’s more expensive than 40 percent of similar places without spending more than 30 percent of your income.” (The 40th percentile thing seems to come from how HUD calculates “fair market rents.”)

Anyway, I rant about it more here:

Not to alarm you, but here’s a headline that’s been popping up a bunch:

Not to alarm you, but here’s a headline that’s been popping up a bunch:

Anywhere? Are you sure? Because, not gonna lie, my backup plan for when I get sick of the world is to go take a minimum wage job and live…

Source: medium.com/@jodiecongirl/not-to-alarm-you-but-heres-a-headline-that-s-been-popping-up-a-bunch-9246716a963e

…and yes, I’m mad about forgetting to put a title on the article and don’t want to talk about it.

What I’ve Been Doing On My Non-Summer Vacation…

Apologies if you’re expecting something totally serious, but come on, it’s Saturday…

I recently wrapped up a work thing, so I’ve been poking around regarding new opportunities…obviously, in the course of doing so I’ve had to update my LinkedIn, resume/CV, etc., and the reality is that if you look closely it becomes clear that I took…well, not a complete sabbatical, more like a half vacation. This is in part because I don’t just put “HEY I WAS WRITING OK LEAVE ME ALONE” as a job title, but also partly this:

Some backstory: I was a competitive figure skater as a kid, but (being realistic here) I wasn’t really good enough for it to be worth it to forgo educational opportunities and such for the sake of a sport. I hadn’t skated in about 15 years until the world figure skating championships took place literally across the street from me- I pulled a few strings and got to be all official and such:

(yup that’s a bathroom selfie I apologize for nothing) At the event, I got to talk to reps from all of the skate manufacturers and such,and you will be pleased to know that ice skate technology has progressed pretty considerably in the last 20 years. That said, skating is still hard and takes a lot of work, but one of the upsides is that there’s an amazing community of adult skaters who are serious about their sport but also have jobs and such. For example, my friend Sarah both runs the nuclear reactor lab at MIT and makes her own pretty dresses, because why not.

I stupidly thought that I would at least be the only economist on the scene, but…no. This guy’s going to be a professor in the fall:

(I’m not giving more info because, in rather depressing news, he doesn’t talk about skating a lot because he’s afraid he won’t be taken seriously in academia. *primal scream*) I consoled myself with the fact that I’m still only at N=2, but then I had the following conversation at a competition dinner:

friend: did you know that one of the men in the dance event has a Nobel Prize in economics?
me: *nods politely, assuming friend must have gotten her facts wrong* oh that’s really interesting
me, googling later: OMG SHE’S RIGHT HOW DID I NOT KNOW THIS

(I really don’t know how I didn’t know this, given that it’s even in his Nobel Prize bio.) So yeah, I’m by far not even the most impressive economist in the adult figure skating world, and it’s not even obvious that I’m the most impressive figure skater in the econ world. (yes, I know that “adult figure skating” sounds like porn, just let it go) But I guess our existence makes graphics such as these make a little more sense:

Now that you’ve read this far, please indulge me and allow me to give what I feel is an important piece of advice: find a hobby that you can be passionate about. No really- I get that work and family take up a lot of time, but it’s important for a number of reasons. Among them:

  • you will get access to a community of like-minded individuals that are outside of your other circles- it’s refreshing, trust me
  • it’s probably psychologically healthy to be able to pursue some goals in a context where your life won’t be meaningfully worse if you don’t succeed
  • you will be a more interesting person (unless your hobby is distance running =P) and probably in better health if your hobby is of a physical nature

Seriously, if Josh Lerner can have a donkey farm, you can do the hobby thing too. Sometimes you’ll even find gear that allows you to combine your interests:

Causal Friday: But What About All The People Who Didn’t Declare Bankruptcy?

I’m not quite sure why this is in the news again now (there was a paper critique I can read ok), but it is so let’s take a look at it. Here’s the setup:

In 2005, she [Warren], along with David Himmelstein, Deborah Thorne and Steffie Woolhandler, published a paper in the journal Health Affairs documenting a memorable statistic: More than 40 percent of all bankruptcies in America were a result of medical problems, they wrote. In 2009, they updated that research with an even more startling number: Medical bills were responsible for more than 62 percent of all American bankruptcies.

One main problem here is the may that “medical problems” or “medical bills” is conveniently defined, but let’s put that aside for the moment. Logically, these statements mean that the study authors claim that medical bills cause bankruptcy. If you look at the methodology, however, you’ll see that the researchers get to this notion of causality by only looking at those people who declared bankruptcy, and…well, that’s definitely not how causality works.

To see why, let’s consider a logically equivalent situation that has the benefit of being far more obviously absurd. Namely, I could claim that having two legs causes bankruptcy because most people who declare bankruptcy have two legs. (I said most do not start with me) In this scenario, your brain’s knee-jerk reaction is probably “hey wait, but most people who don’t declare bankruptcy also have two legs, so this makes no sense.” And your brain is not wrong! For some reason though, people aren’t primed in the same way to conjecture that a large chuck of people have medical bills, not just those who declare bankruptcy. (I think the bill threshold to be counted in this context was $1,000, and really, who among us…)

We see this principle get abused and debunked in a legal sense all the time- and by that I obviously mean on Law and Order. IIRC, there’s an episode where a defense attorney argues that video games lead to murder because the murdery kid played video games and Jack McCoy is all “but what about all of the kids who play video games and don’t kill anyone?” I’m pretty sure Jack won the case, and we all learn an important lesson about holding ourselves to this standard of logic even when the bad conclusion is not intuitively absurd.

But wait, there’s more…my commentary on the matter led to this tweet from a friend of mine:

My initial reaction in a nutshell:

In this case, my lizard brain was temped to answer no, since, well duh. But, technically speaking yeah, you need a counterfactual group of people who don’t get shot (maybe not exactly the same size) to see how many of them die within an hour. I guess the thing here is that we generally know enough about human robustness to conclude that the chances of randomly kicking the bucket in the next hour without getting shot is negligibly small. (*knocks on wood*) But even then, I’m implicitly assuming that people who get shot aren’t systematically close to death anyway…which, I’m pretty sure this is just a different episode of Law and Order. (that link is a pretty good test of whether law school is for you tbh)

So what have we learned from this? Yes, in general, to establish that X causes Y, you need to look at both people who experience X and don’t experience X. (That said, I think you could rule out the possibility that X causes Y by only looking at people who experience X if they don’t also experience Y.) BUT, we can sometimes make do by only looking at people who experience X if we have a good read on what would happen if people didn’t experience X. Be careful though, since this only works if the people who experience X resemble the overall population, since otherwise selection bias bites us in the ass.

This shortcut, if you will, is more than just a thought exercise- in pharmaceutical trials, for example, it’s supposed to be the case that half of subjects get a placebo rather than the treatment being tested. This is ethically fine when the treatment is, say, Viagra, but what if it’s a cancer treatment? The ethics of denying people a potentially successful treatment for the sake of the pure scientific method is far less clear, especially when we’ve previously learned what happens when people don’t get the treatment. (spoiler: they die)

Note, however, that none of this “domain knowledge,” loosely speaking, allows us to conclude that X causes Y by only looking at people who experience Y. You could get closer by establishing that people who don’t experience Y generally don’t experience X (i.e. people who don’t declare bankruptcy don’t have medical bills), but even then you’ve only established correlation, and correlation does not imply causation.

Coming back to the original study and the ensuing debate…I can’t help but be annoyed with Elizabeth Warren here (even though in general I like her quite a bit), specifically because she’s stamping her academic credentials with information that is either poorly thought out or in bad faith. And for what purpose, even? Medical bills aren’t a problem only because they can result in bankruptcy, bankruptcy just happens to be an outcome that is enticingly easy to observe. In a way, they’re overcomplicating things, since a $10,000 medical bill imposes a cost of $10,000 on a household, full stop, and that matters in the amount of, wait for it, $10,000. Focusing on bankruptcy as the dealbreaker outcome even kind of gives the impression of “oh, you’re medical bill didn’t result in you lying in a ditch somewhere? You’re fine then!” which is, well, probably not fine…but I know someone who might think otherwise:

What I’m Reading Today: So, About The Gig Economy…

So here’s something that sounds kind of boring:

Contingent and Alternative Employment Arrangements Summary

Contingent and Alternative Employment Arrangements Summary

Freedom of Information Act  |  Privacy & Security Statement  |  Disclaimers  |  Customer Survey  |  Important Web Site Notices

Source: www.bls.gov/news.release/conemp.nr0.htm

…but hear me out. In the last few years, people have been talking about how the “gig economy”- i.e. Uber drivers, Task Rabbits, etc.- is taking over and how the future of work is going to look significantly different from the status quo. As it turns out, these gigs are a subset of “alternative employment arrangements,” and this particular set of data hasn’t been collected since 2005- 12 YEARS! (the data here is from 2017, I swear my math is not that bad) I’m sorry but that’s at least a little exciting.

Except…it’s kid of not. Contrary to the intuition of a lot of economists and other assorted individuals, the numbers don’t show the explosion of the gig economy that we were convinced is happening, at least not as far as workers’ primary source of employment is concerned. If you don’t feel like wading through the official document, here’s a good summary:

How the Gig Economy Is Reshaping Work: Not So Much

How the Gig Economy Is Reshaping Work: Not So Much

Defying expectations, the first official survey of “alternative work arrangements” since 2005 shows that nontraditional employment has become less common.

Source: www.nytimes.com/2018/06/07/business/economy/work-gig-economy.html

Of course, we don’t know what happened between 2005 and 2017, nor is “gig economy” defined particularly precisely in the context of this survey. If we really do think that the future of work is trending in the gig direction, perhaps we should be tracking it more frequently and precisely, especially since economists have gotten different numbers with similar-seeming methodology. (Duh, I know.) In the meantime, I have a hypothesis- the number of people in these alternative employment arrangements hasn’t changed that much overall, but such arrangements have become more directly consumer facing and consumers have explicitly been made aware of the employment circumstances of the people they’re transacting with. (In other words, there could be, say, gig manufacturing happening all over the place- and I’m told that this used to happen a lot way back when- but you likely wouldn’t ever come in contact with it.)

Anyway, yeah, that’s what we’ve been waiting 12 years for…economists are apparently quite a patient bunch.

An Update On Ben Bernanke’s Helicopter…

A quick google image search reminds me that “Helicopter Ben Bernanke” is a nickname that he’ll never live down:

The consensus is that the name came about as a result of a speech he gave in 2002, in which he said:

Each of the policy options I have discussed so far involves the Fed’s acting on its own. In practice, the effectiveness of anti-deflation policy could be significantly enhanced by cooperation between the monetary and fiscal authorities. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman’s famous “helicopter drop” of money.

Given this, I have questions…first, since “anti-deflation” and “inflation” are essentially the same, I’m not sure why this is terribly controversial, at least as far as economic effects are concerned. (hint: printing money generally leads to inflation in the long run) Second, why is it “Helicopter Ben” and not “Helicopter Milton?” At the risk of sounding like a cranky 5-year-old, he started it:

Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.

To be fair, I’m pretty sure Friedman only intended for this to be a thought exercise, not an actual means by which to increase the money supply and stimulate the economy, whereas subsequent economists have taken it somewhat more literally. In case it’s not clear, Federal Reserve policy usually operates by buying and selling stuff from banks with newly created money, so the difference with the helicopter thing is that people and not banks pick up the money and spend some of it, which starts a virtuous cycle of economic activity. (This is how it eventually got the name “quantitative easing for the people.”)

If we take the helicopter thing less literally, Bernanke would likely argue that Keynes started it:

Keynes, however, once semi-seriously proposed, as an anti-deflationary measure, that the government fill bottles with currency and bury them in mine shafts to be dug up by the public.

I guess, in a way, sure…but what sort of sadist was Keynes? (happy birthday sir, by the way) “We could do a monetary expansion by just handing cash to people, OR…how about if we take the effort to package it and distribute it in the most annoyingly labor intensive, uncertain, and potentially dangerous way possible?” But I digress…

Back to Ben…I’m willing to keep doing the “Helicopter Ben” thing if we can get a Kickstarter funded for this:

Also, I think we finally found where Ben’s helicopter drops take place:

*plans road trip* Who’s with me????

Update: Apparently I have good timing, since here’s some Bernanke talking about quantitative easing from, like, right now.

Hello World!

Hi world, it’s Jodi. I’m an idiot and deleted my site by accident but am in the process of putting it back together. Stay tuned. :-/ In the meantime, I’m adding new posts and restoring old ones so keep reading…

Why Did One Simple Jobs Tweet Arouse the Ire of Economists Everywhere?

So I have a confession…for some reason that I can’t really explain, I thought that the jobs report comes out on the second Friday of the month when the first of the month falls on a Friday. Anyway, I was wrong, and as a result I slept through the jobs report coming out at 8:30am, and I woke up to my Twitter feed of economists going absolutely nuts over this tweet:

I had a general intuitive understanding that it wasn’t cool to talk about the jobs numbers until after they were released to the public, but I wasn’t aware that there was an actual rule against it, since it had never really been an issue before. Thanks to the irate economists, however, I now know more about this than I probably ever need to…and by extension, so will you:

Why Did One Simple Jobs Tweet Arouse the Ire of Economists Everywhere?

Why Did One Simple Jobs Tweet Arouse the Ire of Economists Everywhere?

So here’s a tweet that seems fairly uncontroversial on the surface…

Source: medium.com/@jodiecongirl/why-did-one-simple-jobs-tweet-arouse-the-ire-of-economists-everywhere-65036aeeb08b