Jay on Cohabitation

Meg Jay’s article on cohabitation (“The Downside of Cohabiting Before Marriage”) is a great illustration of the use of the scientific process.  I believe that reading and understanding it is a good investment of time and effort, particularly for a young person considering cohabitation.  Jay begins with an observation.  Beginning in 1960, there has been a tremendous increase in cohabitation.  Currently, 7.5 million people live together without marriage and half of all marriages will be preceded by cohabitation. 

An observation is followed by questioning and measurement.  A survey of young adults found that two thirds believed that cohabitating before marriage was a good way to reduce the probability of divorce.  This belief is contradicted by experience as measured by research.  Cohabitating prior to a commitment to marry increases the probability of divorce.

A hypothesis is formed to explain the higher divorce rate of cohabitors: the population of cohabitors was different than the population as a whole; they were less bound by social norms and therefore both more likely to cohabitate and divorce. As cohabitation became the norm and the result that divorce rates among cohabitors remained higher, other hypotheses were needed.  One was that cohabitation itself introduced risk to a marriage following cohabitation. 

Jay describes the new hypothesis.

Moving from dating to sleeping over to sleeping over a lot to cohabitation can be a gradual slope, one not marked by rings or ceremonies or sometimes even a conversation {This is called sliding into cohabitation]. Couples bypass talking about why they want to live together and what it will mean.

WHEN researchers ask cohabitors these questions, partners often have different, unspoken — even unconscious — agendas. Women are more likely to view cohabitation as a step toward marriage, while men are more likely to see it as a way to test a relationship or postpone commitment, and this gender asymmetry is associated with negative interactions and lower levels of commitment even after the relationship progresses to marriage. One thing men and women do agree on, however, is that their standards for a live-in partner are lower than they are for a spouse.

Sliding into cohabitation wouldn’t be a problem if sliding out were as easy. But it isn’t. Too often, young adults enter into what they imagine will be low-cost, low-risk living situations only to find themselves unable to get out months, even years, later. It’s like signing up for a credit card with 0 percent interest. At the end of 12 months when the interest goes up to 23 percent you feel stuck because your balance is too high to pay off. In fact, cohabitation can be exactly like that. In behavioral economics, it’s called consumer lock-in.

Lock-in is the decreased likelihood to search for, or change to, another option once an investment in something has been made. The greater the setup costs, the less likely we are to move to another, even better, situation, especially when faced with switching costs, or the time, money and effort it requires to make a change.

I might add that I am more likely to like any research that picks up an idea used by economists. 

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It’s the Horse Race

George Mason University’s Center for Media and Public Affairs announced a study covering 118 stories by NBC, CBS, ABC and Fox on the Republican primaries between January 1 and January 10 (“Study: TV News Bashes Romney, Boosts Horse Race”).  I found the experimental methodology interesting and a finding a depressing.

The press release covers their methodology which is designed to create a statistical control and an examination process that can be replicated.

The Center for Media and Public Affairs (CMPA) is a nonpartisan research and educational organization which conducts scientific studies of The Center for Media and Public Affairs (CMPA) employs content analysis to study news coverage. "Content analysis" is a social scientific method for producing an objective and systematic description of communicative material. In order to be scientific, such analysis requires explicit rules and procedures that minimize a researcher's subjective predispositions. Categories and criteria are rigorously defined and applied consistently to all material. Each system must be reliable, meaning that additional researchers using the same criteria should reach the same conclusions. Because it is both systematic and reliable, content analysis permits the research to transcend the realm of impressionistic generalizations, which are subject to individual preferences and prejudices... 

CMPA researchers have honed their skills on a wide variety of projects since 1987, making them among the best trained and most experienced at news media content analysis. Researchers examine news stories on a statement-by-statement level, recording all overt opinions expressed by either the reporter or other individuals quoted in the story. Each opinion is catalogued according to the source of the comment, the target, and the issue under discussion. Researchers do not assign overall positive and negative scores to entire stories, since such an approach fails to fully account for the nuances within each story. Individual statements are logged into a computerized database, allowing statistical analyses to fully describe the relationships among news sources, time periods, the focus of coverage and the tone of coverage.

Depending on the length and breadth of the study, CMPA's codebooks (which contain the categories and rules for coding) range from 100 to 300 pages long and include 20 to 50 different analytic variables. Research assistants are trained for between 150 and 200 hours before they begin work on a project. During the training process, researchers code sets of stories, and their work is compared to that of previous coders until a minimum reliability level of 80% is reached for all variables. That means that the new coders must reach the same conclusions as their counterparts at least four out of five times. For most variables, the level of agreement is much higher.

The story compares the number of positive to negative content of stories by each network for each candidate but that is not the part interested me. You will have to follow the provided link if this part of the story interests you. 

The researchers found that 105 major topics of the stories covered the campaign as a “horse race” and only 16 on the policies of the candidates. I assume that the news organizations know best how to maximize their audience and am left to conclude that their viewers would rather know about today’s poll, mudslinging, name calling and money raising than the candidates issue positions and the likelihood that these they would achieve their stated objectives. That is a sad conclusion.

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GDP Growth for 2011

The Bureau of Labor Analysis released its estimate of GDP growth yesterday; fourth quarter growth for 2011 was 2.8%, slightly below projections and 1.7% for the year.

The graph “GDP Growth: 1970-2011” gives some historical context to the current recession. The orange line plots GDP growth from 1970 through 2011 and the green dashed line plots average growth for the same period. Because I used annual data rather than quarterly and recessions are normally defined by quarterly data, the graph smoothes out the depth of some recessions. The yellow boxes represent recessions and the length of the boxes, their duration. The black vertical lines represent the end of one presidency and the beginning of another.

One insight from the graph is that the current recession is the deepest during the time frame and that the 1982 recession was the second biggest.

The second graph, “GDP Growth Following Three Recessions,” shows the GDP growth beginning with the first year of negative growth and following the subsequent nine years. The Great Depression (1929-1939) was clearly the longest and deepest, followed by the recession of 2008 and 1982. 

The Great Depression and the 2008 recession were both financial crises. Work by Reinhart and Rogoff, This Time Is Different: Eight Centuries of Financial Folly, concludes that financial crises are the most enduring. Not only is the fall in growth larger, but the subsequent growth more shallow. The second graph supports their conclusion. 

Next year’s growth statistics will be interesting. Will growth accelerate, more closely mirroring growth following the Great Depression, or will it continue to tract under the recovery following the 1982 recession? 

The graphs leave many more questions unanswered than answered. Does policy encourage recovery and if so what type? Rather than focusing on GPD contraction and growth, why not focus on movements in the unemployment rate? How do recessions impact sovereign debt? Asking a good question is exciting, searching for its answer, invigorating, and finding an answer, satisfying.
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Conceal Carry Laws on Texas Campuses

The Texas legislature is deliberating a law that would allow all citizens with concealed handgun licenses to carry handguns on college campuses.  Most debates about the impact of gun ownership on crime generate much heat but little light and this debate appears no different.  Little evidence is presented to support a position.  I have four objectives in this post.  First, I will do a very quick review of the literature on the relationship between gun ownership and crime.  Next, I will present a simple model that incorporates both positive and negative consequences of allowing concealed handguns on college campuses.  I will also present my prior beliefs about the effects of gun ownership on crime.  Finally, I will also suggested a method of phasing in laws allowing concealed weapons that could be reversed if data suggests that the laws increased rather than decreased crime on college campuses.

My review of the literature on the relationship between gun ownership and crime will of necessity be short.  I know little about it.  What I know is that the current assertion that crime decreases as gun ownership in a community increases is based on the influential work of John Lott.  His book, “More Guns, Less Crime,” neatly summarizes his empirical findings.  Before his research, the conventional wisdom held that there was a direct causal relationship between gun ownership and crime.  Controversial research sparks additional research to confirm or disprove results.  Ian Ayres and John Donohue published results that found no relationship between gun ownership and crime (“Shooting Down the ‘More Guns, Less Crime’ Hypothesis,” Sanford Law Review, Vol. 55, 1193, 2003; “The Latest Misfires in Support of the ‘More Guns, Less Crime’ Hypothesis,” Sanford Law Review, Vol. 55, 1193, 2003).  Ayres and Donohue’s position seems to represent what might be called the academic “consensus” if it exists although research showing increased gun ownership having a positive or negative effect on crime exists (See also Ayers, “Super Crunchers”).An econometric model could be applied to measure the impact of any change in the use of conceal carry laws, but I will apply it to the current legislation which would allow concealed weapons on college campuses in Texas.  A simple version of the model assumes that there are both direct and externality benefits and costs associated with increased gun ownership.  Direct benefits include a student, staff or faculty member using a concealed weapon to stop a crime on campus.  A positive externality results when someone with criminal intent reduces activities on campus out of fear that the envisioned victims might be able to protect themselves with guns.  A direct cost includes a student acquiring a concealed carry license to plan a crime against a student or faculty member.  A negative externality includes accidental shootings and crimes of passion. 

My prior belief is that the direct benefits and costs would be low and would be overwhelmed by the externality benefits and costs.  My father was a cop and provided anecdotal evidence.  He told me that he never responded to a call in which someone had successfully protected themselves or their families with a gun, but that he responded to many calls in which a person shot a friend or family member fearing that they were a criminal.  I also do not believe that the number of students or faculty who plan murderous escapades will change much with expanded rights.  The level of crime will move depending on changes in the positive and negative external effects.  If the positive effects were larger than the negative, then the law would be beneficial.  If not, the law is harmful.

But why is opinion important when the impact of this law can be measured?  A phased in law would create a natural experiment.  It might work something like this.  Twenty five percent of campuses, selected randomly, would allow faculty to carry concealed weapons.  Annual data on campus related crime would be compared to crime rates on these campuses prior to the new law, and with the crime rates of campuses without the new right.  If statistical evidence showed that the new law increased crime, the law would be rescinded.  If the law reduced crime, faculty at all campuses would be allowed to carry concealed weapons and 25 percent of campuses would be selected to expand the right to carry concealed weapons to students as well.  Annual data would again be collected.  If the expansion of conceal carry rights to students increased crime, that portion of the law would be rescinded but faculty and staff could still carry concealed weapons.  If the law reduced crime, it could be expanded to include students on all campuses.  A phased in version of conceal carry laws accompanied by measurement of impact would take the guess work and some of the heat out of the debate.
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Two Problems with Profiling

Profiling is a method of observing characteristics, actions and circumstances to draw conclusions about a person.  It is a useful tool that we all use every day.  Doctors build health profiles based on age, weight, race, sex and personal habits such as drinking and smoking.  Amazon books uses profiling to suggest books you might be interested in based on past purchases and current browsing. 

Profiling becomes controversial when race is one of the observed characteristics or when the profiler can legally use coercion on the profiled even when the profiled characteristic is statistically based.  Suppose Officer Holmes of the Arcadia Police Department observes that drug use has crept into his normally peaceful jurisdiction.  He travels to Gotham and notes that four times as many Hispanic males are arrested on drug charges than Asian males.  Based on that observation, he focuses his time and other police resources on Hispanic males to reduce drug related crime.  The problem could be one of reverse causality.  Perhaps more Hispanic males were arrested in the past because the police harbor prejudices against Hispanic males.  They are arrested more frequently because they are investigated more frequently.

Now assume that Officer Holmes has read scientifically conducted research based on surveys that finds that 12% of Hispanic males acknowledge illegal drug compared to 3% of Asian males.  He is scientifically justified in using race as a profiling characteristic, but problems remain.  In the course of his work, using race, sex, location and other behaviors to profile potential drug users, he observes 1,000 Hispanic males.  Of these, he stops and questions 270, and of these, he arrests and charges 60 with a drug related crime and all are convicted.  The remaining 210 Hispanic males were innocent and while they were only stopped and questioned, may resent Holmes’ behavior and grow to distrust the police.

Profiling becomes more objectionable as the ability to correctly identify offenders decreases and the level of coercion increases.  On January 8, 2011, Jared Loughner made himself notorious by killing six and wounding twelve in a failed assassination attempt of Congresswoman Gabrielle Giffords.  Some called for more stringent gun control.  Second Amendment supporters and gun owners argued that it would be wrong to inconvenience many gun owners for the actions of a single deranged man.  Others noting that friends, family, students and teachers had observed Loughner’s erratic behavior and on several occasions had called the police for assistance suggest that a stronger enforcement mechanism be developed to help youths with mental disorders and protect the public.

Let’s say that Arizona imposes a new law that that allows authorities to medicate youths profiled by behavioral characteristics as potentially violent.  Assume that researchers followed the behavior of 10,000 young adults and one in a thousand (10 young adults in our sample) have a disorder that will lead to acts of violence.  Now assume that we implement a system that correctly identifies 80% of those with potentially violent mental disorders (8 of the ten potentially violent young adults are identified.  Two are not.).  But there is a tradeoff.   In our example, there are 9,990 young adults who are not potentially violent yet one time in a hundred, or 99.9 times a young adult will be wrongly identified as being potentially violent and subject to forced mediation.  Is catching 8 of 10 potentially violent worth the cost of forcefully medicating nearly 100 who are not?  If this tradeoff is too high, how many wrongful forced medications will you tolerate to stop the violence these youths will cause?
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Economic Reform in Cuba and Sanctions

The Cuban government continues to announce market reforms one drop at a time.  Breitbart reports in “Cuba to allow first US dollar home rentals in 50 years.”

Cuba is to allow some houses to be rented in US dollars for the first time in 50 years as well as the opening up of small businesses as it seeks to shed 500,000 public jobs, state media said Friday.

As central planning unwinds in Cuba, it is worthwhile reviewing the impact of our main policy for dealing with our totalitarian communist neighbor, sanctions.  Sanctions are the restriction of normal trade and financial relations between countries with the intent of changing some political or economic behavior of the target country by inflicting economic pain.  The U.S. government imposed sanctions on Cuba after the Castro regime nationalized American assets in Cuba in 1960.  Hufbauer, Schott, and Elliott whose work, Economic Sanctions Reconsidered (1990) summarized the sanction’s impact.

The US imposed significant costs on the Cuban economy with its trade and financial embargo.  Yet because the USSR was willing to assume a large portion of those costs, the embargo may have exerted a counterproductive effect on Castro, and may have helped consolidate his position in Cuba. 

The standard literature attempts to measure the economic pain inflicted by the sanctions, counter measures taken by the target country or those who oppose the sanctioning country, and they measure the policy change in the sanctioned country.  This literature does not seem to ask if the offending policy implemented by the sanctioning country is sustainable in the absence of sanctions.  The literature does not set up a control variable: the longevity of offending policy in the absence of sanctions.

The Castro regime imposed communism on the people of Cuba.  Communism replaces market generated prices and the information that those prices convey with central planning.  Central planners are unable to replicate the information conveyed in prices and therefore they fail to produce wealth (See Arch Ritter’s “Fidel’s Phenomenal Economic Fiascoes: the Top Ten” for examples of the failure of central planning).  The inability to generate wealth means that communist countries fall behind their neighbors economically and militarily.  To survive, communist countries must allow economic agents to operate in markets to grow.  Communism sows the seeds of its own destruction.  As the old saw states, “communism is the slowest, most painful road to capitalism.”  Sanctions may mask that failure.      >

Hufbauer, Schott, and Elliott wisely observe,

Sanctions also serve important domestic political purposes in addition to sometimes changing the behavior of foreign states.  As David Lloyd George, then a leader of the British political opposition, remarked of the celebrated League of Nations sanctions against Italy in 1935, “They came too late to save Abyssinia, but they are just in the nick of time to same the Government.”  The same is true today.  What president—or Kremlin leader for that matter—has not been obsessed with the need to demonstrate leadership, to take initiatives to shape world affairs, or at least to react forcefully to adverse developments?  And what president—or Kremlin leader—is eager to go to war to make his point?  The desire to be seen acting forcefully, but not to precipitate bloodshed, can easily overshadow specific foreign policy goals.

Are sanctions a peaceful road to impose change on other countries, at least peaceful in the sense that they avoid open warfare?  Are they political cover to do nothing?  Let me suggest an alternative hypothesis.  Sanctions commit sanctioning countries to a policy of confrontation.  If sanctions don’t work, perhaps sanctioning countries will be compelled to war.
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Measuring Changes in the Duration of Unemployment

In “The Folly of Subsidizing Unemployment,” Robert Barro attributes an increase in the observed duration of unemployment during the Great Recession to the extension of unemployment benefits from 26 to 99 weeks.  He supports his hypothesis by observing that the current recession is the only one in which benefits have been extended and that the duration of unemployment has been much greater.
A second method for measuring the impact of extending unemployment benefits on the duration of unemployment exists if states are allowed to follow different rules when awarding benefits.  Have any states declined to extend benefits, reduced the benefits over time or offered bonuses to the unemployed if they find work quickly?  If so, we can compare the duration of unemployment conditioned on the generosity of the state’s unemployment programs.  States with more generous programs should experience higher duration of unemployment if Barro is correct. 

The second method does have flaws.  The logic of the argument might reverse causality.  Perhaps the states with the longest duration of unemployment are the ones that extended benefits.  If this were the case and states can vary in allocation unemployment, then we would expect states with the longest duration to have increased the generosity of benefits.

Any thoughts?
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Toyota and Sudden Acceleration

Last week in class, I theorized that the sudden acceleration problem experienced by a few Toyota drivers was not due to the design or manufacture of the cars but a media and political feeding frenzy centered around a normal number of malfunctions experienced by any make of cars.  The media hungers for stories that sell papers, and politicians thirst for a villain to demagogue.  Toyota was just an unlucky victim.  William M. Briggs, a statistics consultant, writing for Pajamas Media in "Sudden Acceleration or Creeping Fear?" proposes the same theory and supports it with evidence.  We both may be wrong, but it is always good to question the media (and economics professors).  I quote the first several paragraphs and recommend the entire article. 

Just look at these headlines!

• “Inquiry on Auto Acceleration Expanded by U .S.,” New York Times


• “Cars That Speed Up Mysteriously Spark Bitter Dispute Over Cause,” Wall Street Journal


• “Runaway Cars,” Detroit News

And how about these?

• “Car Plows into Park, Killing 3 & Injuring Dozens,” New York Times


• “Car Kills Woman At Market,” Post-Standard


• “Sudden Acceleration May Be the Cause of Recent Accidents…,” Corporate Crime Reporter

Boy, doesn’t Toyota have problems?

Maybe not. That first set of headlines was from an earlier “epidemic” of sudden accelerations thought to be caused by Ford automobiles. The second set was blamed on Audi.
These sudden — then called “unintended” — accelerations happened in the mid-1980s to early 1990s. They were so popular that CBS’s 60 Minutes, in a now infamous segment, “televised a sensational demonstration in which a rigged Audi 5000 was coaxed into accelerating without any hint of pressure on the gas pedal.” They later had to issue a “correction.”

Complaints of unintended acceleration to the National Highway Traffic Safety Administration (NHTSA) were not unusual and were associated with cars of almost every make and model. But after the media reported a cluster of accidents involving first Fords, then Audis, more complaints about those cars were subsequently received.

The unintended accelerations were thought to be caused by everything from electromagnetic interference to sticking gas pedals. But the NHTSA investigated and found: “The major cause appears to have been drivers’ unknowingly stepping on the accleratator [sic] instead of the brake pedal.”

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Climategate: Mostly a Repost

Last November, an important story referred to as "Climategate," or alternatively as "The CRUTape Letters," broke over the Internet.  A hacker or whistle blower has posted over 1,000 e-mails and 2,000 other documents from the University of East Anglia Climate Research Unit to a server in Russia (Watts Up With That, "Breaking News Story: CRU has apparently been hacked – hundreds of files released).  Steve McIntyre of Climate Audit provides a timeline of events related to the story ("The Mosher Timeline").  The information in the documents speaks ill of many of the scientist mentioned (at least eight), and more importantly, of their abuse of the scientific method and peer review process.  The scandal also shouts of the dangers of mixing science and politics.  

How does an economist become interested in climate change?  Our interests intersect in at least three areas.  Economists devise methods to minimize the cost to the economy of environmental protection and cleanup.  Economics and climatology have similar methodological problems.  Few questions we investigate can be answered through controlled experimentation.  Both disciplines establish control through complex mathematical models verified with equally complex statistical testing.  If lack of controlled experimentation were not enough, we generally have bad data.  Finally, all scientists have an interest in the integrity of science, and I fear that science may take a hit from politicized and bad science.[1]

Before I proceed, I do not claim to know a great deal about climate science.  The scientists involved were important contributors in their fields and on the IPCC, but how important I don't know.  Some of the involved scientists managed important databases, but I do not know the percentage of the scientific literature that made use of it.

In class, I place a great deal of emphasis on the scientific process.  The purpose of scientific training is to help practitioners think clearly and free of biases which tie conclusions to prior beliefs, eliminating the need to conduct research.  The scientists involved in this scientific scandal violated the process at almost every step.  An early step of scientific enquiry involves a search of the relevant literature, which they appeared to do, and incorporation of that literature into the formulation of models, and possibly into hypotheses, steps they did not take.  They were aware of criticism of their own work and ignored it, and worse, they attempted to keep opposing opinions from seeing the peer-reviewed light of day.

Another important part of the scientific process involves testing hypotheses, and again, it appears these scientists behaved badly.  At the least, they manipulated data used to produce graphs explaining their findings to the general public.  They withheld data and statistical techniques that they used from scientists that were skeptical of their work.  While this is a very human thing to do, it is not the scientific thing to do.  The released data also suggests that one of the four great databases showing long-term temperature change was not as sound as the Climate Research Unit at UEA claimed.  Lower quality data lowers the strength of conclusions.

The peer review process is, or at least should be, the gold standard of scientific research.  It is supposed to be anonymous, meaning that the scientists who wrote the paper do not know those who review it, and those who review it do not know the authors.  Reputation should not influence the scientific judgement of what is published.  The released e-mails clearly demonstrate efforts to control scientific discourse without regard to merit.[2] 

[1]  Daniel Botkin, one of the first ecologists to explore the impact of global warming, expressed similar concerns in a EconTalk podcast, "Botkin on Nature, the Environment and Global Warming," November 26, 2007).  Botkin demonstrates wonderful scientific restraint in not exceeding the bounds of his expertise. 

[2]  Megan McArdle suggests that I might have an idealized view of the scientific process.  She is probably correct.  She writes ("ClimateGate," The Atlantic: Asymmetrical Information, November 24, 2009). 

A few of you have asked what I think about ClimateGate.  Mostly I concur with Tyler Cowen and Robin Hanson:  I have so far seen no evidence of the kind of grand conspiracy that some critics have charged.  Rather, to my mind this is about how real science (unfortunately) does sometimes get done. 
Scientists are human beings.  They react to pressure to "clean up" their graphs and data for publication, and they gang up on other people who they dislike.  Sometimes they're right--there's a "conspiracy" to keep people who believe in N-rays from publishing in physics journals, but that's a good thing.  But sometimes they're wrong, and a powerful figure or group of people can block progress in science.

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The Passing of Paul Samuelson

Paul Samuelson, Nobel laureate in Economics, passed away earlier this week leaving an enduring legacy on the field. David Henderson, writing for the Wall Street Journal in, "Why Everyone Read Samuelson" describes that legacy in brief. In part he writes,

Three years after World War II drew to a close, a young professor at MIT published "Foundations of Economic Analysis." Its mathematical approach to economics would revolutionize the profession. And its author, Paul Samuelson, would go on to earn many awards and honors, culminating in 1970, when he won the Nobel Prize in economics—the second year it was awarded. Samuelson died on Sunday at the age of 94.

His influence has been profound, but the mathematization of economics has been a mixed blessing. The downside is that the math hurdle in leading U.S. economics programs is now so high that people who grasp the power of economic concepts to explain human behavior are losing out in the competition to mathematicians.

The upside is that Samuelson sometimes used math to resolve issues that had not been resolved at a theoretical level for decades. As fellow Nobel laureate Robert Lucas of the University of Chicago said in a 1982 interview, "He'll take these incomprehensible verbal debates that go on and on and just end them; formulate the issue in such a way that the question is answerable, and then get the answer."

Samuelson had a standard view of the impact of the minimum wage which he described in his textbook.

One of the best and punchiest statements in the 1970 edition was his comment about a proposal to raise the minimum wage from its existing level of $1.45 an hour to $2.00 an hour: "What good does it do a black youth to know that an employer must pay him $2.00 an hour if the fact that he must be paid that amount is what keeps him from getting a job?"

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Climategate

An important story referred to as "Climategate," or alternatively as "The CRUTape Letters," has broken over the Internet.  A hacker or whistle blower has posted over 1,000 e-mails and 2,000 other documents from the University of East Anglia Climate Research Unit to a server in Russia (Watts Up With That, "Breaking News Story: CRU has apparently been hacked – hundreds of files released).  The information in the documents speaks ill of many of the scientist mentioned (at least eight), and more importantly, of their abuse of the scientific method and peer review process.  The scandal also shouts of the dangers of mixing science and politics.   

How does an economist become interested in climate change?  Our interests intersect in at least three areas.  Economists devise methods to minimize the cost to the economy of environmental protection and cleanup.  Economics and climatology have similar methodological problems.  Few questions we investigate can be answered through controlled experimentation.  Both disciplines establish control through complex mathematical models verified with equally complex statistical testing.  If lack of controlled experimentation were not enough, we generally have bad data.  Finally, all scientists have an interest in the integrity of science, and I fear that science may take a hit from politicized and bad science.[1] 

Before I proceed, I do not claim to know a great deal about climate science.  The scientists involved were important contributors in their fields and on the IPCC, but how important I don't know.  Some of the involved scientists managed important databases, but I do not know the percentage of the scientific literature that made use of it.   

In class, I place a great deal of emphasis on the scientific process.  The purpose of scientific training is to help practitioners think clearly and free of biases which tie conclusions to prior beliefs, eliminating the need to conduct research.  The scientists involved in this scientific scandal violated the process at almost every step.  An early step of scientific enquiry involves a search of the relevant literature, which they appeared to do, and incorporation of that literature into the formulation of models, and possibly into hypotheses, steps they did not take.  They were aware of criticism of their own work and ignored it, and worse, they attempted to keep opposing opinions from seeing the peer-reviewed light of day. 

Another important part of the scientific process involves testing hypotheses, and again, it appears these scientists behaved badly.  At the least, they manipulated data used to produce graphs explaining their findings to the general public.  They withheld data and statistical techniques that they used from scientists that were skeptical of their work.  While this is a very human thing to do, it is not the scientific thing to do.  The released data also suggests that one of the four great databases showing long-term temperature change was not as sound as the Climate Research Unit at UEA claimed.  Lower quality data lowers the strength of conclusions. 

The peer review process is the gold standard of scientific research.  It is supposed to be anonymous, meaning that the scientists who wrote the paper do not know those who review it, and those who review it do not know the authors.  Reputation should not influence the scientific judgement of what is published.  The released e-mails clearly demonstrate efforts to control scientific discourse without regard to merit.   

[1]  Daniel Botkin, one of the first ecologists to explore the impact of global warming, expressed similar concerns in a EconTalk podcast, "Botkin on Nature, the Environment and Global Warming," November 26, 2007).  Botkin demonstrates wonderful scientific restraint in not exceeding the bounds of his expertise. 
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Aplia and Your Grade

I propose the following hypothesis: careful use of Aplia is the best method of improving your grade in class. I must acknowledge a measurement problem before proceeding. I cannot measure hours reading or otherwise studying economics nor the intensity of effort. I can measure grades on exams, points earned on Aplia chapter assignments, basic math skills, and Aplia news analysis assignments.

Using ordinary least squared regression, a simple method of estimating a line of best fit, I measured the influence that points earned in Aplia, basic math skills, and news analysis had on exam scores. The only statistically significant explanatory variable was points earned on Aplia assignments and it was significant at the 1% level. Each question answered correctly improved exam scores by .18 points. The graph visualizes this result. The line is the graph is the line of best fit. Students who answered few Aplia questions correctly earned lower grades on the exam than those who earned many points.

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Cochrane On Math and Logic in Economics

John Cochrane gave a good explanation of why math is so important to economics in, "How did Paul Krugman get it so Wrong?"  He writes,

Math in economics serves to keep the logic straight, to make sure that the “then” really does follow the “if,” which it so frequently does not if you just write prose. The challenge is how hard it is to write down explicit artificial economies with these ingredients, actually solve them, in order to see what makes them tick.

If this sounds familiar to my students, then I have done a good job.
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A Blast From the Past: Global Cooling

I just finished rereading, "The Weather Conspiracy: The Coming of the New Ice Age" written by the Impact Team and published in 1977.  The members of the impact team are given, but after an Internet search of three names and not a single useful hit.  The book captures exaggerated concerns of global cooling by a fear mongering media.  They quote a few papers and discuss the extreme outcomes, suggesting that these are the likely.  They conclude that we are headed for a new ice age with catastrophic consequences for civilization: war, famine and pestilence.  A typical passage reads,

America and the rest of the Northern Hemisphere are returning to normal weather. After fifty years of unprecedentedly temperate climate, the world is returning to the more radical shifts and the cooler climate that characterized the previous eight hundred years. Many climatologists believe that since the sixties the world has been slipping toward a new ice age. The only questions in their minds are: What kind of ice age will it be, little or great? How soon will it happen?

Temperatures would only have to drop by 2.8 degrees F to plunge the world into a new ice age.  The authors provide a small list of consequences of a little ice age.

India would have a major drought every four years, and 30-50 million metric tons would be required from the world's grain reserves to prevent the death of 150 million Indians.

China would have starvation conditions every five years and need 50 million metric tons of grain for its people.

Canada would lose 50 percent of its food production, and reduce exports by 75 percent. 

The consequences of a great ice age, apparently equally likely to occur would be much greater and little or great, our descent could happen rapidly. 

The causes of global cooling are natural as well as man-made, dust from pollution blocking the warming energy of the sun.  Intriguingly, the authors mention carbon dioxide emissions as a warming mechanism that does not sufficiently offset cooling, setting up the concern of some scientists that man-made global warming may kill millions, not global cooling.

Many hot-earth men believe that global temperatures will rise by at least 3.8 degrees F by 2020, given that the volume of carbon dioxide is doubled in the next fifty years. If this happened, ships could well sail the entire Arctic Circle, and the melting of the polar ice caps could cause the sea level to rise by two hundred to four hundred feet. London and New York would vanish. So would Rome, Paris, Brussels, Antwerp, Marseille, and hundreds of other cities. Trees would grow in Alaska and Siberia; cattle would be raised on what was once tundra.

Their conclusions sound familiar.  Temperatures have warmed, but we are not underwater yet.  We are not even close to losing a major city. 

Given the more probable event, global cooling, the authors conclude,

Under coming conditions, clearly the rich countries of the world (in other words, the tiny minority) will have to make do with less food.  With the exception of the U.S., they will run a food balance-of-payments deficit that will put a big dent in their economies and cause some degree of social disruption. 

For the poor countries of the world, the implications are more ominous.  Many will starve.  This future will place an almost unbearable moral and political burden on the U.S. and its people.  We must face up to the following "unthinkable questions":

1.  How much food will we keep for ourselves?  In other words...

2.  How much are we willing to reduce our standard of living to feed others?  For example, would we all be willing to stop using our air conditioners if the energy so released would feed another 400,000 people?  Or would we rather stay cool and let them starve?

3.  Are we going to give away our food or sell it?

Who gets how much, and why?

The authors disdain for the market system is clear.  Our accumulation of wealth through markets created the problem.  We consume too much.  It does not fairly treat price as a rationing mechanism.  If food becomes scarcer, it's price would rise and we would buy less.  If food costs more and cooling reduces wealth, we will use less air conditioning (a bad example in a cooling world) and less heating as well. 

Yesterdays misreading of climate change has implications for us today.  I fear that some advocates of the theory of global warming hurt the science supporting their position by focusing on low probability extreme events to rally support for political action to curtail carbon emissions.  If ice caps don't melt, wiping out cities, devastating agriculture, and causing energy wars, science is likely to be blamed.  
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Menzie Chinn Sounds Off

Menzie Chinn, a former Senior Economist for International Finance on the President's Council of Economic Advisers serving President Clinton from 2000-2001, who blogs at Econbrowser adds his voice to those who believe the Bush administration listens less to professional advisors than past administrations. His criticisms sounds very similar to those made by Stephen J. Dunbar writing for Freakonomics and cited in my earlier posting, Economic Advisors and the Presidency. Menzie uses the appointment of General Eric Shinseki to lead the U.S. Department of Veterans Affairs as a springboard to write

While this is not an economics issue in and of itself, it does relate to economic policymaking. Many of the critics of Obama's choices for his economics team have centered on the fact that some of the choices were in the Clinton Administration, or have been associated with the centrist wing of the Democratic party, and hence could not represent "change" (e.g., [0]). But I think this all misses the point. The "change" we need is not so much ideological in nature, but the return to policy authority of people who have expertise, and are willing to look to past experience and (most importantly to me) analysis to make their judgments about how best to proceed -- in economics as well as in issues of war and peace. So I'm happy with the developments thus far (on my previous posts on Shinseki vs. Rumsfeld and the Iraq debacle...

Unlike Menzie, I have never advised a president, but I do know that there is little reason to conduct analysis if it will not affect prior belief.

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