Economics, Literature and Scepticism

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I am a PhD student in Economics. I am originally from South Africa and plan to return there after my PhD. I completed my M. Comm in Economics and my MA In Creative Writing (Poetry) at the University of Cape Town, where I worked as a lecturer before starting my PhD.

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Sunday, February 28, 2010

Carnvival of the Africans #14

Posted by Simon Halliday | Sunday, February 28, 2010 | Category: , , , | 1 comments

Playing host to this month's Carnival, I've had the fun of trawling the web for a few interesting posts by Africans on relevant topics (scepticism, science, etc), and having read submissions I've received for the carnival.  If you'd like to host a Carnival then get hold of Mike at michael{dot}meadon{at}gmail{dot}com and volunteer for a position as host, vacancies as early as next month!  Take a look at the guidelines here.  Anyway, here are the relevant posts for this month's Carnival of the Africans. from Ionian Enchantment submitted two posts. First, In praise of deference, in which he articulates a position where he argues for deference to those with more scientific expertise than oneself.  I need to reiterate that his conclusions differs from appealing to authority - I believe {X} simply because {Big Name Y} believes {X}.  Read the article for his discussion. Mike proposed a second article, The Cost of Truth is Eternal Vigilance, in which he explains why one needs to be vigilant about one's own biases and the biases of others when trying to make propositions about states of the world, parodying his example '2009 was the rainiest year ever!'

Angela, the Skeptic Detective,  has three fantastics posts.  First, 'Atlas V makes you feel like you're tripping', in which she examines sonic booms and speed - a physics fun time.  In the second post, 'How to win friends...' she examines the 'work' of Mike Adams, a 'health ranger' and his beliefs in naturopathy and the natural way.  Good skeptic defence Angela.  Her third post, 'Paranormal Investigators', looks at paranormal beliefs, specific South African urban legends, and their (in)validity as investigated by the South African Society for Paranormal Research. 

At Communicating Science, The African Way, Muza Gondwese asks whether 'To snip or not to snip'.  She presents the evidence about male circumcision in several African countries and says that there is some evidence that it helps to prevent HIV transmissions (helps to prevent minimally she highlights).  She discusses policy implications for Malawi and the situation in Swaziland.  A timely post for those considering the role of prevention in HIV - look at the science, do a cost-benefit analysis. (I understand this is a contentious topic, but it's still worth reading her piece). 

Ross at the Science of Sport wrote an intriguing post on 'The mental edge or physiology' in sport, in which he tries to understand the role of psychology and 'mental toughness' in sport against physiological superiority.  One of the problems, evidently, is that of measurability: how do we measure mental toughness? Is it the same across sports? Is there a consistent and falsifiable theory of mental toughness? He tries to navigate some of these problems in a post accessible to the layperson (so, no, there aren't any discussions of falsifiability and demarcation). Skeptic Blacksheep has has two fascinating reports, the first 'My experience with Simply Slim' recounts the author electing to 'test' this herbal diet tablet and its banning in South Africa, she then recounts some of the fallout of her post on her experiences in the second post, where she was told by a marketing professional that people complaining of side effects are suffering from Munchausen's Syndrome and evidently not the effects of a double dose of sibutramine - the drug the Medicines Control Council foud in the 'herbal tablet'.  Oh conspiracies!

Mark Widdicombe has three good posts.  The first, 'Good News', in which he describes the Lancet retraction of Andrew Wakefield's paper linking the measles, mumps and rubella vaccine to autism and bowel disorders (a skeptic victory).  The second, 'Witch Professor' in which he entertainingly describes an interaction with the eponymous
doctor, has to be read for entertainment value.  Finally, in 'Smoke signals', he reports on his experiences quitting smoking, doing his best to evaluate various methods for quitting smoking.

And finally we get to me. I reviewed two pieces of research.  The first, 'Making money vs. Windfalls - Are you hardnosed' in which I reviewed a 2002 article investigating the methods of experimental economics - giving windfall cash to people and watching them behave. The second post, 'Neural Evidence for inequality aversion when giving away other peoples' money' applies the critique from the 2002 paper to a new paper from Nature investigating inequality aversion using FMRI.  I also have a more entertaining piece, looking at whether ANCYL (a South African political organisation) knows what evidence is: 'Untrue, Fabricated, False Lies'.

Lastly, in an anti-skeptical moment of lunacy, I thought I'd have to proclaim Owen Swart a Pre-Cog, a Visionary, a Psychic!  Why...? Well, he accurately predicted that I'd post this carnival! Genius. Psychic amasingness! Precognitive phenomenon! Philip K. Dick hero!
On that note I'll end this month's Carnival of the Africans.

Friday, February 26, 2010

Harford on frustrating appeals to authority

Posted by Simon Halliday | Friday, February 26, 2010 | Category: , | 0 comments

Tim Harford has a fantastic column today talking about the campaign behind the Robin Hood tax. He argued previously that the campaign was misguided, but what scares him more are the ways in which those who support the campaign - bloggers, commenters, twitterers - have tried to 'argue' to support the tax. What did they do? They appealed to authority. How? The supporters reiterated that 'Nobel Laureate Paul Krugman said [X]' or 'Nobel Laureate Joseph Stiglitz said [Y]'. Harford playfully suggested the following three other Nobel Laureates and their ideas:

He asks whether all those who support the 'Paul Krugman said [X]' and 'Joseph Stiglitz said [Y]' also support all of these simply because they are arguments made by Nobel Laureates. Now, it is important to note that there is a substantial difference between 'Appeals to Authority' and 'deference'. With deference I admit that I lack specific knowledge, education or data about a subject and I request assistance from someone who knows more than I do, while ensuring that I try to understand the underlying argument if I can. I can then also examine the academic consensus on a topic. The consensus may turn out to be wrong, but the consequence of such wrongness is often called 'scientific progress', cf. Newton & Galileo to Einstein. Moreover, if I defer to others, I should know what they have said and be able to reference them. Harford refers to Krugman's piece, showing why he disagreed previously and continues to disagree. 's yet to find out the specific references for Stiglitz's supporting arguments.

So yes, be aware of Appeals to Authority, contrast such appeals with deference, and remain aware of arguments and evidence for and against a policy, especially on a topic as emotionally charged as a transaction tax on international banking.

What's my answer? I don't know. I don't know enough about international finance to be able to say whether it'll be good or bad. I have two opposing intuitions: first it may increase volatitily rather than decrease volatility because the tax will act as a disincentive to spread your risks, second, it may decrease volatility because there will be less currency speculation. Separately, as an international student I might be taxed by it personally - depending on the exact structure of the tax - because I have to move money between South Africa, the UK and the EU while doing my research. I don't have all that much money and the little I do is very valuable to me, so the tax will, in effect, act as a disincentive for me to do what I would like to do: high quality international research for which I have to move around a lot and move money around a lot. So, though I don't know too much about it, my personal attitudes are against it (but this is a very slight probabilistic twist in one direction). We'll see whether the tax gets popular and academic support as the year progresses.

Thursday, February 25, 2010

Call for Submissions - Carnival of the Africans

Posted by Simon Halliday | Thursday, February 25, 2010 | Category: , | 0 comments

I shall host this month's Carnival of the Africans on Feb 28th. If you happen to be an African Sceptical or Scientific blogger, please email me your submissions by 9pm Feb 27 so I can attempt to publish by 9pm Feb 28th. The guidelines are here. Angela, the Skeptic Detective, hosted the previous edition here. You can contact me at simon{dot}d{dot}halliday{at}gmail{dot}com. I look forward to your sceptical and scientific posts. I will trawl the web to find additional un-submitted posts that fit the criteria, but I prefer submissions to trawling.

Neural evidence for inequality aversion when giving away other peoples' money

This week's Nature has a paper by Elizabeth Tricomi, Antonio Rangel, Colin F. Camerer & John P. O’Doherty, reporting on 'Neural evidence for inequality averse social preferences'. Eurekalert reported on it here. I would have read the paper anyway, but a quotation from one of the researchers, John O'Doherty in the Eurekalert article pricked my ears up, "[We can] try to understand how these changes in valuation actually translate into changes in behavior. For example, the person who finds out they're being paid less than someone else for doing the same job might end up working less hard and being less motivated as a consequence. It will be interesting to try to understand the brain mechanisms that underlie such changes." Now this interpretation would be great, if that's what the experiment had examined. But it didn't. I suspect that O'Doherty was led on by the journalist to say something 'print-worthy'. I comment briefly on the paper, and examine what we need to do to make more claims like O'Doherty's above.

Here's the description of the method from the article:

Twenty pairs of healthy, previously unacquainted male participants participated in the experiment. They were each paid a base $30 fee; each then drew a ball from a hat, labelled ‘rich’ or ‘poor’. The ‘rich’ (high-pay) subject received an immediate payment of $50, whereas the ‘poor’ (low-pay) player received no bonus payment. They then performed an identical task in consecutive fMRI scanning sessions. In each trial subjects viewed possible monetary transfers from the experimenter to themselves and to the other player, ranging from $0 to $50 (Fig. 1). Participants rated how appealing they found the possible transfers on a scale of -5 (very unappealing) to 5 (very appealing). After both players’ scans, a single trial was randomly picked from the set, and the transfers for that trial were paid out.
They're basically simulating a dictator game between the experimenter and themselves where all the money is 'windfall', that is unearned money. That leads to the first problem. As I've argued previously and will continue to argue people treat windfall money differently to how they treat earned money. Secondly, when people see that all your options involve only 'giving' to others and not 'taking away' from them then that immediately frames the experiment as something to do with generosity or giving money [see comments on Bardsley paper on this here]. When I know that I could be given something, and someone else could be too, I will react differently than to a situation in which I could have stuff taken away from me while someone else is given something, he could have something taken away while I get something, both of us could have something taken away, or both of us could be given something. I do not know what the ventromedial prefrontal cortex will do in these situations and I think that Tricomi et al should investigate this to see what happens to their results.

So when they say, "Our results provide direct neurobiological evidence in support of the existence of inequality-averse social preferences in the human brain" our focus must be on 'existence'. Yes, there is evidence for such preferences in artificial circumstances, but these circumstances are unlike most interactions and definitely unlike the situation that O'Doherty outlined. Also, and on a similar topic to the research I outlined, I suspect that most people regard CEO bonuses as unearned, windfall bonuses and feel that they are unjustified. I'd be fascinated to see what people would do if they earned their money and others didn't, and then the person who didn't got an additional bonus. What would the VMPFC do then?

Aside: I really appreciate Colin Camerer's work. I draw on it heavily for my dissertation research and I marvel at his output. But I worry about how the work in this paper might be interpreted in the press and by the general Nature readership who may not understand some of the nuances.

Wednesday, February 24, 2010

ANCYL misunderstand Cronin

Posted by Simon Halliday | Wednesday, February 24, 2010 | Category: , | 3 comments

Oh gosh, it looks like I'm going to have to comment on South African politics again. Floyd Shivambu waxes incoherent about Jeremy Cronin's recent public letter about transparent debate about nationalisation. Shivambu said, "Why a communist cadre in the form of Jeremy Cronin refuses to constructively input into the nationalisation of mines perspective even when humbly requested to is worrying. But as they say, blood is thicker than water." What does that mean? Let me get this straight, Cronin writes constructively about the debate (having been asked to do so), but Shivambu thinks Cronin is incoherent and destructive? Well let's look at why.

Let me state outright that I'm not a communist, but I think Cronin is one of the most coherent, if occasionally wrong, members of the communisty party and of the tripartite alliance. Otherwise, I am a big fan of his poetry and have substantial respect for him as a white man who stood his ground during apartheid. We needed more like him.

Anyway, back to the article. Cronin says, "Behind the headline stories of high-life parties and the flaunting of ill-gained wealth, lies the sordid reality of manipulative sponsorships, wheeling and dealing, organisational factionalism, arm-twisting and the general subversion of our democratic order.” Ahhh.... so that's what annoyed Shivambu. Cronin was criticising Shivambu's, Malema's and many other fair-weather socialists' proclivities to parties and spending. Oh well, poor Floyd.

Next thing, Cronin says that “Our socialism is fundamentally about waging a struggle, here and now, with and in defence of the workers and poor.” How can Shivambu have a problem with that? The workers and the poor? I must have misunderstood the position of ANCYL to not see this as a problem.

Cronin goes on to say, “[SACP policy] is certainly NOT about "capturing" the ANC by infiltrating communists onto ANC electoral lists! If communists enjoy popular support and endorsement from within ANC structures that's great. But they serve in ANC positions as ANC members. We want to have capable, honest and hard-working ANC cadres as ANC leaders - some will be communists, many will not be. Rather a capable non-communist ANC comrade in a leadership position, we say, than a less capable ANC member who happens to be a communist.” Oh gosh! There's another potentially veiled insult. Cronin would prefere efficient and effective capitalists in the ANC than ineffective communists. Again, how can that be a problem? Oh wait, maybe Shivambu realises that Malema is basically an incapable and ineffective croney capitalist. Oh well...

Cronin makes several other coherent comments:

  1. Recent bank bailouts could be considered 'socialism for capitalists'

  2. Better to quote it, “public sector ownership, on its own, is no guarantee that this public property will not be plundered by senior management for their own private accumulation purposes.” And also, “It would be the height of hypocrisy, by the way, to be calling for "nationalisation" on the one hand, while being intimately involved in the private plundering of public resources on the other.” Ahah! I can see why Shivambu might dislike that - no lining the pockets. Poor Floyd.

  3. “In advancing our perspective on socialisation, including progressive nationalisation, the SACP fully intends to locate this advocacy, and any other discussion on nationalisation/ socialisation, within the context of our shared alliance strategic priorities - jobs and sustainable livelihoods; health-care; education; rural development; and fighting crime and corruption. We must all guard against the opportunistic appropriation of "nationalisation", treating it as a stand-alone issue and using it as a rhetorical badge of "radicalism". Any progressive call for nationalisation needs be a coherent and do-able part of an overall democratic programme.” Wait, you mean Cronin actually wants to have democratic processes? You mean he doesn't want to be populist. Floyd, Floyd, Floyd how is this not constructive?

  4. “Grand-standing doesn't help. Threatening comrades that you won't vote for them in future elective conference unless they support your position is infantile and unhelpful.” Ahah, there it is again, not-so-veiled criticism of grandstanders like Malema and Floyd. Understably, Floyd doesn't like it. Floyd labels all people who disagrees with him 'reactionaries' or 'counter-revolutionaries'. Evidently Floyd doesn't understand Democracy or Freedom of Speech. Poor Floyd.

  5. “The current crisis around governance, golden hand-shakes, exorbitant tariffs, and failures to actually effectively deliver in many SOEs provides us with an opportunity to advance (not the cause of privatisation, as the DA will do) but rather their effective and increasing socialisation - i.e. subordination to the logic of meeting social needs not private profits.” Ahah! Something else constructive that Floyd doesn't think is constructive: a clearly articulated position on nationalisation. But Floyd doesn't seem to like being articulate. Poor Floyd.

So, I would kindly request that Floyd actually take a look at Cronin's letter and respond to each of the problems that he articulates, look at the positions he takes, and then evaluate his own position reflectively. I assume this won't happen. I hope that Floyd keeps a job somewhere because he obviously doesn't understand political theory, democratic theory, the South African constitution and numerous other aspects of our fledgling democracy. He seems to understand several other things though: populism, croneyism, corruption, spending other peoples' money, benefiting from others work, and preying on others who are doing their best to articulate constructive positions in politics.

Sunday, February 21, 2010

Untrue, Fabricated, False Lies

Posted by Simon Halliday | Sunday, February 21, 2010 | Category: , | 2 comments

So I don't venture into political commentary too regularly, but I thought I'd highlight the role of evidence in the recent ANCYL vs. The Star conflict. The Star ran a report on the lifestyle of SA leaders, beginning with Julius Malema. ANCYL then responded saying that the report was 'untrue and opportunistic'. So let's go with the claims and counterclaims, the evidence presented, and the interpretation of this by the parties. One general comment, the ANCYL representatives evidently don't understand redundancy because they kept referring to 'untrue fabrication's, by its nature a fabrication is untrue, else it would not be fabrication, therefore calling it an untrue fabrication simply evidences your own silliness. Anyway, on to the claims and the evidence.

  • The Star claimed that Malema owned two houses worth R4,6 million that he bought with cash. ANCYL responded saying he didn't buy them for cash but 'like every body [sic] else, he has purchased whatever houses or property registered in his name through banks.' The relevant evidence here is embodied in housing deeds and reports claiming the houses are worth R3,6 million and R1 million each, not whether the houses were bought with cash or not. Does ANCYL produce counter-evidence about him not owning the houses, which is what is relevant given that the article is about Malema's lifestyle? No, they do not produce such evidence.The argue that the report is false because Malema did not buy the houses for 'cash'. Irrelevant. Fail ANCYL.
  • The Star claimed that Malema had Johnny Walker gold worth R700 and Mo√ęt et Chandon 'French Champagne [sic - redundant because Champagne must be French] at his house warming party and that a famous DJ did the music. The Star did not know how much the party cost in total. ANCYL could provide the evidence by giving records of the party's cost and confirm whether or not these items were consumed. They could provide photographs of the party which may or may not indicate whether such beverages were consumed. This would be evidence. My quick inspection suggests The Star had the right price for Johnny Walker Gold, though it could have been donated. Even so that would be relevant. Fail ANCYL.
  • Staying on the party, The Star reported, "A police reservist said at the time that he was assaulted by the youth league leader. Neighbours complained about the noise and mess that Malema's party had caused." ANCYL did not comment on this and did not present any counterevidence, that is they did not produce evidence indicating that Malema did not assault the reservist and they did not produce evidence indicating that neighbors did not complain about the party. Not particularly relevant, I know, but still potentially important. Fail ANCYL.
  • The Star reported that sources claim that Malema's salary is R20 000 a month. ANCYL countered by saying that was 'far from the truth'. That doesn't help. They should print his payslip and lead the way against corruption by making his bank transactions transparent and provide evidence that Malema isn't involved in any corrupt relationships. That would help to explain how Malema is living beyond his means. Maybe his salary is greater than R20 000, which would in itself be valuable public information. Fail ANCYL.
  • The Star made the following claim about vehicles: "The 28-year-old politician owns a black Mercedes-Benz AMG, which retails at R734 000, and reportedly drives an Aston Martin and a red Range Rover Sport, too. Last night he went to a lecture at Wits University in a brand-new white Range Rover - with no number plates - which sells for R1,2m." ANCYL responded by saying, "The second untrue fabrication is an impression created through the report that Cde Julius owns four expensive cars. We like to state on record that Cde Julius has one car in his name." The Star did not say Malema owned four cars, they said he owns one and has driven or been reported as driving another three. The one he owns is worth R734 000. What would be relevant to know is how he afforded that car given the evidence about his salary. Also, it would be relevant to know who owns the other three vehicles. It is of public interest if an official in the youth league of the national governing party owns and drives vehicles that are priced more than houses in some areas of South Africa. Fail ANCYL.
  • The Star reports that Malema is the director of four companies: 101 Junjus Trading CC, Blue Nightingale Trading 61, Ever Roaring Investment and SGL Engineering Projects. The relevance, again, is that he is a leader in the youth league of the national governing party. The Star has the evidence of this in copies of registration documents or something similar (I assume, The Star doesn't say in the report). ANCYL did not respond to this claim. Fail ANCYL.
  • The Star reported that Malema attended a press conference in a Gucci suit, and sported a Breitling watch worth about R250 000 (prices for these are obtainable online and, I assume, this can be verified photographically). ANCYL did not respond to this. Again, where Malema gets the money for these items is relevant because of his role as in the youth league of the national governing party. Fail ANCYL.
  • The Star followed journalistic protocols and contact Floyd Shivambu, ANCYL spokesperson for his comment on the report. He said, "I think you need to rethink what you are doing. What business is this of yours? How dare you call me and ask for comment on this?" Let's consider these three sentences. The first sounds like a threat (See also the report by ANCYL linked to above with more threats). The second asks about whose business is it; as I already explained it is in the public interest to know about the spending, salary, funding and relationships of its leaders, which explains why it's The Star's business. Moreover, Pravin Gordhan, SA Finance Minister has explained that targeted personal audits would occur to increase transparency and decrease corruption. On the third sentence, it shows that Shivambu evidently does not understand journalistic integrity which might require that the newspaper contact a spokesperson before publishing a potentially damaging story. Fail ANCYL.
Well, it looks like this was an EPIC FAIL for ANCYL, for Julius Malema, Floyd Shivambu and Jackson Mthembu. Nothing new, though it worries me that people are not more concerned with the potential corruption of this man and this organization, both of which play such important roles in the politics and public debate about our young democracy.

Friday, February 19, 2010

Here I Come to Lecture in SA

Posted by Simon Halliday | Friday, February 19, 2010 | Category: , , , | 4 comments I wish I could substitute "Lecture" with "Save the day", I'm not mighty mouse. I will be lecturing Intermediate Microeconomics at the University of Cape Town during April and May. We are using Perloff's Microeconomics: Theory and Applications with Calculus which is a demon of a book technically (mathematically rigorous) and will be a challenge to teach with, but still good because of its comprehensiveness and the mathematical preparation the students will have received at the end. I am lecturing on Monopoly, The Discriminating Monopolist and Oligopoly. I hope to throw in some other theory of the firm and behavioral economics. The challenge, I think, when teaching a course like this is to find additional orthodox and heterodox readings to make the course more interesting intuitively and historically for the students. So far I've been thinking of articles on the following list:
Now the list is far too long, far too various, and far too historical (and thus not contemporary). Some of the articles are too radical and just show my wish to present the other side. But I do want to show the students several things:
Economics is Contested: that is, economics admits orthodx and heterodox views on things, but that one set of views often gets taught because of the success of particular schools (Chicago, MIT, Harvard). The problem, however, is that the recent crisis, and economic history and philosophy of economics generally, have shown that this one view is problematic and should probably be taught within a pluralistic framework. Now here I want to show the coherent debate between people about the methods, empirics, history and philosophy of economics as it pertains to what they're studying: monopoly, oligopoly, property rights, the 'rational' firm, the 'profit-maximising firm', etc. It pays to be sceptical and think about flaws as well as to show what economist agree upon.
Economics is Historical: see above, but so many students seem to believe that reading anything that's more than 10 years old is silly. No, no, no. Coase, Hayek, Simon, are as readable today as then and as relevant (I'd add Smith, Marx, and several others, but I can't think too much of prescribing them in 'Intermediate Microeconomics'). Moreover, so many recent articles are highly technical, especially articles in Industrial Organization. I can't prescribe Tirole to my second year students who cross the gamut of faculties: engineering, sciences, humanities, commerce, law. What to do? Go back in time to the classics. is Radical: as was shown recently in an interview with Sam Bowles, neoclassical theory can produce some rather radical results, results that are consistent from Friedman to Bowles - give everyone some money (implement a negative income tax) when they reach a certain age, stop other social welfare if that troubles you. Experiment.
Economics is Conversational: playing into the ideas of economics as contested, historical and radical, is the idea, argued by people like Arjo Klamer, Deirdre McCloskey, Steve Zilliak and others, of economics as a conversation or an ongoing debate. When all students see are the symbolic representations of profit maximisation, they often lose touch with the intuitions. Robert Frank's book The Economic Naturalist captures the idea well as does Tim Harford's The Undercover Economist - think economically, enter the economic conversation, and you can apply the ideas to a host of examples in the real world. Converse about it, create dialogue and you will edify yourself and, we hope, others too.

Anyway, if you hapen about theory of the firm, about teaching Monopoly and Oligopoly and can think of fun(!) and interesting articles, then let me know. I've lectured the course several times since 2005, the syllabus has changed regularly and I've lectured everything in the syllabus, but I wanted, this time, to try to make a wider appeal before getting in there. I look forward to your comments.

Monday, February 15, 2010

NHM - Wildlife Photography Awards

Posted by Simon Halliday | Monday, February 15, 2010 | Category: | 0 comments you are at all interested in evolution, wildlife or photography, I strongly recommend you take a look at the Natural History Museum's Veolia Environnement Wildlife Photographer of the year Competition.  If you're not in London or the surrounds, then take a look at the online gallery of the winners, runners-up and special commendations.  There were several phenomenal shots taken by professionals, amateurs and competitors in the special categories for children and adolescents.  From photographs of leopards like the one adjacent, to puffins, king seals, dolphins, insects balanced on snowflakes, and many more.  The diversity and beauty of our planet displayed in full.  Truly joyous. facet of the exhibition portrays the interaction of Humans and the other wildlife on the planet, with Nature: from urban and wild interactions (monkeys battling over a slurp of water, or a cat fending off a fox) to the more poignant, like the picture adjacent of a king penguin chick fascinated by the footprints of the photographer (indeed, this picture was voted as the favourite by the exhibition's attendees).  Seeing the captured moments of these complex and ongoing interactions reminds me of the nature of our relationship - as humans - with our environment: Nature affects how we evolve and how we interact with one another as Humans; Humanity also affects Nature, the species comprising it, the paths these species will take as they evolve, and ultimately their survivability.  I know that evolution is a wild and amoral thing, but I hope that we manage to evolve and to progress in such a way that we manage to maintain and to protect the glorious diversity and beauty of our planet. Rumination over.

Friday, February 12, 2010

Making money vs. Windfalls - Are you hardnosed?

Posted by Simon Halliday | Friday, February 12, 2010 | Category: , , | 2 comments you treat money someone gives you and money you earn at work differently? I think I do.  This question is central to my dissertation research in which I plan to look at several methodological issues in economics.  One of these issues - legitimacy - coheres around the way in which we treat earned endowments differently to how we treat windfall endowments.  It goes back to an idea of Milton Friedman's in his permanent income hypothesis: we humans treat money differently depending on its source.  But, economists hadn't begun to use experimental methods back then, and only recently have economists begun to see that where money comes from (what the trade calls 'endowment source heterogeneity') affects what people do with money in experiments.  Today, I plan to start a new series of posts about earning and endowment 'legitimacy' in experimental economics and how it affects some of our conclusions from experimental economics and behavioral economics. 

Cherry, Frykblom and Shogren's 2002 paper 'Hardnose the Dictator' made a bit of a splash when it first came out.  Other papers before it dealt with payoff legitimacy, but not many showed as stark a result as theirs did.  The idea works as follows.  Consider a normal dictator game: two players one who is the Dictator the other the Receiver.  What happens if you make the Dictator do a task beforehand to earn their money, and, moreover, when there's differential achievement in that task?  Cherry, et al get some of their subjects to answer questions from the mathematics section of a GMAT (yes, that's problematic, but let's not worry about it for now).  Depending on how many questions they answer correctly, subjects are given $10 or $40. Another group are given an endowment of 'windfall' cash, as has been customary in experimental economics up to now, and they were given $10 and $40 to ensure a decent comparison. For some of the subjects 'distance' is increased when the experiment is done 'double blind'.  Customarily, in the dictator game many Dictators give substantial amounts of money to their Receivers (Camerer, 2003). The question here is: do those who earned their money give the same, more, or less than those who were given windfall endowments? et al. showed that giving decreases dramatically when players earn their money, especially when players earned the most money (and perhaps feel the most entitled to their money). Here's the money quotation:
"In the baseline treatment [of windfall earnings] the theoretically predicted outcome of "zero offered" occured in 19% of the low-stakes bargains and 15% of the high-stakes bargains. In contrast, [in the earnings treatment] zero offers increase to 79% and 70% of the low- and high-stakes earnings treatments." (Cherry et al., 2002, 1219)
Moreover, in the double blind treatment the zero offer became even more prevalent occuring in 95% in the low-stakes and 97% of the high stakes treatments. What can we deduce from these results? First, 'legitimizing wealth', that is getting subjects to work for their payoffs before making decisions, seems to affect how subjects behave in experiments. Second, combining earning and isolation (the double blind treatment) brought the results of the experiment much closer to the theoretically predicted outcome than in almost all other experiments. is all lost for theories of other-regarding behavior? Where do we go from here? Replication and variation. I'll report soon on some similar papers that show similar results with earning in dictator games with some variation (the 'deservingness' of the receiver plays a role here as does culture), and other papers show how earning does not discourage subjects from cooperating in public goods games, in fact it may even encourage them to cooperate.  See you soon for more payoff and earning legitimacy in experimental economics!

Thursday, February 11, 2010

New SA Law Blog

Posted by Simon Halliday | Thursday, February 11, 2010 | Category: | 0 comments

A new South African law blog has come onto the scene - For Voet's Sake.  It's a team blog with contributions from several young South Africans, some of them graduate students in law at the University of Cape Town and a couple of others clerking at the constitutional court (as far as I understand it).  The blog has the potential to speak about all kinds of interesting topics and to offer high quality but accessible insights into the functioning and practice of constitutional law in South Africa.  Two of the bloggers [David Watson and Emma Webber far left and middle in the picture] are former colleagues of mine during my volunteer work with the Township Debating League at the University of Cape Town.  One of the recent posts states the blog's aim: 'To explore strange new worlds, to seek out new life and new civilizations, to boldly blog abot things no one wanted to blog about before.' Good luck to them, at least about the blogging.  I'm less certain about the new worlds and civilizations. 

Recent Sceptic Victories

Posted by Simon Halliday | | Category: | 0 comments

I just wanted to highlight some recent sceptical victories that have been covered in the press - just in case you missed them.
  • Almost everyone should now know about The Lancet deciding to retract Andrew Wakefield's MMR scare paper (reports here and here, Lancet press release here).  Wakefield's paper tried to show that vaccinations cause autism and he has been at the forefront of the vaccination-autism conspiracy for some time.  I hope that this disempowers the conspiracy theorists, even though Jim Carrey's girlfriend has been funny to watch (though still receiving my sympathy for having an autistic child). 
  • On the autism front, and providing additional evidence that the vaccination conspiracy is wrong, is a report by the WSJ on  research trying to understand autism's rise.  The researchers comment briefly on the vaccination conspiracy arguing that if vaccinations did anything then there would be greater statistical regularity about the distribution of cases.  To explain, if kids in Cape Town and Johannesburg are all vaccinated with the same stuff and at the same rate, and if vaccinations cause autism, then the kids should manifest autism at the same rate.  This doesn't happen, even though kids are vaccinated at roughly the same rates, or with statistically similar patterns in different areas (see graphic).  Therefore the claim that vaccinations cause autism is wrong (again).  The article documents several of the fascinating conclusions that people are drawing about the diagnosis rates, everything from education levels predicting higher rates (that is parents with higher education are more likely to identify autism and get it diagnosed), but others say that the patterns are due to unobservables that they can't currently measure (this is a professional way of sayng 'We still don't know.' more power to them).  Either way, vaccinations stay out of it.
  • The mass overdose of homeopathy was entertaining. Hadley Freeman reports on her experiences, or lack of them really, when she 'overdosed'.  Simon Singh is interviewed here. Guardian report here. So, what's the idea behind this? If homeopathy does anything, then taking substantially more than the recommended dose should result in some effect.  Typically with medicine it isn't advisable to take more than the recommended dose as the dose is tuned to meet the needs of the symptom.  If you take more than the dose, then the medication can be poisonous. No one disputes this.  But, homeopaths claim that you have to have been prescribed a homeopathic treatment for it to work (sorry?), or you have to take it for a sufficient period of time.  Therefore, they argue, the overdoes would be ineffectual because you need to have been told to take the stuff by a homeopath (somehow instilling it with power?), or take it repeatedly for a long time.  Now, 'how the taking over a long time' makes something work I don't know, but then their theory of an overdoes should mean that if people took more than they were meant to (having been prescribed it) for a longer period of time than they were meant to, then something would happen? I'll keep that in mind next time I think about taking sleeping pills - it won't matter if I knock back them back over a period of half an hour then if the laws of homeopathy (see 'titration', and a for group discussion) apply - if I haven't been prescribed the pills and the intensity doesn't matter, I should be fine the next morning. Also note, I understand that homeopaths believe that taking a more dilute solution is more powerful, by this reasoning, if I took my dinner, mushed it all up, combined it with water (which supposedly has a memory), diluted it again and again, making sure to shake it of course, and then drank it (assuming the dinner was prescribed to me by a registered homeopath) I would gain more nutritional benefits. No, no, no.  Yes, I might get homeopaths annoyed with me, but they seriously need to realise that the benefits from homeopathy are basically no different from a placebo, or may arise from the fact that patients feel better because the homeopath spoke to them for longer than a GP normally does.

Monday, February 08, 2010

The Temptation of Magic

Posted by Simon Halliday | Monday, February 08, 2010 | Category: , , | 2 comments recent post by William Easterly at The Aid Watch blog, 'Who Gets the Last Seat on the Plane?' reminded me of an article by Deirdre McCloskey, 'Voodoo Economics' in which McCloskey relates the wishes of children (and, in the context of Easterly, development officials) to magic and magical thinking.  Many's the economist or statistician who wishes that there were endless resources, that there were always another seat on the plane, that there were water, food, bricks and mortar to slake the thirst, sate the hunger and house the bodies of the poor. But it cannot be.  Resources are scarce.  Economists do not habitually profit from their predictions, rather they gurgle about shocks, harp on about errors, and make no more money than the next man when a commodity price wanders around like a directionless drunk. 

To support her argument, McCloskey reminds us of several characteristics of Magic:
  1. Magic is often bussinesslike: magic expects to work, and work it shall (or else)
  2. Magic is often arrogant:magic summons and invokes, reality takes heed
  3. Magic is often secret: secrecy with public dissembling
  4. Magic is often exclusive: only performed and understood by a select few
  5. Magic is often nontransferable: only applicable and given to you and only you
  6. Magic is often particular and local: on this day, this week, the moon favours us
  7. Magic is often elaborate: procedures, rituals, sacrifice and execuation - all elaboration and often unnecessary 'economics' for 'magic' and you should laugh.  That said, some truth shivers through, especially when you consider some of the childish or magical economics that gets espoused in the media.  People forget that scarcity exists always and everywhere and that we must always make decisions about costs and benefits.  Right now I have weighed up the benefit of writing this post with the cost of the time of doing so, against the benefits and costs of other activities.  I don't claim that I've indexed every possible activity, but at least one or two have gone through my head: reading another few pages of that article sitting open on my desktop, or doing some writing and editing, or, more frivolously, watching a program or reading a novel. 

These are rather inconsequential costs and benefits, further up the ladder, and pertaining to development directly, the costs and benefits are measured more emotively and significantly: one more child fed, one more mother given anti-retrovirals, one more father employed.  Even so, in development and economics we must always keep ourselves away from magical thinking, from believing in the arcane, secret musings of 'consulting economists' when judging the costs and benefits, we should try to understand the intricacies, if there are any, ourselves. Similarly, in our daily lives if we consider the evidence deeply, if we steer away from magical thinking, remain sceptical, humble in the face of uncertainty and agnostic about whether something like price can be predicted, if we adhere to thinking that is often general rather than specific (i.e. someone claiming that in this place, at this time, and now, apart from all other moments, X must work), if we seek always to remain simple and avoid elaborateness, then hopefully we'll rid ourselves of the magical thinking that the Economic Magicians of policy, business, and development have all the answers, we'll expunge the thinking that scarcity does not apply to them, that all they need is a final utterance, a final spell, or a final conjuring before the problem is *poof!* solved. 

Now, I must say that I consider there to be some caveats to this reasoning lest people misconstrue my meaning.  I realise that there are situations in which people, governments, or firms must make large leaps in order for something, anything to happen, for a poor country to yank itself out of poverty, for example, might require massive and directed investment (throwing in jargon, think punctuated equilibrium, evolutionary game theory, and moving from on basin of attraction to another).  But, when we do this, we must admit that investing in something a) might not work, and b) has an opportunity cost.  Politicians and economists often seem scared to admit projects might fail or that there are opportunity costs, and well they should be scared because their jobs often depend on the the sops in governments and the public believing their magical reasoning that their project - and their project alone - will work.  Economists fail. Often.  We're much better at post hoc explanations and describing existing data than they are at predictions.  We economists know this.  We just seem, every so often, to suspend this knowledge in the belief that one more try might make us right.  I'm not saying economists won't get it right, or we don't get policies right, we do.  But many economists, probably most of the time, get things wrong.  The price goes up, not down.  Or it goes up or down more than we said it would.  Or something else equally scary and equally damaging because we misinformed people and they were led to believe the magic.  Beware magical thinking.  Remain sceptical.  Think of the last seat on the plane and whether you're sitting in it. 

Sunday, February 07, 2010

Gender in the Press

Posted by Simon Halliday | Sunday, February 07, 2010 | Category: , | 0 comments

Last week I started something I'd like to try and make semi-regular: comments in the popular and academic press about gender.
  • A new NBER paper (one of the authors of which is Rachel Croson, one of my favourite economists) describes the results from a randomized controlled trial that some economists ran on themselves, well sort of.  The committee for the Status of Women in the Economic Profession started an RCT on a mentoring program for women in the profession.  Women who were mentored published substantially more articles and got more grant money than the control group.  Trust economists to run RCTs on themselves. HT: Chris Blattman.
  • Duncan Green takes a look at some poverty statistics wanting to know Are women really 70% of the world's poor? How do we know? He jokes about how he has seen the factoid of '70% of the poor are women' regularly used, but he tried to verify the source of the data.  He then found out that the original source included girls and women, but the executive summary of the report just spoke of women.  He then went on to try and find the result elsewhere, and struggled.  He admits that he finds the gender imbalance in asset ownership, power, and many other factors relating to poverty are devastating, but he also says that he wishes that more research would be done and better statistics found to verify stories such as this one about women in poverty. 
  • The BPS research digest reports on different male-female preferences for partners who conspicuously consume.  Women are attracted to men who drive expensive cars, but men aren't similarly attracted to women who drive expensive cars.  I'd argue that there are strong evolutionary reasons for this: women historically needed men who could provide for them, men didn't have such needs.
  • Alison Booth and Andrew Leigh present evidence from a new paper of theirs at Vox EU examining whether employers discriminate by gender in female-dominated firms. They undertook a field experiment in Australia focusing on female-dominated (65%-85% female) industries. Their hypothesis centred around the empirically observed pro-male bias in many industries, so they wanted to see whether the same would hold for female-dominated industries.  Consistent with previous research, they submitted identical CVs with different names on them to see whether the gender of the name might affect the callback rate.  A female applicant received callbacks 32% of the time, while a male applicant received callbacks 25% of the time.  The difference was largest in industries where females comprise 80% or more of the workforce, for industries with less gender dominance, the effect decreased. 
  • An entertaining article in the NYTimes, 'The New Math on Campus', documents how the gender imbalance in many US universities has altered how people interact and, according to their interviews, seems to perpetuate a system where men are invested with power in relationships and can freely cheat on their partners because men of 'high' quality are so rare on campus.  Think 40% men and 60% women, of the 40% of men, the women say they'd date half half to three quarters (others too geeky, nerdy, or ugly? we weren't told).  Then assume that a further half of those men are 'taken' relatively quickly, and there's a substantial minority of single men invested with a lot of dating and sexual power.  Interesting, and slightly funny in a warped way.
  • Jonah Lehrer at The Frontal Cortex comments on Ross Douthat's NYT column, bringing in evidence from an Ariely and Rubinstein paper I love about decision-making in different contexts - sexually aroused and not.  Male decisions seem substantially less controlled, and much less rational, than when the same questions are asked of them in a situation when they are not sexually stimulated. I put it in this week's 'gender' notes because of how it relates specifically to male behavior and had a male sample.  If I understand correctly, Ariely is trying to do something similar with females at the moment to see whether or not they respond similarly to males.

Thursday, February 04, 2010

M&G on Water

Posted by Simon Halliday | Thursday, February 04, 2010 | Category: | 4 comments

Janice Roberts at the M&G reports on water issues in South Africa.  The article's headline is 'SA water demand will exceed supply by 2025'.  So, first off, the title is wrong.  Second, the article doesn't tell us what the underlying models are, what's being held constant, what's varying.  We need to know these in order to understand what the author is trying to say, because she evidently isn't saying it well.

File:Supply-and-demand.svgSo, first off, Supply and Demand are functions, they are not quantities (see the graph adjacent stolen from wikipedia and yes, I understand that I'm adhering to certain weird assumptions using D&S graphs, but I believe they remain a decent heuristic).  If you want to talk about quantities, as in kilolitres or megalitres of water, then you should say 'the quantity of water demanded in the future will exceed the (future? current?) quantities supplied in South Africa'. Again, a function (Demand) cannot 'exceed' another function (Supply).

But, that statement is also incomplete.  Why? It doesn't talk about prices. So what the statement probably means is that the, at current prices, future quantities of water demanded will exceed the quantities supplied.  This is a bit nonsensical because the price will surely change and people will respond accordingly either by consuming less water for luxury uses, e.g., replacing huge water-sucking gardens with water-wise gardens, or having shorter showers, not installing or getting rid of a pool, or they'll find ways to recycle their water, e.g., grey water systems., because water is a necessity, firms will probably have manage this with step-wise pricing systems as it is done now, with free water for everyone up to a point (currently six kilolitres per household regardless of size, again this is silly because it should be by household size, but the government has no way to credibly measure household size, and therefore some households are over-provided and some under-provided, sigh, oh, noting which I think this amount should probably be increased), and then water priced higher and higher per kilolitre the more that a household consumes.  My suggestion, as a complete novice of resource economics, would be to price non-essential water use even higher than it currently is priced.  But, this relies on an assumption that the amount of water provided to household actually affects water demand, and specifically that the fraction of the household demand in South Africa comprising those households that demand more than essential uses of water is sufficiently high to allow others to continue to use it. So this takes us to what the article could be saying, that the quantities of domestically-located water supplied will be exceeded by the essential quantities demanded by South Africa's populace by 2025.  That would be sad, but we could import water (pricey, I know), desalinate water (the technology of which will surely improve by 2025, making it cheaper) and so much more. But, of course, none of this makes for a decent headline of a nationally read newspaper., please note that the article didn't speak at all about industrial water uses and industrial demand (here I'm talking about the function).  If SA experiences economic growth, and manufacturing growth particularly, then industrial demand (again the function) will increase, thus increasing the quantity demanded by industry as a whole.  This will obviously affected the pricing strategy of South Africa's water authorities.  Why? Well, they want firms to come here for FDI as FDI may (or may not) improve economic growth and increase employment.  But, because of international competition, firms will look for places with the cheapest inputs, e.g. water, electricity, labour, if South African prices increase they may choose not to come here and to go somewhere else.  So we have conflicting things happening here.  Firms that are currently located in SA may stay regardless of the cost increase and just lay-off some people (yes that sucks) to cut costs.  Or they may close (again job losses, which suck).  But with closing firms or firms cutting back, demand may decrease, or at least offset the increase in demand predicted from other sources (increased population).  But, my suspicion is that industrial demand and household demand will both increase, which will lead the price to increase and will lead firms to look for new technologies and people to look for other ways to use their current water before hitting higher prices (imagine richer households installing little alarms once they hit the next tier of water consumption - a loud voice chiming through the household 'Water is now 2 thousand rand per kilolitre!' or something).  I also favour social norm interventions and propaganda (yes, really) about water consumption, stuff like 'Do your duty, don't shower after gym!' (yes, that's a joke, who goes to gym? It's the rich folk who can afford to pay higher prices for water anyway! Duhuh...).

The problems all come from the 'other things equal' that the article implicitly held to, without telling us what was being held equal.  I get that my preferences for information probably exceed that of your average Johan, but come on, even he wants to know enough to make deliberate and informed decisions about his water consumption. 

Wednesday, February 03, 2010

DSW on Econ and Evolution

Posted by Simon Halliday | Wednesday, February 03, 2010 | Category: , , | 0 comments

David Sloane Wilson, a controversial and fascinating figure, has a series of posts up on Economics and Evolution.  I commented quite comprehensively on the first post in support, and I'll reproduce it here for the sake of interest.

Here are the links to the three posts that are currently up:
And my comment:
First, thanks for this post - trying to turn (or to help Economics evolve into) an evolutionary science is something that inspires me and more power to you.

Second, yes Hayek did use evolution as a metaphor and brought an evolutionary epistemology into The Fatal Conceit, but he didn't help to formalize the problems that many economists hope to deal with, e.g. out of equilibrium dynamics, that can be dealt with using more formal evolutionary ideas, say the replicator dynamics. For this see Sam Bowles's text Microeconomics: Behavior, Institutions and Evolution where he gives a big nod to the work of Hayek.

Third, and moreover, when one commenter says, "I think there's another "evolutionary economics" that deals with innovation and here evolution is more of a metaphor, but in my personal opinion a metaphor that has been abused." They need to look at the work of Herb Gintis, Samuel Bowles, Rob Boyd, Peter Richerson, and so many others because they do not misuse the metaphor, but do their best to formalize their thinking rigorously (rigor here not necessarily requiring math, but requiring an understanding of selection pressures).

Fourth, on economics as bastard child of physics, as DSW says it does not harm his general point if currently economics does not resemble current physics, the point revolves around what occurred in the history of economic thought around the late 19th and early 20th centuries. Pareto, Marshall, Walras and others were trying to solve a problem, that is searching for a way to achieve and understand economic equilibrium, the tools of which appeared in contemporary physics and the introducion of 'marginalism'. But, to get equilibrium Walras required such things as 'tatonnement' and what later became known (with Koopmans, Arrow, Debreu and other's beautiful depictions) as the Walrasian Auctioneer - one of many farcical assumptions. The tools for out of equilibrium dynamics, punctuated equilibrium and other phenomena that we observe in evolutionary theory just weren't there. And, as many economists and evolutionists can tell you, once you lock in to a specific equilibrium it can take a lot (e.g. a change of environment) before mutations allow the movement towards a different equilibrium. As DSW argues, we can look to evolutionary theory both to improve our understanding of economics as science, and to understand what will occur within economics in response to 'evolutionary economics' (say, dynamics of inter-group competition as in group selection models that have been used for modeling cultural evolution).

Harford on Probabilities and Clustering

Posted by Simon Halliday | | Category: , , | 0 comments getting a bit frustrated with Tim Harford last week for his inaccurate discussion about altruism, yesterday he offered an insightful post about probabilities and clustering.  So, how likely do you think it is that you will get 6 two yolk eggs in your half-dozen egg box? Well, Harford was told that getting one two yolk egg occurs with a probability of 1 in 1000.  So, if you get six of them (and if, BIG IF, they are independent events) you simply multiply 1 in 1000 by itself 6 times to determine the likelihood of getting 6 two yolk eggs in one box. From that multiplication you get a really small number: 1 in one trillion.  But, what if they aren't independently determined? Here's where the sociology of egg-packing comes in, supposedly egg-packers can tell the difference between one yolk and two yolk eggs, and they set aside the two yolk eggs and pack them together later.  Fantastic! What's the moral? Don't count your independent events before they've hatched? Or something like that...