Monday, July 23, 2012

"It isn’t easy to understand how the world works"*

And it doesn't help that we get bombarded with BS on a minute by minute basis:

"Tax rates were higher under Clinton than under Bush/Obama and things were better, so raising taxes now won't hurt economic performance."

"We tried stimulus and the economy was worse than the governments' "no stimulus" baseline, so fiscal stimulus doesn't work."

"We spend more on health care than some other nation does and get worse results, so if we adopted the system used by the other country we'd get better results with less cost."

These are examples of the common mistake of not taking other relevant factors into account. Using one bilateral comparison to determine causality is rarely going to be correct.

Consider the third example above. For the claim to have any shred of validity, we'd need to find a nation that had roughly the same population, income distribution, ethnic diversity, rates of obesity and exercise, diet, and probably a few other things as well. That ain't Sweden, or Singapore, or France.

But yet we hear it every day repeated as a killer argument for some alternative health care delivery system.

Then there are the claims that conflate average with marginal:

"Wages are higher in manufacturing than services, so we should subsidize increases in manufacturing jobs"

"Higher top tax brackets won't deter economic expansion because they only apply to the last money earned. The overall average tax rate won't go up very much." 

Averages just aren't relevant for economic decisions. To determine what kind of job is better, we need to study what are current hires in manufacturing earning compared to services. When deciding to expand production businesses compare the marginal costs and benefits of doing so.

Take heart, at the least the BS shot at you by econo-pundits is not as grossly ridiculous as that delivered by medico-pundits.

Take this recent gem: "If you sit a lot, you will have a shorter life expectancy" which is being widely interpreted as meaning "sitting will shorten your life!"

Did it never occur to these geniuses that sick people probably sit a lot more than healthy people??

And no, state of health was NOT a control in the meta-analysis that is cited in the articles. Only age and gender were used as controls. In other words, the statement is meaningless.

*title quote is from Larry Summers as discussed here by one of his former students, Miles Kimball.

1 comment:

Tom said...

"To determine what kind of job is better, we need to study..." Ahem! It might behoove "us" to first study what politicians or even the general public will do with this alleged information. Meddlesome politicians trying to influence people into jobs that are already "better" are sure to get unintended (but predictable) consequences. Using the police power of the state to change employment opportunity is counter intuitive, at best.

If I (personally) were to use a gun to change YOUR life choices, it pretty sure to be harmful. How better if Pelosi and Boehner do it?