Saturday, February 07, 2015

Truck-stop goat biryani

Tyler is visiting us here in the 405, so we had to get creative for lunch.

Chicken tikka, paneer mattar, and goat biryani at Corky's grill. Corner of MLK Blvd. and East Reno.

Thursday, February 05, 2015

KPC at the CFA: Angus edition

Got all gussied up last night to speak at the Oklahoma CFA Association's annual dinner:

The Topic of the evening was "The Fed and its Critics", with the secret subtitle of "Monetary Cranks".

Oxen were gored, fortresses were plundered, and at dinner we debated which country was more overrated, Mexico or China?

Thanks to @swinkler78 for the invitation and to the good people of the Society for putting up with me.

Wednesday, February 04, 2015

Sunk Costs in a Basketball Economy

Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association 

 Daniel Leeds, Michael Leeds & Akira Motomura 
Economic Inquiry, forthcoming 

Abstract: We use playing time in the National Basketball Association to investigate whether sunk costs affect decision making. Behavioral economics implies that teams favor players chosen in the lottery and first round of the draft because of the greater financial and psychic commitment to them. Neoclassical economics implies that only current performance matters. We build on previous work in two ways. First, we better capture potential playing time by accounting for time lost to injuries or suspension. Second, we use regression discontinuity to capture changes when a player's draft position crosses thresholds. We find that teams allocate no more time to highly drafted players. 

Nod to Kevin Lewis

Sunday, February 01, 2015

Odds are Good

This is annoying, because it (again) shows that people have an impoverished sense of what probability means.

Because they can't wrap their head around an "event."

The incident:  Michigan lottery "picks" same 4-digit number two days in a row?  What are the odds of THAT happening?  It must be (pick one:  God.  Fraud.  Sign that probability isn't real.  Etc.)

Well, it depends on what you mean by "THAT" in the paragraph above.  Consider:
  • 44 US states have lotteries. Let's say they all have a 4-digit game, to keep things simple.
  • There is a lottery result every day, all 365 days per year.
  • The chances of hitting any given number is 1/10,000  (because 0000 is a possibility, up to 9999, by ones)
 So, if "THAT" is the chance of the Michigan lottery having exactly the same number two days in a row, then THAT is pretty unlikely.  It's 1/10,000 every day, because it's the chance of hitting yesterday's number again today.

But if we are talking about one state lottery somewhere (there was nothing special about it being Michigan, ex ante) on some day in given year (there was nothing special about those two days), then THAT is just the chance one lottery out of 44 picks the same number on consecutive days, out of 365 (since it could happen on the first day, but that would be across years).

If there are 44 4-digit lotteries every day, and the probability of getting a different number in each particular lottery is 9,999/10,000, that means that the probability of duplicate numbers in SOME state (out of 44), on a given day, is .00439.

But we do that 365 times per year.  Since the chance of no duplicates in all 44 states, on a given day, is .9956, the chances of no duplicates for a year is .9956^365 or .2007.

If that's right (and I'm just doing this back-of-the-envelope, so I've probably made a mistake in logic or calculation!), that means that in any given year the chances of a duplicate lottery, two consecutive days the same number, in some state, is about 80%.

Does that sound right?  If you carry out to multiple years, say 5 years, the chances of getting at least one duplicate in at least one state are better than .999.  It will be a little more complicated in real lotteries, because they are not all simple "pick four digits between 0 and 9," but the same sort of logic applies.

With the caveat, again, that I have likely made a mistake.  The question, then, is whether consecutive duplicates are really as common as this calculation implies.  Thoughts?

Example.....  Example.....  Example..... Explanation.

Excellent example...

Lagniappe:  Scott de M suggests an exercise, left to the reader:  Prove that some athlete, somewhere, in some sport, has a jersey number that matches both  his age and number of wins he has played in.