Ask the grumpies: Is all irrational behavior rational?

CG asks:

Is most/all economically “irrational” behavior actually rational for one reason or another from the individual’s viewpoint?

Nope!  This is why we have the field of behavioral economics!  Behavioral economics deals with ways that people are systematically irrational.  That is, they deviate from rational assumptions of economics, but in ways that we can model.  (Other social sciences sometimes talk about irrational behavior we can’t model.)  A really good example is present discount bias– basically why we procrastinate or eat too much etc.  We value now more than we value later, even though we would be willing to pay for a commitment device that forces us to work instead of play video games, eat healthy food instead of junk, save for retirement instead of spend, etc. etc. etc.  That’s not rational.  Another example is when you break transitivity… like if you value a>b>c you should value a>c, and it shouldn’t matter if there’s also a d option that you value less floating around.  And yet, menus, for example, are designed with expensive items almost nobody buys in order to encourage people to buy something pricier than they normally would.  Irrelevant options do affect people’s decision-making and not just through information channels.  Behavioral economics is fun and exciting!

That said, some seemingly irrational behavior actually is rational.  For decades if not centuries, the (white male) economist answer to why women and minorities make less in the market place was because they don’t behave enough like men.  Women and minorities were irrational– they didn’t get the education needed, they didn’t ask, they weren’t competitive enough.  It’s only been in the past 15 years or so that this idea that no, women and minorities are just as rational as white men, perhaps even more so, but they’re playing different games.  They don’t get the education needed because there are barriers in the way or it isn’t rewarded, they don’t ask because they’re punished for asking, they avoid competition because the games are rigged against them or they get punished whether they win or lose.  Their (Our) behavior is actually rational given their different constraints.

Dream job not happening

Everything went great until my last meeting. The dean was late as is his usual, apparently.

Then he made a small amount of small talk about his son going to the school. Then he asked me if I wanted to work there and why. Then he was basically like, you do not currently have an R01, therefore I will veto anybody that wants to hire you.

And I’m like, NIH doesn’t fund the work I do. Does it have to be NIH? I’m between grants right now, but I’ve been getting NSF funding more recently. And he said NSF was fine, but it had to be government funding, foundation funding doesn’t count. But the next two grants I’m scheduled to submit are both foundation (and he’d never HEARD of one of them, which, dear readers, many of you have likely heard of because there are celebrities involved with the larger organization). But he said, no, overhead is important and he wants 67% overhead, not 15%. (My colleague who works there says the majority of her funding comes from this specific foundation so the dean has definitely heard of it.)

Then he said that he’d decided not to do a targeted hire and there would be a job posted with a search committee and I was welcome to apply and the search committee was welcome to do what they wanted, but he was going to veto anybody who was not bringing in government funding with the appropriate overhead rate. It’s an equity issue, he said.

NSF deadline is in January, they say what is being funded sometime in the summer. It usually takes two tries. This is not going to happen.

Also he said, this is probably illegal for me to ask, but what does your husband do? When I was on the job market the first time I told off two guys at Berkeley (for a post-doc that I did not get) who asked me that. He’s not a coal miner, there are jobs for anybody in Silicon Valley.  (And yes, they only asked women with rings that, and they did stop the next year.) This time I answered, but I HATE it when people do that. It’s not a state school, where doing that actually would be illegal in this state, but I’m willing to bet they have guidance that they’re not supposed to ask.

Unless I move over into health, it would be very difficult for me to keep up a steady stream of government funding and also get publications out. My work is of strong interest to foundations right now and they are much faster to fund. But they don’t allow more than 10-15% overhead. Even though this job is hard money, I just don’t think it is a good fit for me. I can think of a couple of people it would be a good fit for, but they’ve recently just moved to other jobs that are hard money without the additional funding expectations.

So, a nice visit, but I shouldn’t have spent so much time looking at housing and schooling in the area. It’s not going to happen.

Ask the grumpies: What’s your take on Oster’s interview about gun violence?

OMDG asks:

What’s your take on the Emily Oster interview of the ED Dr at brown about gun violence?  https://emilyoster.substack.com/p/understanding-gun-violence 

I am sorry to disappoint, but sadly the interview is only available to paid subscribers and Emily Oster really does not need my money.  (She and Jesse make waaaaay more than DH and I do.)

From what I can tell, the interview is with Megan Ranney, so I looked to see what else she’s been saying on media recently.  Here’s a Boston Globe article.

Ranney said she believes all of the actions being taken by the Biden Administration on gun violence are significant and important, all for different reasons. But the investment in community violence programs is key, she said.

Everything she says in the article seems to be sensible and to be following our best knowledge about preventing gun violence and gun deaths at this time.  She’s also got a Ted talk, and many other interviews online that aren’t pay to access.  I think she knows what she is talking about.  I assume she doesn’t say anything wild and crazy in the Emily Oster interview.

Grumpy Nation:  What do you all think?

Myths about the value of college

ARGH, I’m seeing so much misinformation going around in twitter because of student loan forgiveness.  It’s driving me crazy.

Myth:  The value of a college degree is not worth it.
Reality (based on recent work of David Autor, but also many many other people): Even with the high costs of a degree and student loans, the additional earnings make it worth it for most college graduates.
Sub-Reality (I don’t remember a big name on this one, but lots of people are studying it with mixed results): The benefit of going to college and not finishing– we’re not as sure about that. Depending on the loans that you take out, it may not be worth it to spend a couple years in college and then not have a degree (though 2 years at community college with a degree is worth it). And lots of people go to college, take out loans, and don’t finish. That is a problem that lots of people are studying.
Sub-Reality (David Denning and several other papers): Even a degree from a for-profit college usually does result in higher earnings, but you are no better off with a for-profit degree than you would have been with a community college degree (worse given student loans, though the worst offenders have thankfully been addressed in the new Biden thing). They provide the same benefits, it’s just the for-profit degree is stupidly expensive by comparison.

Myth: It is better to go to a low tuition regional school (or community college) than to the best school that you can get into.
Reality (Hoxby and Turner in an amazing RCT, and other papers that are not experiments but use clever regression discontinuity designs): Schools with better endowments 1. Give more and better financial aid, meaning that for poor kids who can get into them, a state flagship or a highly endowed private prestige school will cost less. And 2. More prestigious schools do a better job of retaining low income kids– this seems to be through a variety of methods– better financial aid means working fewer hours, but also they just have a lot more resources devoted to keeping low SES kids, offices, sometimes mentorship programs, short-term loans etc. That means for low income kids, the more prestigious school means that they’re more likely to actually *graduate.* And, we also know among graduates (through a lot of different papers, though no RCT to my knowledge), prestigious schools help low SES kids make more money as grownups than do less prestigious schools.
Sub-Reality: For middle/upper middle/rich class kids, it doesn’t matter. They just need a degree.  (And the rich probably don’t need a degree.)

Myth:  The skyrocketing cost of college is caused by financial aid accessibility.
Reality: The skyrocketing cost of college is caused by decreased federal and especially state investment in state schools. (And to a much smaller extent: better quality education, gambling on fancy sports programs that don’t pay out, fancy dorms at private schools, etc. But this is like nothing compared to the effect of how much the government has stopped subsidizing higher education.)

And some stupid Republican propaganda:

Myth:  Non-college training is free.
Reality: Truck driving requires CDL training. Hairdressing requires training. Nursing requires training. Plumbing requires a TON of training. So many professions that don’t require a college degree still require technical training which still costs money.

Myth: Working class people don’t have student loans
Reality: A lot of people drop out of college and have student loans. A lot of people get student loans to pay for technical training.  Plenty of working class people have student loans.

It still boggles my mind that only 30-35% of US adults have college degrees.  But a big percent start but then drop out without an additional degree.  (You can get exact numbers from http://www.ipums.org)

Making fun of people for (rationally) picking and choosing covid/monkeypox risks

There’s a lot of people who complain about how we have to mask at conferences, except during meals when we’re all eating at the same time.  Why mask at all?  Or why mask at the grocery store but not at a wedding?  Or why go to parties at all if you’re worried about covid?  Or why not go to parties if you’re not going to mask at work or if you have a child in daycare?  Why don’t people take the same level of caution at every moment of their lives?

Some of the argument is the same as when people make fun of people who order big macs and supersized fries along with a diet soda. From an economics standpoint that makes sense– they get utility from the fries and big mac that justify the extra calories but not from the soda. (Ignoring that from a health standpoint diet sodas may mess with how your body deals with sweet things.)

Going to Walmart because the cost/benefit ratio makes sense but not going to a wedding because it doesn’t *is* reasonable. There’s a lot more things besides risk that go into a cost/benefit ratio. I mean, I avoid amazon when it’s easy and I use it when it’s not easy to avoid. I boycott Nestle when it is easy but sometimes still buy Haagen dazs because it’s actually good and one of our grocery stores only has Ben and Jerry’s as an alternative, which we like, but sometimes you need something they don’t have. That is rational, not hypocritical. (And yes, I know my individual boycott means nothing to Nestle… but bigger boycotts do matter, and *I* care.  Just… not always enough.)

Maybe it is that people don’t understand risk, but maybe some of it is that risk is only part of the cost-benefit ratio but the most acceptable of the social excuses these days. Or that going to the gym is the only way to force yourself to exercise and you wear gloves to remind you not to touch your face after touching the equipment even if you know that the air is more likely to spread covid than surfaces. (And to be fair, I stopped touching doorknobs without sanitizing back when I was on the job market decades ago because I realized I no longer came back from travel sick! Covid isn’t the only bug out there.)

Are there rational choices that you make that seem wrong to people who don’t understand your cost-benefit calculus?

Data and bias

This tweet recently made the rounds of twitter:

Economists have spent so much time studying how monetary incentives influence behavior, they have become immune to those very same influences. Homo economicus? That's y'all, not me. pic.twitter.com/TI8OmR6v5r

— Jathan Sadowski (@jathansadowski) July 19, 2022

Justin Wolfers has since deleted his defense.

But… here’s my 2 cents as someone who isn’t bringing in over half a million per year in salary from the University of Michigan (Justin Wolfers and Betsey Stevenson’s salary info is available online as state employees):

1.  100K is a lot, and if you don’t think it’s a lot, there’s a problem.  To speak in terms that the top 2% can understand, that’s a whole new personal assistant.

2.  The motivation of 100K is not really as big a deal as getting stunning data. Just the data by themselves are incentive to not bite the hand that feeds the researcher (in this case Uber).  And the Uber data are stunning.  They’ve helped us learn a lot about human behavior and contingent labor markets, and probably lots of other stuff that’s more industrial organization.

Does that mean that you can’t trust anything that comes out of the Uber data, or any other study where the company has generously provided data?

No.

But it does mean that you need to think really hard about the studies that do come out of the data (and the studies that don’t come out as well).

Ask yourself:

Does the company (or in some cases, government agency) benefit from the study results?  If not, then it’s probably ok.

There are plenty of amazing studies using the Uber data that tell us about the type of employee who uses the contingent labor market and what their preferences are.  Uber has no reason to benefit from or to suppress this information.  The studies are orthogonal to influences that Uber might be giving (purposefully or not) to grateful researchers.  These results are probably trustworthy, that is, they can be evaluated on the merits of their own internal validity.

If the company would have cause to benefit from the results– then you might be more cautious.  Not that a good economist would purposefully fudge data or results.  They don’t need to.  With any research project there are a lot of decisions that need to be made about specifications and samples and data cleaning.  Researchers just have to unconsciously feel grateful to the company to bias themselves with these choices, particularly if they don’t have a pre-analysis plan.  (And even if they do have a pre-analysis plan, they might still choose what they unconsciously think will benefit, or at least not hurt, the company).

On top of that, there’s selection bias in the choice of research question.  Even excellent economists will choose to just not go places that might make the company look bad when said company has provided data.

Similarly, negative results can be suppressed by the data provider.  I know of a case where the US government suppressed one of my colleague’s research findings that made their agency look bad after providing him with data (though they did allow someone else to publish the same negative findings later under a new, less fascist, government regime).  Any time that clearance is required to share results, that can be a problem.

To sum:

Just data provision is enough to bias research results.  If a company provides data, then results that show the company in a positive light will be shown and results that show the company in a negative light will not be shown to the public.  Results that don’t affect the company one way or the other are probably fine and can be evaluated on their own merits.

There’s a lot to be said for data that come from legal requirements (ex. FOIA), are available from third parties, or from internet leaks.

It is important to know who provided the data, not just who provided the funding, when doing disclosures.

Myths about TANF

This is an old post in the drafts from 2011.

Entitlement:  Not really sure what I meant by this one.

Cadillac mama:  The idea of the Welfare Queen was thought up and popularized by one of Ronald Reagan’s speech writers.  There’s little to no basis in reality, though some point to one woman who was perpetuating actual fraud (and was caught and went to jail for it).  There were no single mothers living large on Welfare back during Reagan’s time and TANF is even less generous, so that’s even less of a thing.

Encourages more babies:  TANF does not pay enough for an extra child to make it worthwhile to have an extra child.  The extra child will cost more than the additional benefit of TANF.  Anybody saying they want babies to get on welfare is delusional.

Encourages divorce/not getting married:  maybe.  Welfare (pre-TANF), potentially even more so, because it was targeted at single moms and even more difficult to get if married.  But even if TANF does encourage divorce/not getting married, that’s not necessarily a bad thing if it helps women not be trapped in dangerous marriages.

Discourages work:  yes and no.  Welfare pre-TANF did discourage work.  TANF is an improvement over that.  TANF is designed to try to keep it from discouraging work as much, though theoretically it still could.  Empirically it seems to not discourage work much.  One of the terrible things is that work doesn’t really provide a living wage for a lot of people on the margins of TANF.

People move to states with more generous benefits in order to receive benefits:  This just does not happen.  First:  People do not leave their families and support networks to chase benefits.  Second: even if they did, states have waiting periods where you have to live in said states for more time than most poor people can handle before benefits start up.

Ask the grumpies: What’s the best coffee to buy according to economics?

Leah asks:

Any good economic info on picking coffee to buy? In the ecology sphere, Latin American shade grown coffee is great, but African depends on the region (some shade grown good for the environment and others not).

An economist would say to get the one that makes you happiest (net of cost).  Basically, get the coffee where the highest utility function just touches your budget constraint.

Ecology considerations might fit into your utility function, in which case you should consider those.

Unfortunately, saving the environment deals with externalities, and because of the free-rider problem, market forces won’t be enough to get to the social optimum and government needs to step in and price those negative exerternalities (probably through taxes on coffee that is bad for the environment).  That’s probably not going to happen though.

Here’s a depressing news story from wired on the ecological impact of brewing your own coffee.

On salaries in economics

I recently went to a talk by a woman from the census who connected the survey of earned doctorates to tax records.  She has the entire universe of econ phds for the past 20 years (I’m in there!).  Econ PhDs in industry make more than those in academia make more than those in government.

I have more money than I ever dreamed of (though my dreams were small) and more than we actually need.  When DH is also working we are not even upper middle class anymore (though there are still multiple marginal tax brackets above us).

And yet…

Adjusted by quality/prestige of my PhD, my salary is below the median for academics.

In fact, my salary is below the median for academics in the PhD quality/prestige of the bracket below mine.

Should this matter?  I don’t know.  My friend at a SLAC likes to point out that her salary is way below mine and she’s from the same grad school.  And I think if I were to move to a SLAC I’d be ok with a salary cut (and I’d be happy to move to a SLAC so long as it didn’t come with an increase in my teaching load, which is already high for econ).

DH pointed out that part of the problem is that salary is considered an indicator of quality.  If you have a “low” salary, how good of an economist can you be?  After all, wage equals marginal productivity, doesn’t it?  Especially after the labor market has a chance to sort itself out?  (Answer:  no!  That’s completely ignoring search frictions and compensating differentials).

Should I care about prestige?  Should I equate salary with being valued?  Does it matter when I’m getting paid a ridiculous amount already that others are getting paid even more ridiculous amounts?  Would I be more productive if we had more money?  Should the fact that DH is also making a lot even enter into my equation?

I go back and forth on these questions.  I do like money.  And… half of the people do have to be below median.  It’s just hard when having a below median salary means people think you’re a below-average economist.  You know?  And my salary is publicly available.

Does your field equate salary with productivity?  Does it equate salary with value?  Do you?

Selection into the sample on the variable of interest: A Rant

First, a disclaimer:  I dislike mike the mad biologist.  I blame men like him for Trump being president because of his relentless attacks on ‘this woman, I would support any woman for president, just not this one” and the fact that he’s one of those assholes who does absolutely zero work and again, attacks people who are actually doing something as always doing the wrong thing.  Those men make doing things that they claim to support more difficult and emotionally draining while not lifting a finger themselves.  The only reason I ever look at his blog is because he’s on Bardiac’s blogroll and occasionally he’ll have one of those post headlines that I have to click.  Previously I thought he was just an unselfaware misogynist blowhard.  Now, I’m realizing that he’s … also not got very good statistics training.  (Interestingly, I’ve seen a recent survey that finds that people who are explicitly racist also just tend to be wrong about other things unrelated to their racism.  Not saying that translates to implicit misogyny, but… )

Ok, so here’s the post in question.  In it, he claims that a survey of people who aren’t getting vaccinated proves that time pressure and inability to take a day off work are not reasons.  (Therefore any policies targeting making getting vaccinations easier or getting time off work are wasted effort.)

The problem?  If you click on the survey, it says it has a 6.1.% weighted rate for taking the survey.  (So only about 6 out of every 100 people they sent the survey out to actually responded.)  Also, it is an online survey.

If that 6.1% were a randomly selected sample of a general population, there wouldn’t be a problem.   The problem is when the selection into the sample is based on the outcome that you’re measuring.  In this case, if you’re measuring people who don’t have time or ability to get vaccinated, well, likely they don’t have time or ability to take a survey either.

The Census Bureau isn’t stupid– they know this is a problem and they have lengthy documentation about the non-response bias in the sample generally.  They make it clear what you can trust the results for and what you can’t, as well as the limits of their weighting schemes.  The survey isn’t completely useless, but it is only externally valid for the groups that were surveyed!

I had been planning to use this little example of “sample selection on the Y variable” in my stats class this fall, but now I can’t because his response was so ironically ignorant that I have to blog about it instead.

Here’s his response:

The low income people who are supposed to be burdened by the time constraints also don’t report access as an issue compared to other factors. Are there any data that could convince you, or will the answer always be the same?

So– I guess I was right about his complete lack of self-awareness.  Can you imagine being convinced to make a huge policy change based on one extremely selected survey?  The people who ran the survey would never ever want you to make a policy change based on this result!

The answer to the question of what would be convincing (taking it seriously rather than just an accusation of me being set in my ways):

1.  A nationally representative sample that found the same result.  The US government has some of these, where you are required to take the survey and they have much better response rates (not perfect, but much better).  This survey is not one of them.
2.  A sample representative of the population who we are trying to target with our policies (ex. a state going into a few factories with onsite vaccination clinics before expanding the program).
3.  Multiple biased surveys that are biased in different ways (that is, are not biased on the outcome variable of not having enough time).

No good policy maker would make policy based on such flimsy evidence as the survey mike the mad biologist presents.  In fact, we rarely make big changes based on the result of any one study, unless it is the only study available or is the only well-designed large experiment available.  And even then, good policy makers keep their eyes out for new evidence and try not to do huge national things when the evidence is scant.  Ideally we’ll have a largescale randomized controlled trial, but failing that we’ll take a series of mixed methods– qualitative information, event studies (these two are the easiest and cheapest to do but can be biased depending on how they’re done), natural experiments, and so on.  Ideally we’ll have information about heterogeneity– we think, for example, that the effects of the Affordable Care Act and the effects of universal health insurance were different for Oregon compared to Massachusetts compared to Wisconsin or Tennessee.  And that could be because they have different populations and different starting environments, or it could be that each of these states had a different methodology used to study it with different biases.

Unlike Mike the Mad Biologist, every single thing I do (in research and in teaching!) has the potential of helping or harming someone’s life.  I have to be extremely careful.  I don’t make policy recommendations until the bulk of evidence supports those recommendations.  Because, getting back to that first disclaimer– I’m actually out there doing stuff, not just complaining about the people who do things.

So yeah, I teach my students about how not to use samples that are selected on your variable of interest.  It’s a more challenging concept than people say, lying about their weight or height, but it is an extremely important one.  I have a lot of students who go out and design/make/evaluate policy when they graduate.  Hopefully the lessons I give them remain with them.