Thursday, December 26, 2013

The role of theory in experiments

This is really great (and not nearly as long as its breakdown into chapters would suggest!) It (hopefully!) won't contain much new information for economists past the first year or two of grad school, but nonetheless, I thought his explanation of how misinterpretation of p-values is an instance of base-rate neglect was clearer than any other discussion of problematic interpretation of p-values that I've read. I've taught base-rate neglect a few times in behavioral economics classes without realizing the connection.

That then made me realize a more rigorous justification for economic theory, beyond the standard "it forces you to think very carefully and clearly about what your assumptions imply, and helps you discover subtler implications that don't intuitively jump from your assumptions." Economists routinely say things like "Our experiment design should be informed by theory" or "Our analysis should be informed by theory" which is pretty vague and doesn't imply anything deeper than the justification above.

But if you want to understand the chances of your statistically significant result being a false positive, rather than simply the chance that random data could have produced it, you need both a p-value and a prior belief. If an outcome is different between two treatments with p=0.05, but there was only a 1% chance that those treatments actually produce different outcomes on average, there's a pretty small chance that your result in fact isn't a fluke, even though random data would only produce your result 5% of the time. But if you are already sure of the assumptions of a model, and the model predicts a difference, your prior should be much higher than 1%. Any statistically significant results that corroborate the theory are much more informative than they otherwise would be.

Tuesday, December 24, 2013

Merry Christmas

Things sure have changed since the last time I was at my parent's church, last Christmas eve. Like, what part of Jesus do you suppose is missing from the gluten-free communion wafers?

Matt: The glutes, of course.

Nabokov

Nabokov is my favorite writer, and it turns out he was also a lepidopterist. I can't tell if this is a wonderful essay or it's inevitably wonderful given the topic.

I think Nabokov would be one of my fantasy-dinner-party invitees.

[Perhaps stolen from MR, don't remember...]

Saturday, December 21, 2013

minimum wage versus EITC

This is interesting. (File under "things every citizen should understand about economics" and "things about economics I should've been familiar with already but was not because I'm almost more of a mathematical sociologist than what most people would think of as an economist* and because politics depresses the living hell out of me so I try not to read too much about it**.")

First look at this graph, showing that the diminishing real wages of minimum wage workers often reported has been compensated for by increases in often neglected EITC (see this for more details):


Then go read this short and extremely clear post by Steven Landsberg on why we should be happy that EITC has replaced minimum wage as the social safety net mechanism, which is also stated in the NYTimes article but without much elaboration.

Steven Landsberg is great; you should read him in general. He explains things more clearly than any other blogger I know of. Sometimes a little too virulent for my taste, but hey, considering the target is consistently Paul Krugman, it's only fair... And he makes up for it with fun math puzzles.

*Pssst, don't tell the job market people :)

**See number 3. I highly recommend this list, even though 1, 5, and 10 are still challenging for me. (But on that point, see the coda.)

Wednesday, December 18, 2013

written kitten

Someone please turn this into an emacs plugin!! http://writtenkitten.net/ I want it for writing my next paper.

(Thanks to my friend Yang for mentioning this site :)

Tuesday, December 10, 2013

amazon

Amazon is a fierce price competitor. It's awesome. It's a mighty engine of consumer surplus.

So it's a little weird that they keep squeezing resellers. When I first started reselling books on amazon, they took a fixed 15% cut and I made a ton of money, even on books that sold for 1 cent, because the shipping charges were a bit higher than the actual cost. Now amazon takes a much higher, increasing percentage, and also digs into the shipping charges. I haven't posted a book on there in several years because it's never worth the hassle.

So I was surprised to discover recently that half.com still only takes a 15% commission, and has the same shipping charges as amazon. In the last couple months I've already sold a dozen books on there for plenty of cash.

Why is amazon ruthless about cutting its profits in order to gain market share in every other domain except reselling?