How I learned to stop worrying and love the data

I have always been comforted by data. Just as I don’t think I will win the lottery, I also don’t think I will be involved in a plane crash. And now, as I have spent the past three years filling my head with mathematics and statistics, I also have become more prone to go ahead and run the numbers on how much I should worry about certain things.

Emily Oster, associate professor of economics over at U of C felt the same way as a pregnant future mother. She turned her obsession with getting to the bottom of all the dozens of “pregnancy rules” doled out (inconsistently) by OB/GYNs, doctors (and midwives) into a book (read the intro here). In it she finds that many of them are based on highly flawed or outdated studies, or that the rules that they foster are the strictest possible interpretation of less-than-clear study results. I wish we had had it available when our daughter was gestating. It would have allowed my wife to enjoy her day to day life as a pregnant woman a great deal more.

The book was critiqued in reviews like this one purporting to “debunk” it (by comparisons between Oster and anti-vaccination “activist” Jenny McCarthy. The author here comes down firmly on the side of listening to whatever often conflicting advice your doctor(s) give(s) out citing “Dr. Marsha McCormick, a professor of maternal and child health at Harvard Medical School and the Harvard School of Public Health, who can’t, for example, imagine a medical doctor evaluating economic data and dispensing policy recommendations or financial regulations for the housing industry.” This may be good advice for Dr. McCormick and other medical professionals to follow. A 1978 study in the New England Journal of Medicine found that 87% of a random sample of physicians, students and residents serving in hospitals of the Harvard Medical School could not answer the following question correctly:

If a test to detect a disease whose prevelance is 1/1000 has a false positive rate of 5%, what is the chance that a person found to have a positive result actually has the disease, assuming you know nothing about the person’s symptoms or signs?

If you are interested in how to answer such a question, which is a straightforward application of Bayes’ Theorem, go here and see how you do in getting there. The correct answer is that a positive result indicates a 1/51 (or approx 2%) chance of having the disease. Most answers from respondents in the study ranged from 95% likelihood of having the disease down to around 50%. Even this lower estimate overstates the risk posed by a positive test by 25 TIMES the actual risk! The authors’ conclusion was that “in this group of students and physicians, formal decision analysis was almost entirely unknown and even common-sense reasoning about the interpretation of laboratory data was uncommon.(Such errors have been replicated in numerous studies over many years up to the present day. Here is another more recent study of the same type without a paywall.)

While this sort of analysis is not super easy for a lay person, it really should be pretty manageable for a trained physician who makes diagnostic decisions based on the statistical data contained in medical studies. It is apparently not for many or even most physicians. But such analysis is very straightforward for any trained economist. Bayes’ theorem is covered in virtually any intermediate-level undergraduate economics course and again in any introductory or mid-level statistics or probability courses. By the time one completes an Econ PhD, simple applications of Bayes’ Theroem have been beaten into a students head for years and years. So it may well be that Emily Oster may be able to interpret the results of clinical studies in a manner that physicians should take note of based on the extent of her mathematical training alone. If we venture into the realm of potential problems with study design, discerning between correlation and causation, and other such methodological analysis of medical studies, then an economist has a clear advantage over most practicing MDs.

Another point that Oster makes in the intro above is that in economics the focus is on weighing trade-offs. Since most people don’t do things habitually that have no personal value to them at all, if someone prefers to do something it usually indicates that they gain some enjoyment or value (let’s follow tradition and call it “utility” henceforth) from doing so. We all seek utility from the things we do and we are constrained, by time, money, information and many other factors, from doing them exactly as we would prefer to. In pursuit of utility we all make trade offs with our health and our very lives every day. We eat too many sweets or we cross the street while texting or we smoke or we have a couple of drinks and figure it’s okay to drive home because the alternative is terribly inconvenient or we stay on the road when sleepy or we take our medicine in different doses than prescribed and so on. In every case, we are making a decision about risks and rewards. In most of these cases we don’t even have good data to guide us, just a gut feeling. We also worry too much about very, very low risk situations like the risk of an airplane accident or the risk of having our homes broken into.

Which is all a long way of introducing a trade-off I have been weighing in my own life. It is about the seemingly arcane decision of which way to face my 16 month old daughter’s car seat in our car. Flashback to pre-2002. The American Academy of Pediatrics (AAP) recommended at this time that children should face backwards in a car seat until they weighed 20+ lbs with good neck muscle strength, which tended to correlate with turning one year old. So the heuristic used by many was to say that you can face your child forward after they turn one year old. Then apropos of this 2007 paper “Car safety seats for children: rear facing for best protection” by Henary et al., the recommendations were revised to say that children should stay facing backwards in the back seat until they reach either age two or the limit of their rear facing car seat (which in infant to toddler seats is usually about 40 lbs).

If you search this sort of thing on the internet you are likely to come across a lay-person AAP press release such as this one. The meat and potatoes are as follows:

While the rate of deaths in motor vehicle crashes in children under age 16 has decreased substantially – dropping 45 percent between 1997 and 2009 – it is still the leading cause of death for children ages 4 and older. Counting children and teens up to age 21, there are more than 5,000 deaths each year. Fatalities are just the tip of the iceberg; for every fatality, roughly 18 children are hospitalized and more than 400 are injured seriously enough to require medical treatment.

New research has found children are safer in rear-facing car seats. A 2007 study in the journal Injury Prevention showed that children under age 2 are 75 percent less likely to die or be severely injured in a crash if they are riding rear-facing. (My bold)

Now, the first paragraph above is kind of strange since it refers to children age 4 and up. This has nothing to do with children between the ages of one and two years. Also 5000 deaths per year in the US for children and teens up to age 21 sounds like the results of a very low probability event, and that is for everyone from birth to drinking age. Then from these unrelated statistics we suddenly jump to the report’s finding that children under 2 are 75% less likely to die or be severely injured if rear-facing. 75% sounds like a lot right? But 75% of what? The answer turns out to be 75% of children under the age of two who suffered severe injury or death in a car crash and who happened to be sampled in the National Automotive Sampling System Crashworthiness Database between the years of 1988 and 2003 (I will get to problems with this sample shortly). The habit of making claims like “children under 2 are 75% less likely to die or be severely injured in a crash…” Is sufficiently misleading to even doctors, let alone the general public, that it warranted a recent blog post on the website of the Journal of the American Medical Association highlighting the difference between relative risk ratios (what the authors of the car seat study tout as their finding) and absolute risk reduction (what I am about to explore below). Physicians are implored to understand the importance of this distinction, which would imply that many currently do not.

So I wondered what was the probability on average of my family getting into an accident that fit this set of criteria? One absolutely critical thing to understand is that your average risk of being in a crash is based on miles driven, if you don’t drive, you are not going to get in a car crash. If you drive very little it is much less likely you will be in a car crash and so on.

Using the State of Illinois crash statistics for 2012, here is a walk through a number of statistical steps to a very conservative approximation (meaning overstating the risk at each step*) of the probability of my child being severely injured or killed based on the direction I face her car seat, given my family’s driving profile.

(To minimize monotony henceforth, I will state here that all of these figures are average risk, based on annual statewide statistics, so that I can dispense with adding “on average” to every sentence I write. I would characterize my wife and I as pretty average drivers. We have each been involved in a separate, minor, non-injury, other-driver-was-at-fault, accident once in the last decade or so.)

1) Probabilty of being in a car crash: 1 in 2.6 million (1 / 2,600,000) per mile driven.

We drive with our daughter an average of about 200 miles per month (a generous overestimate). This works out to 2400 miles per year. So our most basic probability of being in car crash with our daughter is 1 in 1083 annually. But there’s also this:

2) Proportion of crashes between the hours of 8 AM and 8 PM: 72%

This time period contains nearly 100% of the time we ever drive with our child in the car and serves to multiply the denominator of the above probability by 1.385. Thus our average probability of being in a car crash with any injury is closer to 1 in 1505 annually. (Edited based on feedback about an error.While the distribution of miles driven by time is hard to find, the National Household Transit Survey gives time breakdowns that don’t exactly match these hours but suggest that perhaps 85% of driving is done between 8am and 8pm. This would give a multiplier of  (.72/.85) and moves the probability of a crash to about 1 in 1279 annually. (Figures below have been edited to reflect this change.)

I will plug this average probability of being in a any sort of crash with our daughter in the car into the data contained in the report cited by the AAP guidelines. This study looked at a sample of car crashes with children in the car drawn from the time period 1988-2003. This is an unorthodox (actually an invalid) method of creating a sample based on the way it is subsequently analyzed, but I will take the methodology as valid for the moment. I will split the probability into two cases, rear-facing car seat (RCFS) and front-facing car seat (FFCS). The authors of this study use the Maximum Abbreviated Injury Score (MAIS) system to rank injury and death. In this scale 0 is no injury, 6 is death, and 2 is “moderate injury”. The study uses greater than or equal to moderate injury as the baseline measure they call “moderate and severe injuries” (even though the study discusses the risk of severe injury or death as the finding of interest).

3) Proportion of children in crash sample with no injury or light injury: RCFS = 99.5%, FFCS = 98.9%.

This translates the 1 in 1505 figure for my family above into the following two ratios. The absolute probability of severe injury or death (as defined in the study) for my child in an RCFS is 1 in 255,800 annually. The same probability with a front facing car seat is 1 in 116,272 per year.

Now, that seems quite low to me, but if it doesn’t seem low enough, let’s stop assuming that the research design is valid (because it isn’t). Keep in mind two things as we dig in here. One, I am a pre-first year graduate student in economics as I write this and, two, that these criticisms are quite obvious and valid in spite of my “pre-economist” status. While most readers probably will or will not take my word for this instead of going through the trouble of researching the claims and links below, I am happy to correspond with any readers who may like to press me further on them.

The paper in question (Henary et al.) uses data collected from the National Automotive Sampling System Crashworthiness Data System (NASS-CDS) on children 2 years and under involved in crashes between the years 1988 and 2003. From this data they obtain an initial sample of 1870 crashes. From these they exclude unrestrained children and also explicitly improperly restrained children, which excludes 29% of the sample. They also exclude children with unknown restraint use/type, which excludes another 23% of the sample. After these exclusions, they end up with 870 crashes to analyze.

There are already problems at this point, so let’s dig in. In doing statistical research and analysis, there are two primary types of data sets. The first is cross-sectional data. This is a set of data taken from one point in time. Examples might include data from the 2000 census or retail sales for Black Friday 2013. Such data sets look at some (often large) number of people, sales, car crashes (or what have you) at one particular point in time. These data sets can be used to analyze differences in outcomes between observations given the conditions that prevailed at the time of the sample.

The second primary type of data set is time-series data. This is data looking at the same set of subjects at different points in time. Examples of such data sets are changes in the value of the stocks in the Dow Jones Industrial index between 1990 and 2000 or changes in US automotive fatalities between 1988 and 2003.

Hopefully that last example gives a clue as to a major, major problem with the data set used in the Henary paper. This sample has been created by aggregating discrete events across many years and analyzing them as if they all happened at one point in time (in other words, they are collecting time-series data into a cross-sectional data set…this is a no no). It took the authors 15 years to collect together 870 crashes they considered useful to look at. (They then apply a statistical weighting based on a single year’s accident trends to claim the sample represents a nationally representative population sample.) By discarding time variables from their observations they are implying that cars, car seats, aggregate fatalities and any other thing you might care to wonder about did not change between 1988 and 2003 (and in fact they do not address this issue even in passing in the report). Let’s unpack the implications of doing this in a few parts.

First aggregate fatalities. Between 1988 and 2003 total fatalities declined from 3.44 per million miles driven to 1.48 per million miles. That represents a decline of more than 2/3rds over the time period that has been engineered to be a single period. The authors came up with a total of 42 infant car seat deaths over these 15 years (an average of around 3 per year) but we have no information about what years these deaths took place. Probability suggests that more of them came from the late 80s/early 90s than from the early 2000s. Look at the car seat samples below and think about whether this information would matter.

Now cars. It was the advent of the passenger seat airbag that resulted in the recommendation of putting car seats only in the rear of a car. During the period the sample was drawn from, the average age of the US auto fleet hovered around 10 years old so, among cars in this sample, airbags went from being non-existent to being an option for the driver’s side, to being an option for the passenger’s side, to being standard for both front seats in all cars, to including standard rear seat airbags. Would that seem to matter? Many of the front-facing deaths in this sample may have occurred in the front seat of the car as the standard protocols of car seat placement were only just being formulated during the earlier years of this sampled period. Airbags may have played a role in a number of these deaths as well.

And what of child restraint systems (CRS)? Virtually all the norms of car seat installation, operation and placement took place during this time as well, meaning that in many cases there were no established recommendations as to how and where to install quite primitive car seats. To give a sense of the dramatic differences in car seat safety knowledge around the sampled period, here are a few excerpts from this timeline of the history of child restraint systems.

1987: Survey of CRS use in 19 cities across the country shows 80% usage (correct and incorrect) of restraints for children under age 5.

1989: Evidence of CRS misuse grows; car seat inspection clinics in Virginia and California find high levels (87-93%) of errors.

1991: Almost all states have passed safety belt use laws. Many do not cover rear seat occupants and can be enforced only if the driver is stopped for another violation.

1993: CDC issues a the first public health warning on interaction between air bags and rear- facing child restraints (MMWR, Vol 42/No 4, April 16, 1993)

1995: July: First death of infant from being struck by passenger air bag while riding in the front seat in a rear-facing restraint. (First infant known to have been injured by air bag, November, 1994.)

1999: September: The tether part of the universal child restraints anchorage standard (LATCH) began with the requirement that all forward-facing CRs must pass a reduced head excursion test, for which almost all employ a tether strap.

2000: September: Phase-in of the tether anchor requirement of the universal child restraints anchorage standard (LATCH) continues, with 100% of all model-year 2001 passenger vehicles (including SUVs, pickup trucks, or vans) being required to have tether anchors.

So in the early part of the sampled period, as many as 90% of the approximately 80% (a high estimate it appears) who used CRS at all were probably doing so incorrectly. Then for years, many people placed children in the front seat with armed airbags. Also the entire modern system of anchoring for child seats was conceived of during this period and was only full implemented in the last year or two of the sample period.

Finally as to the seats themselves, the period 1988-2003 encompasses much of the development of car seats from rickety metal frameworks that would look more at home next to the kitchen table to the modern formed plastic with shock absorbent foam models that we are familiar with today. Here are some examples of car seats in use during the sample period (sourced from here).

Techart – 1988

Fisher Price T-Shield – 1990

Renolux GT2000 – 1993
Evenflo Medallion – 2000

These car seats are all lumped together as if they were on the road at the same time. It is pretty apparent that both in general and in particular with respect to side impact crashes (a metric the report places quite a bit of emphasis on) a lot changed over the 15 year period sampled and also in the ensuing decade since. Do you think the first and last car seats have the same protective properties? It seems highly unlikely that they do even leaving aside the profound differences in tethering systems that prevailed between the decade and a half that the sample is taken across.

So, in short, this report provides no significant evidence about the efficacy of forward or rear facing child seat placement in terms of modern automobiles and child car seats. It MAY BE that there are some significant issues with respect to car seat direction, but the report that underpins the AAP recommendation that people are following is devoid of value as a piece of research.

And then finally, there is the issue of utility. Since my daughter has been facing forward in our car she is a much happier camper nearly all the time that we drive. We have little or no crying and just about any parent can tell you that a crying (or screaming) baby, particularly when you cannot see them at all makes for some very distracted driving. Most of the time now she just babbles to herself about the view. Better and safer for us both.

So, I concede that was perhaps a long blog post but, to paraphrase Chomsky, it takes time to contradict the conventional wisdom. The moral of this story I suppose is twofold. First, don’t be afraid to question putatively authoritative sources. Sometimes they are just plain wrong. We used to douse whole neighborhoods in DDT every summer to combat mosquitos, we used to give hard narcotics to babies with colic. These were not accidents, they were policies or recommended practices. Second, question any rules or policies that consider only risks and not benefits (or vice versa!). Very rarely planes crash and almost everyone always dies but no one is telling you that the safest policy is to not fly. Even more germane to this topic, if you want to be as safe as possible with your baby with respect to driving, simply abstain from any driving that is not absolutely essential to the health and well-being of your baby. That is the safest way, hands down.

Mostly, just think of life as it really is – full of trade-offs that we have to make every day – and make your decisions accordingly.

Thanks for reading!

* With the sole exception that we do most of our driving in Cook County, which has a disproportionate share of all Illinois accidents. Accidents per mile were unavailable to me on the county level so using statewide data may slightly understate our risk vis a vis driving in Cook County. But we also drive about half of our miles on the highway between Illinois and Wisconsin and, since highway driving is a good deal safer on average than urban driving, this abnormality is likely a wash.

Posted in healthcare, statistics / data analysis | Tagged , , , , | 4 Comments

Governance, aesthetics and architecture

I have been meaning to write up a few thoughts that came out of a beer-fueled conversation with a friend some weeks ago. We both lived in Austin, TX for some time during the 1990s and now have both lived in Chicago for all of the 21st century thus far. The discussion was about the architectural transition that has taken place over the last decade plus in Austin.

Our conversation began with my friend noting how depressing the bad architecture explosion was in Austin. Now, it needs noting that Austin has seen a population explosion that I might guess is one of the biggest in the nation over the last decade or so. In 1990 Austin's population was around 500,000. Today it is around 850,000. That is population growth of 70% over the period, or almost 6% per year on average. This is more in the ballpark of the growth of urban areas in China than of urban growth in the US. So obviously some things had to be built. Over the same 13 years the average price of housing has (by my own informal observations) increased by about fivefold. So, according to basic principals of supply and demand, tall buildings are a good use of space as land increases in price and population grows. Until I began writing this, had it in my mind that there was some fairly onerous building code height restrictions in Austin in the past that had someone to do with the UT tower, perhaps based on a story I heard about some big fight over the Dobie dormitory a few blocks away. However, that story may have been apocryphal based on a web search and I can't find anything about maximum height restrictions more generally either (Austin has a somewhat controversial McMansion ordinance from 2008 but this concerns maximum non-permeable cover on residential lots and such things). Readers, please correct me if I am wrong on this. As a side note, for a taste of the problems these sorts of restrictions can pose to affordable housing in particular, consider the cost of housing in Washington DC over the last decade and also read about the cautionary tale of Boulder, CO, which has stringent restrictions on both height and sprawl.

So, let's just say that some tall buildings are gonna get built. Tall buildings have the perhaps unfortunate feature that their pulchritude, or the lack thereof, travels much further than that of low buildings. An ugly skyscraper is ugly from really far away. A one-story building is only ugly from right in front of it. And it is fair to say that Austin's skyline is not terribly distinguished. Perhaps the most emblematic building is the Frost Bank tower (in the middle in the picture below), which looks like the improbable headquarters of some superhero's corporate alter ego in a Marvel Comics movie.

While I may disagree about the extent of the badness my friend was bemoaning overall, I will concede that, from the vantage point of Chicago (picture credit)…

It is a reasonable critique. But it got me to thinking about some of the main differences between Chicago and Austin at the level of why what gets built gets built. And it seemed to me that Austin's rather hodge-podge-y skyline is reflective of the fairly anonymous and pluralistic sort of governance that takes place there, while the skyline of Chicago, bristling as it does with world-class works of architecture, rather reflects the autocratic and undemocratic form of governance here.

Perhaps most to the point, since 1955 Austin has had 15 mayors and the longest serving among them (I think three total) served maximum terms of six years. On the other hand, Chicago has had 5 mayors in this 58 year period and the two Richard Daleys account for 43 years (or nearly three quarters) of it. While Chicago technically has a “weak mayor” form of governance (though this is something I have just read, I don't really understand the mechanics of this assertion), we have de facto mayoral control over virtually all things beyond the ward level, and even there, the mayor can make things happen by hook or by crook, particularly the Daleys. In fact, the Balkanized Ward system is a key to assuring the mayor an easy route to policy dominance. Just divide and conquer. It is even easier with TIFs now.

Austin on the other hand has a new mayor virtually every term and there is no political dynasty of any sort, period. The city also has a city council elected on an at-large basis, so council members have to satisfy every voter in the city to some degree. While I am rusty on current Austin politics, the city manager is perhaps the most powerful policy maker in some ways as they typically have a tenure of several years, at least in recent decades. Overall, there are puh-lenty of people who will animatedly criticize city government. Austin, but the crazy thing is that some of them, such as long-time journalist-city-council-gadfly-turned-city-council-member Daryl Slusher, end up serving in it, while many others actually accomplish meaningful reforms through their agitation before the council.

So my argument was that in a city like Austin, even assuming that some majority of the mayor and city council think a proposed building is ugly or garish, if some builder does everything according to city ordinances and follows all the rules, they can build a butt-ugly building because essentially Austin is a well-functioning government. On the other hand, in the Daleys' Chicago if the mayor especially didn't like a proposed building, it is safe to say that it would not get built. I may lack documented examples of this, but to extrapolate from the contrapositive, consider the building of the campus of the University of Illinois at Chicago (my alma mater) under the guiding hand of Richard J, the elder.

Undergraduate Center to a full-fledged four-year institution. After a long and controversial site decision process, in 1961, Mayor Daley offered the Harrison and Halsted Streets site for the new campus…In a report on August 28, 2008, by newsman Derrick Blakely, CBS TV reported that in 1963, the decision to build the University of Illinois decimated Taylor Street's little Italy. Florence Scala, Chicago’s legendary Taylor Street activist and long time Hull House cohort, blamed the board of directors of Hull House for betraying the thriving, vibrant, tight knit neighborhood. They encouraged Daley to go ahead and destroy the neighborhood. Her challenge as to why the Hull House neighborhood and not the vacated and easily accessible Dearborn Station resulted in the bombing of her home. In addition on November 10, 2003, WTTW Irv Kupcinet related a story about Mayor Richard J. Daley asking him what he thought was his most crowning achievement. Daley answered “Putting the school in the Italian neighborhood.” Meaning the old Taylor Street neighborhood being condemned to make way for the Chicago Circle Campus. Today, the University's main academic library is named for Daley.

The man who mowed down an entire neighborhood to build a highly controversial, brutalist, university campus could be expected to have no big problems making a zoning problem arise or a downpour of bureaucratic hold ups appear for a disfavored project. And hiring world-class architects to design news-making buildings was probably a good way to assure that your building was smiled upon by the ruler.

Millennium Park is a case study for Richard M Daley's ample “juice”. The park, featuring a Frank Gehry designed centerpiece concert performance space, was completed four years behind schedule (or 996 years early as the saying often goes in Chicago) and for over three times the original budget, ending up at $475 million from a $150 million starting price tag. As the cost overruns mounted, the mayor also came up with an astonishing amount of suddenly willing private donors to keep the city's portion of the overruns to only $120 million. Try that Lee Leffingwell!

It may be that the price of good governance is potentially mediocre architecture. Though Chicago is still getting some pretty noteworthy buildings like the Aqua Tower from time to time, the days of Mies and friends are most likely over. So carry on Austin. For a city dealing with profound runaway growth, I think the relatively earnest work of the short-lived and anonymous politicians of Austin is going reasonably well.

(Full disclosure: Your author has a history of having a fairly congenial view of Austin, though he would argue that it is an eminently supportable position under cross-examination.)

 

Posted in the built environment | Tagged , , , , , | 2 Comments

What to do with all the time?

I am now done being an undergraduate. I'm still short a piece of paper as of this writing but it appears that I hold a BA in economics and a minor in mathematics. I racked up a total of four Bs in three years of schooling, which was a bit of a disappointment, but I will get over it once I am safely enrolled in grad school.

I think that my last semester gave me a pretty good taste of what grad studies will be like. Perhaps two of my four classes were about as hard as first-year grad work (at least my analysis class was, based on comparisons by my classmate who was in this class and grad micro at the same time) and I still worked about 20-24 hrs./wk over most of the semester at my job and RA work. I also completed 2 grad school applications during finals time. Plus the psychic cost of pure math classes versus any course putatively related to economics in some concrete-ish way was, for me, very high. I am THRILLED to be done with pure math classes (meaning no disrespect, pure math, you just aren't my cup of tea). Thus ends three years of nonstop schooling. Spring, summer, fall, spring, summer, fall, spring, summer, fall.

One thing that was a good sign for the future was that I absolutely loved working on my honors thesis. It was a study examining the link between the principal labor market in Chicago high schools under school reform, where principals are hired and fired by parent-majority local school councils, and student outcomes. This was a pretty good proxy for working on a dissertation and also doing research as a future economist and I loved it and was totally obsessed with the project. Digging through data and doing background research and thinking about the nuts and bolts of applied research was just a really rewarding and thrilling experience. It turned out rather well too (with considerable help from a fourth year grad student friend and my project supervisor).

So I now wait for grad school decisions to be made. I believe I am a safe bet to get into my alma mater, which would be a really decent outcome and is allowing me to rest considerably easier than I otherwise would. Additional admissions would just be gravy. Still, it will be a big relief to know what the next four to five years will hold, as the range of possibilities is pretty varied, particularly a couple of long shots that would involve relocation.

But for now I wait and sort of relax. There is something funny about becoming so expert in keeping all the balls of work, school and family in the air at one time. Now that one ball is taken away my rhythm is a bit awkward, even though it is easier overall. I have been enjoying spending extra time with my daughter and wife (though I like to think I kept the family balance pretty reasonable during my studies). But I cannot rest for too long. I have already begun to dig into some self-study. I got a taste of how subpar my econometrics coursework was while doing my honors thesis so I am now trying to do the work that a quality econometrics course should have put me through. I am also endeavoring to wade into the mathematical material I will be seeing this fall and am also planning to sit in on a grad health economics course. Take my spare time, please!

At any rate, I also hope to return to this blog a bit more regularly and also to take it back to a less solipsistic place. There is much to discuss and I'm going to try to do so with some regularity. Thanks for continuing to read…

 

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A nice post on microeconomics…

When I returned to school, I thought I was all interested in macroeconomics. It was probably the ideological aspects of it that attracted me in hindsight. Lots of fuzzy data in macro, so you can add your own spices, cook it all up and take a stab at claiming your view is the right one. I skewed well over to the heterodox left-ish side of things (“naturally,” says nearly anyone who knows me).

Yet the more I learned about economics, the more this fascination wore off. Having to learn Mankiw’s principles, etc. (thankfully there are a number of writers out there trying to relieve the tedium of the 10 principles like this guy) just made me want to go to a place within economics where there was an endless stream of rather specific issues to wonder about and a burgeoning wave of pretty usable data to wade through in attempting to answer such questions. Thus: applied microeconomics, the path I am on now.

As I prepare for grad school application season this fall, my desire to focus on applied micro has made me more interested in rigorous public policy programs than straight econ grad programs, at least in large part because you can skip the macro! But also these programs tend to be pretty well loaded up with a bunch of people doing really interesting and relevant work.

Anyway, that is all just a long-winded wind up to sharing this nice piece by Frances Woolley over at Worthwhile Canadian Initiative. Two years ago I would have been scratching my head about some of the things in this post, but it really spoke to me, both the pros and the cons parts. I am, like FW, pretty optimistic about the ability of applied economics to give increasingly good and relevant advice to policymakers. The problem of people ignoring it persists, but the examples of Nudge and the “nudge units” and so forth that it and similar books has spawned makes one a bit more hopeful that as we become more resource constrained and challenged by population density and a number of other factors, more of the low hanging fruit may be picked as time goes on.

The post again.

Posted in grad school, microeconomics | Tagged , , , | Leave a comment

Things are getting real: Personal education update

Life has not been kind to my ability to blog. I am riffing this post out without bothering to check when the last time I wrote something was, but I am pretty certain it was >6 months ago or thereabouts.

Having a child definitely sharpens the mind with respect to allocation of time. It is my most scarce resource by far now. Primarily because much of it is given over willingly to my 4-month old daughter, but work, school and my wonderful wife are always there to spend the remainder on.

Of school, things have become much more clear during the last months. I chuckle when I think of what I imagined an undergrad degree in economics to consist of. I thought it would be an ultra-rigorous battery of courses that would leave one quite well versed on the ins and outs of non-specialized economic practice. In reality, this is probably more the case at some other institutions, but overall the UG degree is little more than a moldable jumping off point for a) grad school in Econ or policy, b) an MBA, c) some job with general analysis duties or other less-than-accountant-level demands d) maybe pursuing a law degree.

I am pretty far along on the grad school preparatory path. You can take the course 'Calculus for business' class and be done with mathematical requirements at UIC. Conversely, if you would like to attend a reasonably useful grad school, you would be well-advised to take Calc I, II, and III (multi variable calculus) and then at a minimum, Linear Algebra, Introduction to Advanced Mathematics and Real Analysis. I am doing this “minimum,” which, FWIW, will also get me a math minor. This I will accept as a little gold star for taking far, far more math than I ever envisioned I might in my life. Per below, it is also a little plus on the signaling front.

Another giant piece of the puzzle is crushing the quantitative portion of the GRE examination. Most grad school websites give lip service to the verbal portion, but judging from the deeply English-challenged student instructor pool at UIC and a more general finger in the wind, this is not terribly important. In fact, a professor well-placed to know about issues involving GRE scores and admissions told me a certain score (the equivalent of roughly a 95 in normal 100% scaling) would not likely be good enough to be considered for most competitive programs “but since you're American you might get by with that.” So there is apparently some elasticity of substitution with respect to the sections of the test. This could be looked at as a sop to underprepared US students but I think it is more fairly looked at as ALSO a sop to foreign students who perform often terribly on the verbal portion and must certainly be deeply compromised in the cultural savior fairer that is a hallmark of good economists (you have to know enough about the nuanced complexities of the world to notice the interesting things to research). The GRE is a weird sort of pure sorting mechanism in that the level of math is really nothing beyond a solid HS level math curriculum. It is as more about the ability to take a stressful test well than it is about the material, as most anyone who is applying to Econ PhD programs has taken math years and years beyond the level present on the test. It is an unfortunate mechanism for these who lack strength in high stakes test taking but might otherwise be apt future economists, but them's the breaks. Summer mission: learn how to ace the GRE quant section.

The GRE is also one component of the signaling part of grad school admissions. There are large, busy forums discussing Econ grad admissions and much of what is discussed is how to look like a good candidate. My current semester features some calculations based on such considerations. I eschewed taking a course on the history of economic thought that I have been waiting for the university to offer for the last three semesters in favor of a course on Game Theory. I thought that would look much more compelling on a transcript in the end, not only because of its content, but also because of the pure signal of “STAT 473,” a monikor that denotes a “grad-level” course. 400s and 500s good, 300s….meh. The course has turned out to be really good and engaging, but my primary reason for taking it was to send the right signal. There is much overlap of course between some of these signals and engaging learning opportunities, such as the research work I have been doing and the next research gig I am about to start, but forget to consider the signaling value at your peril. Letters of recommendation, publishing credits, etc. etc. all are critical in the marginal battle to get noticed in a sea of candidates, many of whom are tossing a Hail Mary pass with their applications in the first place. Hence the need for such crude first order sorting mechanisms as the GRE.

The trick for me as a pretty fully adult person who should be (is?) in the prime earning years of my life will be to:

1) Be accepted into a reasonably well-funded program so I can have a baseline income that will keep me afloat with a kid, mortgage, etc. to think about.

2) Figure out how to manage a functional transition with respect to my role in my business that works for myself and my partner and my employees.

3) Have that program be in Chicago or a very short list of other locations that revolve around a combination of family support structure, cost of living and job market considerations.

4) Get into a program that is a good fit with my academic interests.

No big deal, right?…

Speaking of academic interests, I have also undergone an unlikely (to me at least) transition in academic interests. I was pulled into the field by my hobby-ish interest in macro and I groaned about my Principals of Microeconomics course (which was admittedly pretty meh… “taught” by a disinterested masters graduate as an online community college course). Whether it was going on to a school with a strong applied micro focus (and with only one macro prof on faculty who lectures in a pretty dry way), or the really engaging and enjoyable Intermediate Micro course I had (with the best student instructor I have had by far), or maybe it was just the way things worked out… But the result of whatever is that my focus has entirely shifted to things micro. Particularly, I am really compelled to work in education policy, a Gordian knot of epic proportions, but one that a) matters profoundly for the future of the US and b) one where a good idea or an important finding might actually turn into some direct policy results. My upcoming research work is as a research assistant for our dept. head doing a study on educational issues in the CPS and I am really over the moon about this. The signaling value is there of course, but I am fortunate to have it converge completely with what I would be most interested in working on (and it pays a little bit to boot).

Anyway, that's a ramble. More sometime?….

 

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Obama’s War on the Constitution…

I have been having a number of pretty depressing but spirited debates about the fact that Obama is assassinating people around the Middle East in numbers that might actually make George Bush blush including U.S. citizens.

I keep feeling like I’M the crazy one for being too “hung up” on things like the Bill of Rights or equivocating about assassinating thousands of people on questionable or even no evidence with robot planes.

Then I found this interview. It made me feel a little better. Please, please, please read it.

John Cusack interviews John Turley about Obama’s War on the Constitution

Finally, someone who posits that it shouldn’t be the responsibility of people who support the rule of law and international norms about war crimes and some VERY basic respect for national sovereignty and the Bill of Rights and so forth to justify themselves. It should VERY MUCH be up to those who would equivocate about these most basic things that help to keep in place a very hazy, half-assed line between a nominal democracy like the U.S. and nations that we have condemned throughout our history (even while funding and covertly supporting them a number of times).

“But the Supreme Court” and all that. I know, I know. I’m kind of tired of talking about this with people, so I thought I would just make a little clearinghouse of information and let people get as informed if they care to be. Please feel free to leave any reasonably thoughtful comments. I welcome discourse. Links below:

The “leaked” NY Times story that started the recent hullabaloo about drone strikes and the “kill list.”

(about “leaked”)

Deaths in Afghanistan

More deaths in Afghanistan

Deaths elsewhere

Why there aren’t any “civilian casualties” (hint: it’s by definition)

Killing a U.S. citizen without trial (but just look at him! Trials are only for good U.S, citizens.)

Killing his 16-year old son (…look at him. What a terrorist.)

There’s plenty more if you can stand to poke around. Assassination is the new torture. This is the guy that “progressives” are going to pull the lever for. Hopefully everyone can get right with that. I suspect it will be all too easy. I’m gonna sit this one out myself.
P.S. Coming soon… Drones in U.S. airspace. Signed by Obama.

(photo credit)

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Rent and rent – the twain shall meet

Source: http://commons.wikimedia.org/wiki/File:For-rent-sign.jpg

There is rent and then there are “rents.” Everyone is familiar with rent that one pays to a landlord, residential or commercial. The field of economics defines “rent” as money that accrues to someone who controls some scarce economic resource and is able to charge a premium over the cost of production merely due to this control. Examples include guilds and trade unions, which can often limit the supply of practitioners of a craft and entities that control the pricing of resources constituting natural monopolies / oligopolies such as OPEC. In our current deregulated world large banks, trading firms and so forth are spectacular rentiers with respect to charging a premium for access to capital*.

In a linguistic irony, private equity firms and other financial rent seekers are actually beginning to enter the normal “rent” business. The sharks are beginning to circle around the wholesale foreclosure auction business And rent-controlled apartment buildings with an eye towards exercising enough market power to influence residential rents and shifting as many operating costs as legally permissible to residents. In New York, private equity is buying up thousands of rent-controlled apartments and attempting to force current residents to leave through legal and other means, as this is the only way such investments will show the type of return these “investors” are seeking.

In many ways, this is the next logical step (by today’s crony capitalist logic at least) for moneyed players in the housing market. Already, well capitalized property developers, realtors with access to large lines of credit are often the only parties able to make the cash purchases required to buy up foreclosed properties. Such parties are typically able to be well compensated for their intermediary role by doing the minimum required work to make retail lenders comfortable lending to homebuyers under standard mortgage requirements. In some cases, these middlemen can raise the price of a home by tens of thousands of dollars above the cost of the work done in just weeks (in some cases, no work is done, the buyer simply has a sweetheart deal with realtors, keeping even the selling bank in the dark). A recent story on WBEZ sheds some light on this phenomenon.

So now the big fish want in on the rental market. Home ownership has plunged, existing rental inventories are relatively tight. A well capitalized equity fund can buy up scores of properties at a time with near zero interest on the capital and banks are all too happy to do one transaction for hundreds of properties.

The whole scoop is here in a recent post at Naked Capitalism.

This same process (pushing the frontiers of rent-seeking) is playing out in for-profit education. Some doctors too are already wincing at the potential implications of cost-cutting mandates on individual medical practice with predictions that eventually only large hospital chains and insurance companies may be able to afford to deal with the slim margins that primary care providers may be facing shortly.

The common thread in all of this is that much (most?) of the “allocation of capital” these days—which is, after all, the raison d’être of the finance sector—is doing nothing to improve productivity, fund new economic activity or to contribute to a dynamic economy. In all these cases it is simply being used by a well-connected financial elite to capture existing revenue streams that feature a distressed seller and/or a captive consumer. These acquisitions are then squeezed for every penny they are worth and then some. Time will tell how far this trend will go. But with the current lack of political will to take on the rentier class, it may go very far indeed.

Another recent NC post discusses the irony that much of the money used by private equity firms is public pension, state and sovereign investment funds. So it is often the retirement money of average citizens being used to fleece them today.

* (with retail banks, even depositors access to their own funds are charged a rent in the case of ATM machines, which typically carry fees orders of magnitudes higher than the cost of operating the machines and vary by as much as 200% or more between different machines.

 

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