Quandl update
It’s been a few months since I wrote about how much I love Quandl so you might be wondering how things are working out for me. The good stuff is still really good but there are a few things that still need work. Read more
Archive for month: October, 2013
Inequality is natural
The moot in a debate organised and run by VILP (Victoria International Leadership Programme) students on 15 October 2013 was: “Is inequality natural?”
I was on the affirmative team with Harry Berger and Even Bain, two smart and articulate Victoria students.
We won the debate 49-43. Once you adjust for the home ground advantage to the negative side (organised following the inequality symposium in Victoria earlier in the year, and debate opened by Max Rashbrooke, author of Inequality: A NZ Crisis – link to book here!), I reckon that pretty much counts as a land-slide victory 😉
Natural versus equitable
Our argument was very simple. Inequality is natural – as in it is in nature. We appealed to biology, evolution and human behaviour. But that it does not make it fair or equitable. We have to appeal to our humanity and empathy to deal with negatives of inequality – but those are defined in many cases by normative judgements that society has to agree on. Read more
It’s economic analysis, not commentary
Every time the statistical authority releases new data there is a surge in economic commentary. Not analysis, but commentary. A thoughtful analysis would usually say that a single new data point doesn’t provide enough information to change anything we thought previously. There’s just too much randomness and error in point estimates to be able to tell much from them. Commentary is different because it creates a narrative and fits the data into that narrative.
A good example is the narrative about double and triple-dips in the UK. Commentators made much of the ONS’ revisions to the GDP series that ‘revised away’ the triple-dip, ‘vindicating Osborne’. The revisions may have eliminated a slight dip in GDP but they didn’t change anyone’s understanding of what had happened in the macroeconomy. That data was important for commentary but not for analysis. In fairness to commentators, distinguishing genuine trends from randomness is not easy. Our eyes are drawn to ‘streaks’, whether in football games or economic time series, even when the series is essentially random. Economists are always looking for techniques to separate the streaks from the randomness. The problem we face is that many of the tools are fairly impenetrable to casual observers and hard to explain.
Edward Tufte has suggested using randomised sparklines to visually distinguish genuine trends from deceptive streaks, so I thought I’d give it a go with the last four years of UK unemployment data. Here is the monthly change in the UK unemployment rate since June 2009: 
. We think that a recovery has begun so the recent years’ falling unemployment looks good. Now let’s try randomising the values and see if the ‘streak’ disappears. Read more
NZ isn’t the US: Employment rates
So often we hear that, even though the unemployment rate is falling in the US, employment is low. It is the low level of employment, and the lack of integration in the community that entails, that is causing so much anger over there. The lack of opportunity illustrated through the low employment rate is one of the key pieces of information pulled out to suggest something must be done.
Often people in New Zealand talk as if whatever is happening in the US is happening here, therefore something must be done. However, lets be a bit more careful – especially as in the case of the employment rate that is untrue.
Yes, the story is more complicated (Working for families increased the number of second earners in the labour market, a factor that will in of itself have pushed up the participation and employment rates). But if anything that suggests we need to be a lot more careful applying “lessons” from the US situation to New Zealand. We are not the United States – a point we’ve noted when looking at median income comparisons in the past 😉
Nobel 2013: Fama, Shiller, and Hansen
Yah, Nobel prize. All guys that deserved it … I just wouldn’t have expected them to get it together. To be honest, the reasoning makes sense though – they have all added significantly to the empirical analysis of asset prices, albeit in quite different ways 🙂
Still, don’t read me. Read Cochrane (here, here, here, here, here). And Marginal Revolution (here, here, here, here, here, here).
Also I enjoyed this. And this post on why the Chicago school gets so many Nobel laureates is a good counter-measure to all the arbitrary bile that can be thrown around on the interwebs 🙂 . I also enjoyed this post from Noah Smith.
I have a bias towards Shiller in all of this because of my interests. He is a big proponent of trying to view economic phenomenon through a lens of history dependence (with the regulatory difficulties that entails) and has talked about how exciting neuroeconomics is – completely agree. However, this has nothing to do with empirical finance in of itself, as this is not my field. While I think some of the stuff is pretty cool (and remember really like GMM a few years back) I have nothing to say. Hence why you should be going back and clicking those links to Cochrane and Marginal Revolution 😉
Marriage, investment, and sunk costs
At the moment, many of my friends are getting married. At the same time some of my other friends who are not married are telling me they don’t understand why people get married.
While I am not married, I think the idea of marriage is grand. I think it is a great way of dealing with a social issue that involves both search and relationship specific investment! When entering into a relationship, make sure that you are a perfect match. There is a reputable dating site that will help you find the right one for you. Visit this website, https://www.perfect12.com/, for more hints about ideal dating.
Now, you may think I’m being too romantic here by bringing up terms like “relationship specific investment” – but let us not forget the awesome power of economics for dealing with these ideas. The question is, given marriage as an institution what specific type of co-ordination failure did marriage turn up to solve?
