Category Archives: Dubious statistics

The Persecution and Assassination of the People of Greece as Performed by the Inmates of the Troika, Under the Direction of the Eurogroup

A new paper shreds the myths that justified the misguided application of austerity and wage-rate reduction policies in Greece and the Eurozone.


Bill Black: How the “Super Crunchers” Became the “Super Torturers” of Finance Data

Many of the concerns about Big Data focus on the surveillance apparatus used to collect it, or on the naive modeling approaches, like attributing causality to mere correlations. Here Black addresses an established problem: that of deliberate abuse of models.


Michael Pettis: Will China’s Asian Infrastructure Investment Bank Eventually Matter?

The financial media has attributed considerable importance to the fact that many of America’s close allies, including the UK, Australia, and Israel, have joined China’s new infrastructure bank against the clearly-stated desires of the US. While these moves seem to signal America’s declining influence, it does not necessarily follow that the infrastructure bank is destined to become a major international institution any time soon.

Michael Pettis deflates some of the hype surrounding this initiative, arguing that it is less significant from a geopolitical and practical perspective than virtually all commentators assume. China is simply not about to become the issuer of the reserve currency any time soon, and that limits how much financial clout it will have.


‘National Competitiveness: A Crowbar for Corporate and Financial Interests

We’ve regularly derided the notion of “national competitiveness” as a an inevitable accompaniment to the oversold notion of “free trade”. Economists are aware of, yet choose to ignore, the Lipsey-Lancaster theorem, which says when an idealized state cannot be attained, moving closer to it may not be an improvement; it can often produce worse outcomes. You need to evaluate the “second best” options specifically and not go on faith.

But economists and policy makers treat “free trade” as an article of faith, and with that comes the idea that countries must compete to find customers overseas. There is too little consideration of the fallacy of expecting countries to be competitive and by implication, seek to be exporters. It is impossible for all countries to be net exporters. Moreover, countries are often better served to design their policies primarily for the benefit of domestic workers and markets, and to promote export-oriented programs only to the extent that they do not undermine conditions at home, or will clearly produce a net benefit.


Uncertainty and Morality in a Dynamic Economics

This post makes some very good observations about the nature of uncertainty and the value, as well as the cost, of additional information. But it uses a personal pet peeve as the point of departure for the article, that of the so-called Trolley Problem. The people who pose it argue that the two options (saving four lives by throwing a lever that results in five people being saved at the cost of another person dying, versus saving four lives by throwing a fat man off a bridge) are morally equivalent, yet the fact that most people say they will throw the lever but will reject throwing the fat person off the bridge is a cognitive bias.

Hogwash. They aren’t comparable. The throwing a fat person off a bridge (to stop a train) is presumably meant to eliminate the “what about me jumping off the bridge” option. Second, I’d wonder if I could in fact succeed in shoving someone over. And third and potentially the most important, if you do succeed in pushing the fat person in front of the train, you are unquestionably guilty of first degree murder. Tell me how you talk your way out of it if you are caught. You were knowingly planning to have the man serve as a human brake to the train and that that would be fatal. By contrast, if you flip the lever, you can say “I was trying to save five people” and profess uncertainty as to what would happen to the other person who winds up getting killed.

In fairness, the article does treat the two cases as representing more differences from an informational perspective than most who use it as an device do, but not as pointedly as I’d like. So please try to take the horrible Trolley Problem in stride and focus on the meat of the article.