Uber may reduce alcohol-related auto accidents

5 April 2017

My graduate student advisee, Jessica Peck, has written an excellent paper that examines the impact of Uber on alcohol-related auto accidents in New York City using both differences-in-differences and synthetic control methods.

The Economist has a very nice Daily Chart about her work.

Congrats, Jessica!


Economics as Science?

27 August 2013

I am sure that Rosenberg and Curtain (“What is Economics Good For?“) are intentionally trying to be provocative.  And I should state up front that I think we (as economists) often oversell what we do. But this article misses the mark by a wide margin — in part, because I don’t think these guys haven’t really thought very hard about what their saying, or maybe haven’t read any recent empirical work.

Rosenberg and Curtain could have at least recognized the difference between macroeconomics and microeconomics.  They make the undergraduate mistake of thinking that economics is all about managing the macroeconomy.  What about the successes we (primarily microeconomists) have had in understanding things like the effects of school inputs on short- and long-term outcomes?  Or understanding the labor supply responses to changes in tax policy?   Or the behavioralists progress in understanding the limits of our standard utility-maximization model?

I disagree strongly with their focus on predictive power.  As if the only thing that economists are up to is gazing into a crystal ball to predict the next recession. They also completely fail to engage the difference between experimental and observational data.  Essentially they are saying “economists work with observational data, and they can’t yet predict what will happen next in observational data”.   Macroeconomists have, what, 15 recessions that they’ve observed with any degree of accuracy and given the interrelatedness of national economies?   Would physicists  have been able to write down a complete model of gravitation with 15 observations on which to base it?    How is experimental economics or field experiments in subfields like development and labor not “science”?

In searching for the Higgs boson, physicists needed 1 quadrillion proton-proton collisions to be certain enough that they’d found the particle to make the claim of discovery, at a cost of $10 billion just to build the Large Hadron Collider. I’m pretty sure that after observing 1 quadrillion recessions and gathering however many petabytes of data that the LHC generates that even macro economists would be able to predict future recessions with complete accuracy. Or have the tools to make them not happen at all.

I wonder… if the Higgs had not been found, would these guys claim that physics is not a science, because it has poor predictive power?

The interactions economists (or psychologists, for that matter) are trying to “predict” (and I really hate the emphasis on prediction here) are pretty complex, observed, even in experimental data, at a far lower frequency than in disciplines like physics or chemistry.  To say nothing of observational data.

Sure, our models involve simplifications that may reduce their verisimilitude. But we have made progress. That the severity of the Great Recession was less than that of the Great Depression is due to the progress that economists have made over the last 70 years. Surely, with more political will, the consequences could have been made even less severe.

December 2012 Jobs Report

7 December 2012

Hard to see too much bad news in today’s jobs report:  146,000 new jobs, and a drop in the unemployment rate.   Of course the unemployment rates for teenagers (23.5%),  blacks (13.2%), and Hispanics (10.0%) are not very encouraging.


The number of long-term (27 weeks or more) unemployed has decreased by about 900,000 from a year ago and the number of discouraged and marginally attached workers has decreased by about 200,000 from a year ago.


One would like the progress to be faster, for sure… but this is somewhat encouraging.

Political Influence on Taxes

30 November 2012

Some interesting graphs today from the NYT:

How the US Tax Burden Has Changed

There’s clearly more variability in the top two income groups, and the most in the top income group.  My intuition tells me this is probably due to the increased influence on the political process that folks at the top have.  One would think that the tax uncertainty can’t be good over the long haul.

Another argument for federally-funded elections?

I have yet to see analysis in the popular press that talks about what taxes would have to look like, given our present level of entitlements and a reasonable defense budget, to generate surpluses in expansions and deficits in recession (based an understanding of what kind of stimulus is typically needed).  Shouldn’t this be the start of the conversation?

Strange Incentives

23 November 2012

The NY Times reports from the budget negotiations that Washington is considering keeping the top marginal rates at 35 percent, but for higher-income folks making that rate apply to all income, just not the marginal dollar earned:

Seeking Ways to Raise Taxes but Leave Tax Rate As Is

This strikes me as pure sophistry.  And it would seem that it also sets up perverse incentives for some range of income, essentially shifting a family’s budget constraint down at the margin where the 35 percent rate applies to all income rather than just on the marginal dollar.

Tax revenue needs to be raised.  Some combination of eliminating certain deductions and changing the marginal rate on those earning over a particular threshold would seem to be the way to do so without creating perverse disincentives.   Treating investment income as regular income would also seem to be a way to level the playing field a bit.

But it would be nice if Congress would at least try being honest with what they’re doing rather than relying on some trick to say they didn’t raise taxes when in fact they did.

Election Observations

6 November 2012

On election eve, I thought a fitting return to my blog might be a few thoughts about the US electoral process and how it is obviously broken.   While Electoral College is inherently undemocratic, the influence of vast sums of money and the potential for vote tallying fraud have pushed the system to the breaking point.  So a few thoughts on how we might improve things:

1)  Eliminate the electoral college.  Or, encourage states to sign on to the National Interstate Popular Vote Compact, in which states agree to have their electors split in the percentage of the national popular vote, rather than in a winner-take-all system.  Living in Ohio this electoral cycle has been interesting, but also hellish — we get at least 3 or 4 robo calls per day.  Why should voters in Ohio have so much influence?

2) Federally fund Presidential, Senate, and House elections.  The Citizens United decision makes a mockery of democracy.   Allow individuals to voluntarily contribute to an election fund (similar to the check-off item on income tax forms), to reduce the burden on the Federal government, but otherwise eliminate all individual and corporate contributions.    Set limits of $750 million for presidential candidates, and then develop a formula for Senate and House elections that takes into account population and geographic area.    That is — totally level the playing field, and attempt to eliminate the undue influence of people like the Koch brothers and (admittedly) unions.  Politicians with a serious interest in governing should like this because it would free them from having to fundraise constantly.

3) Have voting for federal elections be run at the federal level.  Voting machinery and standards for counting should be uniform across all states.   Have machinery and software approved by an independent and bi-partisan panel of computer scientists, etc.  The machinery should be designed so that it provides easy methods of verification and recount.  The procedure for reporting the final tabulation should be standardized across states and local jurisdictions.  The machinery and software should be such that it can be used for state and local-level elections, but the software should be reloaded for each federal election.

4) I don’t believe there is widespread voter fraud, but… introduce a national ID card and make it easy and cheap to acquire.  Require this card to be shown when voting.  The national ID system seems to function well in Germany and other European countries.  I do not see why such a system here would not also work.

So a variety of proposals… I don’t think the whole package would meet with 100% approval from most liberals or conservatives, nor 100% of Democrats or Republicans….  But something needs to be done to restore faith in the democratic process and to focus politicians on the issues of government and not politics.  Only then will we find some degree of bipartisanship that will help us solve the massive economic problems that still plague us.

Quarter of birth is not a good instrument! Hallo?

17 August 2009

Arrrgh! After 15 years, it’s hard to believe that John Bound’s and my critique of Angrist and Krueger’s quarter of birth instrument (and the whole weak instrument literature that followed, plus a bunch of papers that specifically adress the AK 1991 QJE paper) has yet to make a dent. How can the Economist claim that

In an influential early example of this sort of study, Joshua Angrist of the Massachusetts Institute of Technology (MIT) and Alan Krueger of Princeton University used America’s education laws to create an instrumental variable based on years of schooling. These laws mean that children born earlier in the year are older when they start school than those born later in the year, which means they have received less schooling by the time they reach the legal leaving-age. Since a child’s birth date is unrelated to intrinsic ability, it is a good instrument for teasing out schooling’s true effect on wages.

WRONG!!! Quarter of birth meets neither the relevance (at least in AK’s preferred specification) nor the exclusion restriction assumption required for IV. See Kasey Buckle’s and Dan Hungerman’s excellent paper that, one hopes, is the death knell for any paper that claims quarter of birth is unrelated to outcomes except through the compulsory schooling/school age starting law mechanism. There’s also a very good paper by Rashmi Barua and Kevin Lang that shows that the compulsory schooling/school age starting law mechanism doesn’t meet the monotonicity requirements for a LATE interpretation of the IV estimate of the effects of school entry on outcomes.

Despite all this, Angrist and Pischke in their otherwise excellent Mostly Harmless Econometrics once again belabor the AK results and present them as if they are sensible estimates of the returns to education.

Why is this? How can a result which has for many reasons and by many authors been shown to have problems persist in being held up as a shining example of the usefulness of the IV technique? Part of the answer is that more than any other IV story (and every good IV paper has a story), AK’s story is really good. Incredibly clever. Easy to see in graphs. Believable. So, we (even I) want to think that AK’s instrument is sensible and good. Because if the AK story doesn’t hold, then lots of other IV stories are probably invalid. And with them goes the whole natural experiment movement.

(I posted a slightly different version of this to The Economist website.)

Universities and Immigrants…

28 June 2009

Thomas Friedman lost me completely when he endorsed the invasion of Iraq, and most of the time the things he says are pretty vapid. But today’s column is actually pretty good, if, as usual, lacking in a full appraisal of the situation. In particular:

I still believe that America, with its unrivaled freedoms, venture capital industry, research universities and openness to new immigrants has the best assets to be taking advantage of this moment — to out-innovate our competition. But we should be pressing these advantages to the max right now.

That’s probably true, especially the bit about research universities (being totally objective). American’s higher education system is the best on the planet.

This is also on-target, I think:

China is also courting trouble. Recently — in the name of censoring pornography — China blocked access to Google and demanded that computers sold in China come supplied with an Internet nanny filter called Green Dam Youth Escort, starting July 1. Green Dam can also be used to block politics, not just Playboy. Once you start censoring the Web, you restrict the ability to imagine and innovate. You are telling young Chinese that if they really want to explore, they need to go abroad.

We should be taking advantage. Now is when we should be stapling a green card to the diploma of any foreign student who earns an advanced degree at any U.S. university, and we should be ending all H-1B visa restrictions on knowledge workers who want to come here. They would invent many more jobs than they would supplant. The world’s best brains are on sale. Let’s buy more!

The current problem is that even the richest research universities (like Harvard) are cutting back. How long this will last remains to be seen, but the downturn in the stock market (and thus in the endowments of those rich universities) is causing problems in hiring. I am sure this also has had an effect on graduate student funding.

So, Friedman gets it right, but misses the broader effects of the crisis on higher education.

QJPS Style Guide — Required Reading!

26 June 2009

I received today the best style guide for a journal that I have ever received… from politcal scientists, no less.

Here are a few excerpts (and my comments) from the style guide of the Quarterly Journal of Political Science:

Acknowledgments. Please be brief. Avoid hyperbole and effusive expressions of debts of gratitude to family, friends, pets, etc.

HA! I wish they’d also added that one shouldn’t include that craven caveat “All remaining errors are the responsibility of the author,” or somesuch stupid thing. Even worse, in my opinion, is the cryptic “The usual caveats apply.” Duh! Of course the errors are the responsibility of the author. If I give someone comments, they can take them or not… but it’s their name that’s on the byline, not mine.

Put another way — If you’re an economist (or political scientist), I’ll be happy to share authorship on any paper if you’re willing to let me take part of the blame if you’re found to have screwed up. Unless you’re Steve Levitt.

Reporting of Data

  • Please use three significant digits in tables and text.

I agree. This is usually sufficient.

  • We prefer the reporting of standard errors, because QJPS readers can divide. We
    frown upon stars and daggers not only because they are unsightly but also because
    QJPS readers have inalienable rights to choose their own critical values.

YES! I’ve been saying this for years (something I got from Gary Solon in grad school, I think). Ironically, the paper I submitted to the QJPS actually had asterisks in it… but only because we thought political scientists liked them. Now I know that the opposite is true, at least among the serious empirical political scientists.

  • Because the alternative hypothesis β ≠ 0 is not as interesting as β ≥ 0, p-values should be one-tailed in most instances.

Here I disagree. It depends on what’s appropriate to the underlying theory being tested. A priori, I’m not sure you can say that one is more interesting than the other.

One correction, though. If the null is β = 0, then the strong inequality should be used in the alternative, not the weak inequality. What if the coefficient were identically zero, would you reject or not reject the null?

  • In text and tables, avoid abbreviations in the names of variables. Modern typesetters can accommodate upper and lower case fonts and words longer than eight characters, so full descriptive words or phrases are preferred.

    •  Opaque: The coefficient for DINVTSHR is positive.

    •  Clear: The coefficient for Democratic incumbent’s vote share is positive

Again, YES! I hate it when people use variable names in their tables and in the text of their papers. You have to spend all your time reading the paper flipping back between the table that defines the variables (if there even is one) and the table you’re interested in. In my experience, the Industrial and Labor Relations Review is especially egregious in this regard.

So, hats off to Keith Krehbiel and Nolan McCarty, the chief editors of the QJPS. Everyone doing empirical work should adopt these guidelines, whether they’re in political science, economics, demography, public policy, or other fields.

“Toy Models” and “Stylized Facts”

12 June 2009

I’ve been at a couple of different conferences over the last two weeks, both very different in content (immigration vs. law/econ) and style (20 papers vs. 7 papers over two days). This has given me a little time to ruminate over fad phrases in economics.

The one that seems to be running around these days is “toy model”. I’m not sure where this started, but I think it’s dumb. What do people mean when they say this? That’s is a partial equilibrium model? Then why not say that? It seems to me to be a way for empirical folks to say that they wrote down a model, but they don’t think it’s got much relation to reality or the empirical work that follows. If you write down a model, you should be willing to defend it. If you think it’s not very complete, then why do it? Just refer to it as “the model” and be done with it.

A phrase I hadn’t heard in a while, but which showed up at one of the conferences was “stylized fact”. I also don’t know where this got started, although I seem to remember hearing it a lot from Harvard and MIT grad students on the market when I was a grad student at Michigan. I have always wondered exactly what is a “stylized” fact. Does that me that it is somehow not true? Or that it’s a simplified version of reality? I am glad that this fad phrase seems to have goneout of fashion, because like “toy model,” I think it’s just dumb — one of those phrases that economists utter to show that they’re “in the club” that generally have little or no content.

Thankfully, I have never heard anyone say that they were going to employ a “toy model” to try to explain the “stylized facts”!