Best argument for creationism, ever

No, not this one. This reminds me too much of celestial teapots and the fact that a strong prior will get you anywhere (and you can't have science without priors). Thucydides would have been appalled by this sophistry. I'm talking about this one:

The materialist explanation of the creation has nothing to offer - if we came from nothing and go into nothing, then that encourages people to lead reckless and materialistic lifestyles.

Evolution is a world-view that leads to futility. It's no wonder people are dissatisfied with it.

We have no reason to accept knowledge that disatisfies us. You should believe what pleases you.

Just don't try this with gravity.

Inequality, poverty, or something else?

The 'human cost' of the collapse of Lehman Brothers:

Andy Bevan, 27, who works in equity derivative finance, was more upbeat.

He said he had been given the "official word" at about midday.

"It is what it is," he said. "But I am lucky - I don't have any dependants or a mortgage to worry about. I feel sorry for the managing directors - they were paid about 50% of their bonus in stock, that's been written off."

Many serious people believe that what really matters is helping people in poverty; others point out that people have preferences for the degree of inequality as well, beyond making sure the weakest in society can enjoy a certain minimum standard of living.

But this story shows there's something else at play too: being paid what is perceived 'fair', and changes in relative status. Hence our sympathy for the managing director who is losing his bonus, and our dislike of the burglar, as well as our sadness for the fallen rockstar and deposed King.

The moral content of economic terminology in the popular press: A guide

Foreign direct investment (inbound): Good
Current account deficit: Bad
Trade deficit: Catastrophic
Capital account deficit: Not used. Presumably bad.

Weak national currency: Bad
Exports: Good
Imports: Bad

Rising house prices: Good
Falling house prices: Bad
Affordable houses: Good
Unaffordable houses: Bad

Free trade: Neutral
Unfettered free trade: Bad
Fair trade: Good
Outsourcing: Evil
Buying local produce: Divine

Pay rises: Good
Low interest rates: Good
Inflation: Bad

Communism: Very Bad
Socialism: Bad
Capitalism: Bad

The benevolence of the petrol station manager

A Devon petrol station is charging drivers more than £1.99 a litre - or about £9 a gallon - for petrol and diesel as drivers clamour for fuel.

He said the move was prompted by dwindling stocks. "We cannot get any more supplies. We're not being mean. I would say I'm a very nice person. The price will go back to normal as soon as we get a delivery."

Here's more.

UPDATE: £1.99 it is no more. The free market is out, rationing is in. Tim Harford comments.

Surging oil prices? Think again

Barrels of oil per dollar in blue, Euro in red and ounce of gold in purple.

The recent prices of crude oil has been perceived as ever rising, surging, incredible expensive, ... but as an analysis published by American Geological Institute Workforce Program, once you measure oil in gold, it seems that the price has been fairly stable since 2001.

The steep increase in the price of crude oil in the United States remains a headline issue, along with the falling US dollar. The drop in the dollar has caused concern in oil-producing countries which use it as the economic basis for the commodity, and often their currency. The chart below shows the spot market price of crude oil per barrel (BBL) in US dollars and in euros from 2001 to today. The price of oil has grown faster relative to the dollar than to the euro. Yet, a portion of the rise in oil prices is due to the fall of the value of the dollar. The graph also shows the number of barrels of crude oil per cost of an ounce of gold, demonstrating the parallel growth in commodity pricing.

Bush, the debt, Mankiw and spin

An 'econonerd friend' of Greg Mankiw's in the White House emails him with this analysis. Greg posts it approvingly, and I am fuming. Yes, Senator Conrad's analysis is misleading, but he is a politician - I've long learned to not seek insightful economic analyses in public statements by that lot. Last time I checked, however, Greg Mankiw was still one of the brightest stars of the economics profession and higher standards apply.

Let the econonerd speak:

Yes, the federal debt is higher than when the President took office. Debt in 2001 = 35.1% of GDP. Projected debt in 2009 = 37.9% of GDP. [...] Measured as a share of the economy, it's about 8% higher than it was when the President took office. (37.9 - 35.1) / 35.1 = 8%

Debt as a % of GDP stood at 35.1 at the end of fiscal 2000. But, as Senator Conrad reminds us, the budget is presented by the president outgoing, so GW Bush did not inherit the debt at 35.1% of GDP: he inherited it at 33% of GDP, where it stood at the end of fiscal 2001. (37.9-33)/33 = 15%.

So how did G.W. do compared to his predecessors? I multiply 15% by 8/7 to estimate an overall effect of Bush on the debt, as well as double the number for Presidents who only served one term (so that I can compare like with like). 'Kennedy' covers both the Kennedy and Johnson presidencies, and 'Nixon' covers Ford's presidency too.

Here's the effect each administration had on public debt as percentage of GDP:


George W. is slightly better than his dad in terms of not-increasing-public-debt-by-very-much, and he shines compared to Reagan. Eisenhower and Nixon/Ford actually reduced debt as a % of GDP (albeit by less than the adjacent Kennedy/Johnson and Carter administrations respectively), while Bill Clinton can boast the largest reduction since at least Kennedy/Johnson.

So, historically speaking, W. Bush only performs 'well' compared to the worst performers, Reagan and his dad, both Republicans (note that all Democrat Presidents achieved significant reductions in debt as % of GDP during their terms)

And there's more:

[Chairman Conrad's presentation is misleading in that it includes] no comparison to the historic average - It's relevant to compare our federal debt [held by the public] with historic averages, to see if we're in a lot of debt relative to where we've been in the past.

Here's the graph the 'econonerd' - (by this stage I believe a more accurate description would be econospinster') posts:


And here is the same series going further back:


'Debt is near the historic average'?!? The series goes all-over the place, so 'historic averages' are mostly driven by the time window chosen. Choose the number of years that suits you, and you can claim that current debt as a % percentage of GDP is higher/lower/equal to the long-run average (going back beyond 1953 makes this even more interesting). Why not calculate a historic average going back 30 years? (the decision to not go back further than 40 years probably has to do with the fact people would start thinking WWII). The econonerd also missed the killer point here: why not compare US Federal debt with Italian public debt? (do I have to do your work for you?)

Also, note that choosing to start your graph at 1991 creates a nice 'debt ain't that high' visual effect. (the first person to propose a plausible-sounding reason why 1991 should be the choice of a starting point for a 'debt under Bush' graph wins a White House 'economics' job).

And finally, a question for Bluematter. readers: Is "almost doubling" an inaccurate description of a 79% increase? This is not a trick question, looking forward to your views in the comments section.

Update: Andrew Samwick has another objection, via Angry Bear.

Anger over £1.99 Tesco chickens

I kid you not. (note to non-UK readers: Tesco's is the biggest and most successful supermarket chain in Britain) This is the story and where the debate is at:

Animal welfare and farming groups have criticised the supermarket giant Tesco for cutting the retail price of its standard whole chicken to £1.99.
The store says bringing down the price of a bird from £3.30 will benefit "shoppers on a budget".

The National Farmers' Union (NFU) says the move is "extremely ill-judged and short sighted. [...] They're devaluing the product and doing it at a time when, overall, the market is strengthening and chicken prices are rising[DC: Wtf?!?]. They're sucking value out of the supply chain and unless Tesco is going to subsidise this, it is not a sustainable price," he said.

Compassion in World Farming (CIWF), which praised the chain in its latest supermarket survey for improving the environment for indoor-reared birds, believes that Tesco have taken the wrong approach [...] "If Tesco is prepared to drop their prices in this way, why don't they decrease it on the higher welfare chickens and make that more accessible to poorer consumers."

The RSPCA, which oversees the "Freedom Food" programme for livestock welfare, said low-price chicken "was not the answer".

Once more, the BBC's coverage of all matters economic is abysmal (not that political coverage is much better - Chris Dillow makes some very good points here). This is decidedly not public service broadcasting; I want my license fee back.

Related: Indiffirence Merv on hating supermarkets.

Thoughts on ownership

Forrest emails me with a comment on this amazing story:

These parents in the Czech Republic found out they had been given the wrong baby 9 months after the birth and switched back.

This got me thinking. I guess that if you find out pretty quickly (say after a day) that you have taken the wrong baby home, you’ll switch back. I also guess that if you don’t find out until the kid is 18, you probably won’t. So what do you reckon the tipping point is here?

Addendum: This story reminded me of one of my most cold-hearted posts on Bluematter.

Race and brains, once more unto the breach

If the previous post did not persuade you to stop wasting your time thinking about it, McMegan links to Jim Manzi who addresses the question. He concludes his well researched piece with this:

Do genetic differences accounts for any material portion of the difference in IQ scores by self-identified racial groups in the US? The only honest answer is that we don’t know. This, not political correctness is why the American Psychological Association’s formal consensus point of view on this question is stated without qualification: “At present, this question has no scientific answer.”

All right and proper, but that's not the right question to ask. What you really want to know is this: are 'black genes' leading to materially less intelligence than 'white genes'? And the answer is simple: IQ tests can't tell you that.

My understanding is that IQ scores say nothing about 'absolute' intelligence, they only provide a ranking. Or to use terminology more familiar to some of my readers, IQ scores only have an ordinal, not a cardinal meaning. It is very well likely that someone scoring 110 is only trivially more intelligent than someone scoring 90; what the difference between 110 and 90 actually means in terms of 'amount of intelligence' is anyone's guess.

OK, I hear you say, but don't we use quasi-cardinal interpretations for IQ scores? (e.g. isn't 'normal intelligence' supposed to lie between 90 and 109?) Quoting Manzi again:

There are statistically significant differences in IQ test performance between self-identified racial and ethnic groups in the US, and these differences have been sustained over long periods of time. The specific difference that is most widely discussed is the fact that in the US Non-Hispanic whites score, on average, about 15 points (~1 STDEV) higher than African-Americans. (Leaving aside the complication that it matters exactly how we define “long periods of time”, since, for example, there is circumstantial evidence that the black-white IQ gap may have been reduced substantially over the past several decades.)

So, 15 points is the maximum possible difference between the races. We also know with certainty that environment plays a role in determining intelligence, so the difference that can be attributed to genetics is a maximum of 10 points or so, with the actual difference (if it exists) likely to be much smaller. That's nothing: let me remind you that the average (and I think also median) person scores 100 by design, that 'average' or 'normal' intelligence is a 20 point band, and that in any case IQ is a flawed measure of 'intelligence' as used in everyday language (and a 'better than random' - but not by much - predictor of 'success' in life).

To bring the human element into this, my own results from several IQ tests are uniformly distributed across a 35 points range, and while I'm pretty good at arriving to answers to almost every IQ test type question thrown at me - questions that the average person won't answer at all - I take more time than the average person to do so (does that make me more or less intelligent?). And since the human element sells, I got more for you: here is a long list of highly successful and intelligent people who were very likely autistic, and here's the corresponding long list of people with dyslexia. What's the point? Intelligence is not a uni-dimensional variable.

And just to make sure, I should also mention the Flynn effect, quoting from this (excellent) paper (free access):

Since 1932 and probably prior to that, test scores have been increasing at a rate of 3 to 6 IQ points per decade, depending on the IQ test used. The preponderance of evidence indicates that scores are continuing to rise at a constant rate (Flynn, 2006b).

And since you apparently have to be a genius to read Bluematter., I won't even draw out the implications of the following observation on the likely (non)persistence of any currently observed differences amongst races (ala Manzi's circumstantial evidence):

There is at least one exception, however. The Scandinavian countries currently are showing little or no rise in their test scores (Flynn, 2006a). As large IQ increases were seen in Norway prior to 1968, Flynn suggests that Scandinavia might have experienced early increases that have since abated. This raises the possibility that IQ increases in other industrialized nations will also end.

So in IQ we have a metric with no cardinal interpretation, with a weak correlation to 'general intelligence' and an even weaker one to 'success in life', with the observed differences between races being pretty small and most likely diminishing even before controlling for environmental characteristics.

What's the issue again?

Assume blacks have lower IQ than whites and DNA is to blame

Now name one thing you would do differently - as a politician, as a citizen or as a human being. I'll be damned if you can come up with a single example.

I really, really can't understand what this debate is all about (other than in an immature 'I did not evolve from the apes' or 'I am really frustrated the earth is not at the centre of the solar system' kind of a way). Hell, even this debate is more relevant.

Now can we please, as a culture, move on?

Paul Krugman explains why I can't stand political reporting

Think about what passes for a “tough” question on the Sunday talk shows. It’s not “Senator Bomfog — you say X, but the statistics show that it’s actually Y. How can you explain this discrepancy?” In fact, I’ve never seen that happen. In political reporting, being wrong means, at most, that your claims are “in dispute.”

The excerpt is from his NYT blog, via Economist's view.

Paul is spot on. For some reason (misguided notions of unbiasedness? journalists and politicians that don't know their left hand from their right?) bringing reality to a political discussion is bad manners. Everyone is entitled to their own preferences and opinions, and their own facts too.

Apple's new thing - 'All this hype for something so ridiculous!'

No, not the iphone, but the first ipod to be released back in 2001.

A loyal reader emailed me with this fascinating forum discussion at Mac Rumors right after the ipod was announced. How different things turned out to be...

Why do people hate the market?

Stardom sent me this clip about Seva Cafe, a restaurant operating the Radiohead business model: eat first, then pay whatever you feel like.

Instead of a warm glow, I feel depressed. Why are projects such as Seva Cafe so loved? Why is someone volunteering to do social service more respected than, say, an industrialist that creates tons and tons of consumer surplus? What is wrong with commercialism? Why do people hate prices, money, and the market mechanism itself?

One potential reason behind the markets' bad reputation is their worrying tendency to generate inequality when left unchecked. Most people, however, are not simply against free-market libertarian societies; they are suspicious of markets at the micro level, even when these operate within reach of the redistributionist arm of the state.

My feeling is that people suspect markets because the incentives of the seller are diametrically opposed to those of the buyer: the former wants the price to be high, the latter low (with the opposite going for quality); furthermore, and perhaps more crucially, the parties in the transaction are usually better off concealing information from each other, or communicating outright misleading information (seen any ads recently?). This is not a problem in the textbook model of perfect competition, but real-world markets can generate a lot of ill feeling amongst participants. Information is gold, and it's often hard work. In contrast, in a perfectly altruistic 'giving' economy, the incentives of the giver ('supplier') are fully aligned to the incentives of the receiver ('the buyer'): the former is better off the happier he makes the latter. I'm way more confident in the quality of the food my mom serves me than that of my local chinese. I feel way more comfortable with a friend that 'cares for me' than with an explicitly selfish business associate. I prefer a partner who loves me to paid-for company.

One problem with this is that altruism exists in very small amounts, and it tends to constitute a very unstable equilibrium (a few people deviating is usually enough to bring to whole edifice crumbling down). And even if that wasn't a problem and the objective was to organise an economy of angels, there is no technology that is nearly as good as markets in determining the relative value of goods. An 'altruistic' model can work - often very well - only at the most micro of levels (e.g. in the case of Seva Cafe) where the lack of information can be brushed aside and gross inefficiency can be 'subsidised' from outside the system. But it is no way to run a full-blown economy. Alas, this is not immediately obvious.

The implications of the public's mistrust of markets are profound. Simply put, it's the resource allocation equivalent of having invented the chainsaw and insisting on using your nails to cut down trees. What can be done to change public perceptions of markets?

Science reporting explained

Via Social Science Statistics. The Dilbert blog is, of course, by far the best economics blog amongst nominally-non-economics blogs out there.

Plagiarism, of a cute nature

Scott Aaronson has a money-can't-buy experience:

A reader named Warren Smith informs me of an Australian TV commercial (which you can watch on YouTube), in which two fashion models have the following conversation:

Model 1: But if quantum mechanics isn’t physics in the usual sense — if it’s not about matter, or energy, or waves — then what is it about?

Model 2: Well, from my perspective, it’s about information, probabilities, and observables, and how they relate to each other.

Model 1: That’s interesting!

The commercial then flashes the tagline “A more intelligent model,” followed by a picture of a Ricoh printer.

More intelligent, or simply more shameless? Ladies and gentlemen of the jury, allow me to quote from Lecture 9 of my Quantum Computing Since Democritus notes:

But if quantum mechanics isn’t physics in the usual sense — if it’s not about matter, or energy, or waves, or particles — then what is it about? From my perspective, it’s about information and probabilities and observables, and how they relate to each other.

Postscript: Responding to his (many, many) comments, Scott stumbles upon two fundamental truths that many a blogger will relate to:

The longer I blog, the more I despair of ever achieving my central goal in life, namely for everyone to like me.

The longer I blog, the more I despair of ever achieving my secondary goal in life, namely for everyone to understand me.

I bet the sign is made in China

Via Oli.

Horoscope economics: A quick tour through cognitive bias

This is what my horoscope reads for today:

The excellent aspect between the moon in Virgo and Venus could have you rethinking your day. Sometimes the easiest options that require the least effort aren’t always the way to go. A little creative thinking will help you work out which way is best. (horoscope.com)

There is never a good time to deliver bad news, but you can be compassionate. (yahoo!)

Now is a good time to have a frank discussion with someone who's been upsetting you lately. Be honest, but try not to get too emotional... (Facebook)

Reading the horoscope is a very popular activity, even amongst people you'd think would know better. And if you are too quick to dismiss it all as being a load of bull, then you may be suffering from bias blind spot - the tendency not to compensate for one's cognitive biases.

To start with, reading the horoscope can compensate for the ambiguity effect — the avoidance of options for which missing information makes the probability seem "unknown". Advice such as 'now is a good time to have a frank discussion...' can work wonders for your status quo bias - the tendency for people to like things to stay relatively the same. And to cap it all, individuals tend to be risk-averse. This way, they attain suboptimal outcomes over long time periods (such as a lifetime). Reading the horoscope, and believing it is somewhat grounded on reality, means that the perceived risk of any course of action is now lower, leading to superior outcomes (a higher expected utility value).

But, I hear you say, what if my horoscope prescribes a course of action I know to be wrong? Well, horoscopes are hardly clear in their predictions and the advice they prescribe; and you need to remember that humans come with built-in selective perception — the tendency for expectations to affect perception - and confirmation bias — the tendency to search for or interpret information in a way that confirms one's preconceptions. The information you get from reading your horoscope will not fundamentally change your beliefs or make you do something you strongly believe you shouldn't; but this won't stop it from lessening the biases mentioned in the previous paragraph.

Of course, a requisite step is to actually believe in what you are reading - if you can't help but discard it out of hand it probably won't be much use. But next time you spot your partner browsing the net for this week's horoscope, be nicer: they are hard at work overcoming bias.

Ban less, tax more

Indifference Merv recently wrote that non-smokers supporting the smoking ban is the equivalent of turkeys voting for Christmas. His argument is simple: whatever the 'negative externalities' associated with second-hand smoke, smokers compensate non-smokers handsomely for the costs they impose on them. In fact, the average non-smoker in the UK is no less than £135 better off each year as a result of taxes on tobacco.

Merv is absolutely right. In fact, his point applies much more widely.

In economics, saying that x generates a negative externality simply means that whenever someone does/produces/consumes x, he pisses off someone else (x could be harming that latter someone physically, or it could simply be that she objects to x on grounds of taste, morality etc). If you are looking to maximise social welfare and your solution to the externality is to ban x, the assumption has to be that the person(s) suffering from the externality are no less that infinitely pissed off.

Economists are often accused of knowing the price of everything and the value of nothing; in actual fact, economists know that nothing has a value of infinity, and there are very few things that society should keep pretending are absolutely invaluable (for example, the right of a citizen to not get murdered). Banning anything for which adequate compensation can be paid to those adversely affected is inefficient, and we would all be better off if we could ban less and tax more (and then perhaps returning the extra money by reducing income or corporation tax).

Look, for example, at the ban on fox-hunting. Now, a large part of the population believes that 'killing a fox is wrong'. 'Wrong' is a relative statement - and, for most people, fox hunting is near the bottom of the 'wrong' list. What if each dead fox meant 10 children in Africa could be vaccinated against deadly diseases? The fox-hunters would prefer taxation to an outright ban, and so would almost everyone else.

Or think of the (recently reformed) restrictions on pub opening times in England: did anyone in their right mind ever propose that allowing an establishment to operate beyond 11pm would carry a social cost of infinity? What about making large political donations?

No. So, people: let's stop banning 'socially undesirable' stuff, and let's start haggling over the price.

Postscript 1: There are some generic cases where taxation can be no alternative to outright prohibition. One is property crime: how can I possibly compensate you for the £100 I stole from you and be better off myself at the same time? Also, coercion of any type still ought to be illegal (if you could compensate someone for 'forcing' them to do something, how would that be coercion?), as should various behaviours involving minors.

Postscript 2: I have just come back to Athens from here (jealous, anyone?) I'm returning to London and regular blogging in a couple of days, but I thought I would drop by and say hi.

Is the smoking ban based on bad economics? Part 2

This blog recently raised the issue of some bad economics behind the smoking ban . But in addition to these previous comments, missing from the whole media/public debate about the smoking ban seemed to be the issue of the massive tax revenues we raise from smoking.

I fully recognise that this is a highly regressive and inequitable tax, but ignoring welfare implications for other people (and other principles), the deciding factor for whether to be supportive of the ban should be whether you as an individual are better or worse off.

For smokers who don’t want to quit, unsurprisingly most are against the ban. The benefit of avoiding passive smoking doesn’t apply when you’re non-passively smoking anyway and for many, the smoking ban is equivalent to an exile from all pubs that don’t have an outdoor area and a winter of drinking at home lies on the horizon.

For non-smokers, there’s the benefit of avoiding passive smoking and avoiding smelling like an ashtray after a night in a pub/club. On this basis alone, all non-smokers I know are massively in favour of the ban, which seems to them to create massive benefits without any costs.

But this misses the potentially massive cost to non-smokers of reduced tax revenues from smoking, which non-smokers will ultimately have to fund themselves by either paying higher taxes or by seeing reduced public spending. Tobacco taxes are forecast to raise £8.1bn in 2007/08. The HMRC national stats pages helpfully provide information on how we might fund any loss of tobacco taxes.

Hypothetically, if the long-run impact of the smoking ban is to cause widespread quitting, we could conceivably lose a few billion of the £8.1bn. For the same tax year, 1% on the basic rate of income tax would raise around £3.3bn, so it’s not implausible that this might give an indication of the long-term impact of the smoking ban. For someone earning (say) £30k per year, this would equate to around £250 extra tax per year. Assuming you already worked in a non-smoking building, as a non-smoker, divide that by the number of times you go to the pub and you have your extra cost per pub visit of the smoking ban. If you go only 2 or 3 times a year (as per one of my non-smoking friends who massively supports the policy), the ban could end up costing you an extra £80-125 per pub trip. Even if you go once a week it’s still an extra £5 per visit, which is worth an least one extra gin & tonic in London and equivalent to 3 pints up North.

So when you add to that the absence of (interesting) smoking friends at the pub or having to stand outside to placate them, as a non-smoker ignoring the welfare of increasing the progressivity of the tax system, the mass support of the smoking ban by non-smokers seems like turkeys voting for Christmas.

PS. if losing smoking tax revenues due to anti-smoking policies could be funded by abolishing DEFRA rather than raising other taxes I might actually be in favour.

PPS. "Cigarette packs to feature graphic pictures".

Economists are idiots, says Lou Dobbs

Watch the video, it seems to me that Lou Dobbs is completely in sync with the 'average American' on free trade. The quality of the debate, as you would expect from CNN, is of the highest standards too.

Alex Tabarrok of Marginal Revolution is singled out for special praise.