Once upon a time there was a cute, little method called the Linear Regression. It had some interesting uses. It blew many people’s minds. It was loved and cherished by economists. But then some people loved it too much. They used it for everything. Everything. I’d like to give a little example (nonlinear relationship) and a possible fix for the problem.
I’m usually a Python user myself, but for quick and easy convenience, along with the fact that a lot more economists and social scientists use
You might see where this is heading. Let’s try running the simple linear regression
Well here’s a problem!!! In case you didn’t notice, the variable from which zzz is derived (xxx) does not show as "significant" (there’s a discussion for another day) in the linear regression. Oh, and yyy, the variable which is only related to zzz via xxx, shows as unbelievably significant. The only thing even close to right here is the standard error. To be fair, who can blame the computer?
Holy crap! yyy drops out like the poser it really is, while xxx makes a move to become zzz's new significant other (pun totally intended). And thus they lived happily ever after. And look at that smile!
I’ve considered working on a paper to similar effect as this blog post, obviously more involved, using previous studies, technical technicalities, and cool applications. Suggestions are appreciated!
Back in my pre-grad school days I became inspired to help children, largely as a response to this church talk. At the time I had big plans to go get a T14 JD and then go make a bunch of money - but I wanted to do something that was helpful and mattered before I got caught up in making millions. So I got into a program called The New Teacher Project (TNTP - similar to and somewhat affiliated with Teach for America) to be placed as a teacher in a high need location. I was ready to go save the world. I was scheduled to go teach high school on the Navajo Reservation in northern Arizona, but there was an extreme need for teachers in Yuma, AZ so they asked if I'd be willing to go down to the Mexico border to teach chemistry instead, which I accepted. Yuma changed my life.
Yuma is a unique place. Some of it's uniqueness can be seen in this article I wrote while living there. It's a depressing place. Unemployment is inconceivable (yes, that word means what I think it means). Most of the local population are immigrants from Mexico, many of whom are seasonal farm workers. These immigrants' children tend to see how life is in Yuma and figure life doesn't get much better. Going to the local community college is seen as a major aspiration and accomplishment by most people. It broke my heart. I cared about my students, I saw them every day and I wanted them to make the most of their lives, but most of them saw little hope in their own futures.
In any case, moving on to the title of this work, the school district had been doing some restructuring imposed upon them by the state (because local public education was rather abysmal), and in the course of trying to make the students "college ready" they chose some packaged chemistry curriculum. It was an awful curriculum to prepare kids for college, indeed it did not prepare whatsoever - in fact, in a training for the curriculum that was given by the company which produced it, the company instructor stated that this was intended to be a low-level curriculum which would not prepare students for college. Even worse, the curriculum didn't even teach the concepts required BY STATE LAW. I brought up my concerns a number of times with the head of the science group at the school, and continually got "Well this is what we have to do." I brought up the issue with the principal, which was met with "Discuss your concerns with the head of the science group." I was at a loss. So finally, being a teacher who cared about his students' futures, I designed my own rigorous curriculum based on the state mandated concepts. Problem solved. For a day.
It seemed rather dishonest to sneak around with my own little plans under the guise of implementing the unfortunate curriculum given by the district, so I sent an email to the head of the science group letting her know what I was doing. Within half an hour my email had been forwarded to authority and I was asked to meet with the school principal ASAP. At this meeting I was suspended immediately, and an official date was set up for me to meet with the principal and a district administrator - at which meeting I was told I could bring someone of my choice.
As I considered who I would want to bring, I decided that the entire proceedings here were rather problematic and the community and parents would not be very pleased with how things were playing out, so I chose to invite a reporter from a local television station. I felt the students of Yuma were being betrayed and I wanted my story heard. I arrived on schedule at about the same time as the reporter. The reporter and I entered the meeting, and it was rather apparent that the present administrator and principal were horrified that I brought a reporter. Score. Just kidding. To my dismay, the administrator said the meeting could not occur with the reporter present, and even worse, the reporter knew the meeting members personally and was entirely willing to simply leave things where they were and never look into the situation again.
The meeting was rescheduled, I attended by myself, explained my entire point of view and all that had led up to my creating my own curriculum. It was apparent that the other attendees had nothing to retort, had no argument, and seemed to rather agree with how I felt about the situation. But being right isn't enough in the machine of school district bureaucracy. I was given the choice of teaching the curriculum specified by the district, or being dismissed from my position.
They gave me a few days to decide. I was torn. Should I abandon my students and let someone else teach them garbage, or should I go back and be the one who taught them garbage? I decided that it wouldn't do much for anyone if I went back. I would be showing my students that The Man can control you, that you just give up and submit when the stakes go up. I decided that, perhaps, it would mean more to at least some of them (and maybe be even a little inspiring) if I were to stand up, be immovable, and be the ridiculous idealist I obviously am. I told the principal I wasn't willing to teach the district's curriculum, which he skewed into me saying that I was quitting (apparently firing people is just a gigantic hassle). And that was that.
What did I learn here? That making big changes from the bottom up is difficult, and sometime impossible. If you want to change the world, you need a position of power. You need to be a big fish. I didn't save the world. But I'm still working on it. Three graduate degrees later, I still look back to my time in Southern Arizona when I need some perspective.
Okay, let's be honest, people who deny global warming has been happening for the past 150 years are a bit delusional. Some might debate about how much of global warming is attributable to human activity and how much is independent of man, but it's happening. Policy makers have been working on this problem for 40 to 50 years. Has it slowed? Probably - and it could certainly be because of the measures first world countries have taken. But global warming is not going to stop. The US, Canada, and Europe have taken measures to reduce impact, but there is still some impact. In terms of human-caused warming, the major global warmers of the future, however, are developing countries. In trying to catch up to first world countries, developing countries care much less about environmental concerns than about economic progress. Alternatively, in terms of natural warming processes, we are not yet at the consistent peak temperature seen in numerous previous ice-age cycles. Whether you attribute global warming to man or nature, there's no stopping it.
The battle is lost. So what should we be doing? Instead of pouring billions of dollars into, and regulating billions of dollars out of, combating global warming itself, we should be spending those billions on preparing for the inevitable. Money should be spent on relocating high risk coastal populations, on building levees, on stabilizing populated coastal terrain.
I'm not saying we should just throw in the towel at slowing global warming, by all means, let's attempt to moderate it. But we must be practical in admitting we can't win, and so put more effort into preparing for repercussions. Let's actually save lives, rather than complain about how lives and cities will inevitably be lost and then watch it happen.
Today, while walking (the abnormally far distance) to the bus in moderate rain, a stereotypical gangsta rolled up next to me in his Mustang, music thumping (lyrics chanting about firearms and various drugs), and asked if I needed a ride. I was caught very off-guard, and with little time to think about it I said "Sure!"
I got in and his extremely aggressive driving immediately made me a little worried I wouldn't make it to school that day. He pulled in at the gas station and said he needed to buy some cigarettes. After he came back out he got in, turned the music up even more, drove as fast as ever, and lit up a Marlboro. Note I don't smoke, and I try to avoid smoke for health reasons, not to mention there is good evidence that smoking while driving increases accidents. I was uncomfortable. This was in no way a normal situation for me. But despite these feelings, the world is a better place because I got in that car and stayed.
Racial tensions in the country are still a bit high, especially in the Midwest. I'll be honest, Midwesterners are sweet, and kind, and inviting, but the racial divide is much more blatant than out West. The choice that this man made to offer me a ride showed his willingness to surpass the tension between blacks and whites, especially considering the striking stereotype both of us convey. By accepting his offer I helped him continue the feeling of trust for people different from himself, and I validated his desire to be kind. It can be a great service to accept the help of others, it helps them become the people they desire to be.
I am now very happy to have had to opportunity to accept this disconcerting ride. I am now a better person for sacrificing some comfort (and possibly - but hopefully not - some health) in order to have a friendly relation with someone from a very different demographic. I am also filled with hope for humanity, that in fact the current tensions between people of differing races, or income classes, or geographic locations can be transcended, that we can work toward the goal of being of one heart and one mind, with no poor among us.
A quick glance at an excerpt from an economics publication and... BAM! Of course! It all makes sense! How could I have not known! (See picture)
There is a serious disconnect between economists and normal people. I once had an econ professor suggest that economists purposefully use multiple words of a common definition precisely to maintain their allure of being the only people who know what's going on, and so maintain their own importance and job security. Another of my former professors recently posted to social media that the nature of finance research is simple 'rent-seeking' - the idea that one creates the necessity of payments to his/herself without actually creating any value.
Another defect of the general public's understanding of economics is that many "educated" college graduates have taken one, or two, or three economics courses and they think they REALLY know economics, making all sorts of claims based purely upon the content of their coursework. Equally as detrimental are those with the same coursework experience who see a world where none of the simplistic models in Econ 201 hold and decide that economics as a discipline is wholly worthless. For the record, the idea of supply and demand equilibrium was conceived over 300 years ago, and the theory of convergence given a certain elasticity (your typical supply and demand curves) was new research 128 years ago. Modern economic research is much more complicated and attempts to get at all those little things that just don't work very well conceptually with rudimentary methods from sophomore microeconomics (or senior microeconomics for that matter).
I plan to write a book. I plan to write a number of books. I've begun writing a number of books (and I really have no idea where the drafts have gone...). In any case, one book I plan to write is a guide for normal people to understand modern economic research, notably economic analysis pertinent to policy. Voters and politicians alike struggle with the ins and outs of economic analysis, and all sorts of ridiculous claims are made for and against every angle and perspective.
Here are a few tidbits I expect my book to cover more thoroughly:
There was an article on WSJ today about how President Trump tweeted that he asked China to reduce the US-China trade deficit by $1B, while others report that the request was actually $100B. Every week I am stupefied again and again with the ridiculousness of Trump's tweets.
Apparently Trump posts his own tweets, some are of his own authorship and others are written by/with the help of aids. I am struck by the continuity of false, offensive, and silly tweets - it seemed that if Trump wasn't thought credible before, he is only injuring himself further. And then I had an epiphany.
Trump has never had the general support of the establishment, and let's be honest, if he did a turnaround today and became the man we wish he were, the establishment would probably still reject him. He built his election on the blue-collar attitude, and it worked. He HAS to maintain that support of the blue-collar culture, otherwise he will have no support at all. How can he do that? By being controversial in the news. When people (like me) are repeatedly critical of him, those who originally supported him are always on edge to support him, to argue, to be angry and defensive. If Trump were to lie low for a few months, he'd go to the back of everyone's mind, including his supporters, then when he did something that was generally criticized, his supporters wouldn't be prepared to resist on his behalf, they wouldn't have the fire welling up within them.
I'm still unsure whether Trump's election success was a fascinatingly calculated scheme of victory, or just dumb luck, but my opinion is that Trump's current trend of "Get in the news by saying something stupid" is absolutely purposeful. It continually maintains his image in the forefront of his supporters' minds, and keeps them with their hand on the hilt, ready at a moment's notice to ward off the foe (and honestly, prevents them from giving cool, collected consideration to Trump's really bad policies and personal shortcomings).
If we would stop talking about Trump it would likely be his downfall, and he and his staff know it. For Trump, maintaining presence by any means is a political technique, even a political weapon.
President Trump, in case you haven't seen... any news source at all... has decided we should really have some steel tariffs. And, of course, the EU and China are a little annoyed. Everyone should be annoyed. Especially when the President tweets about trade wars being good. In the words of my friend, "Good for who?", and in the words of myself in response, "Basically it's good for the US companies that make steel, but only in the short term."
Because I have to work on some homework for theoretical asset pricing and applied linear models I'll have to keep this post short, but COME ON. Protectionism is bad. It artificially raises prices - I mean that's the point. This means steel-using companies will reduce their steel consumption (which is why this is a short-lived triumph for domestic steel companies). This also means the price of steel dependent products made in the US will go up - but those produced outside the US won't. This makes US production less competitive worldwide and domestically. It raises prices for consumers, so they effectively can buy less, or if possible, they'll switch to buying imported goods. The impending trade wars will reduce demand for US goods even more, even in non-steel dependent products.
One could make the argument that we need to keep steel production available just in case a war or some such thing happens. Because steel isn't a tech-central product and nothing about it is perishable would be reasonable prep plants for "storage" and leave them unused until needed. A subsidy could be given in the form of a tax break for corporations that maintain such facilities. A reserve short term stockpile could be maintained that would last until domestic steel production could be reinstated. This seems a far better resolution that engaging in trade wars.
Protectionism is bad for businesses, it's bad for employees, it's bad for consumers, it's bad for other countries.... it's basically bad for everyone. Two thumbs down, Donald.
Applying to PhD programs is a TON of work - especially when you're working on a thesis draft to use as a writing sample. Finance is an extremely competitive field for PhD students because programs accept so few students each year. This necessitates assembling an application as perfect as possible, not to mention applying to a number of programs which becomes VERY pricey. Luckily a number of schools offer application fee waivers for various reasons, but with GRE scores and an endeavor to attend the best school possible I'm still forking out a 4-figure amount.
I started writing a book entitled The Slug and the Skeleton. It's an analysis of political economy from a new perspective. I have written little so far, but I thought I'd share the opening paragraph:
The United States is home to varying economic and political ideologies and beliefs, but two mainstream factions dominate political economic thought: Left and Right, Liberal and Conservative, Democrat and Republican. Whatever terminology we use, you know who I’m talking about, which politicians I’m referencing, what sort of extremists exist on each side. Sometimes we find great chasms between left and right policies, and even when we don’t, we all know that deep down the politicians wish the policy were more extreme. I will not address the social/religious issues of partisanship and ideology in this book, but in political economy the great divider, the cause of anger and hatred and distrust and utterly false Facebook posts is based on goals. If the people and politicians of the US had the same goals, certainly we’d find a centrist distribution of ideology, but the divided and non-cooperative nature of political workings in the US are founded upon a differing opinion of what our government, our nation, our people are to accomplish.