Everyone knows that correlation doesn't imply causation
, but researchers invariably need to come up with plausible explanations (i.e., models) for the patterns found in their data. However, very different models can "explain" the same pattern. The books The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It
and Wars, Guns and Votes: Democracy in Dangerous Places
by Oxford economist Paul Collier
try to explain why some countries have remained poor using data from econometric studies. In his very interesting review
(PDF), Mike McGovern
, a political anthropologist at Yale, critiques the types of explanations found in popular economics books. Statistician Andrew Gelman has further thoughts on descriptive statistics, causal inference, and story time
posted by Jasper Friendly Bear
on Jul 13, 2011 -
The housing bubble was the last chance most middle-class families saw for grasping the brass ring. Working hard didn’t pay off. Investing in the stock market was a sucker’s bet. But the housing bubble allowed middle-class families to dream again and more importantly to keep spending as if they were getting a big fat raise every year.
- How the Bubble Destroyed the Middle Class
posted by Slap*Happy
on Jul 11, 2011 -
"Any industry would be proud of an average annual growth rate of 34% over ten years and of a global reach from Austria to Taiwan. But the headlong expansion of exchange-traded funds (ETFs), which by May this year controlled almost $1.5 trillion of assets (not far short of the $2 trillion in hedge funds), has become a matter for concern among financial regulators. Could ETFs be the next source of financial scandal, or even of systemic risk?
" Characterizing the Financial sector "like a hyperactive child" that "can never leave a good thing be", The Economist
appears to be wishing
for the ETFs
to be better regulated
because "it would be a shame if reckless expansion spoiled a good innovation".
posted by vidur
on Jun 26, 2011 -
The Age of Imperialism is over, but its impact remains
, leaving behind a long-lasting legacy through cultural norms. Comparing individuals on opposite sides of the long-gone Habsburg Empire border within five countries, it shows that firms and people living in what used to be the empire have higher trust in courts and police.
posted by -->NMN.80.418
on Jun 3, 2011 -
The McKinsey Global Institute has published "Internet Matters: The Net's sweeping impact on growth, jobs, and prosperity
" [70 Page PDF or just the Summary
]. "On average, the Internet contributes 3.4 percent to GDP in the 13 countries covered by the research an amount the size of Spain or Canada in terms of GDP, and growing at a faster rate than that of Brazil... For governments, investments in infrastructure, human capital, financial capital and business environment conditions will help strengthen their Internet supply domestic ecosystems." Found on Marginal Revolution where Tyler Cowen
has a few interesting comments.
posted by Blake
on May 26, 2011 -
PBS's excellent weekly news magazine, Need to Know
why European broadband speeds are racing ahead of the USA. Britain now has 400 broadband suppliers with service available for as little as $6/month. Bonus: Harvard's Berkman Center reports
on broadband supply trends around the world.
posted by anigbrowl
on May 13, 2011 -
Fareed Zakaria: Are America's Best Days Behind Us?
- "We have an Electoral College that no one understands and a Senate that doesn't work, with rules and traditions that allow a single Senator to obstruct democracy without even explaining why. We have a crazy-quilt patchwork of towns, municipalities and states with overlapping authority, bureaucracies and resulting waste. We have a political system geared toward ceaseless fundraising and pandering to the interests of the present with no ability to plan, invest or build for the future. And if one mentions any of this, why, one is being unpatriotic, because we have the perfect system of government, handed down to us by demigods who walked the earth in the late 18th century and who serve as models for us today and forever. America's founders would have been profoundly annoyed by this kind of unreflective ancestor worship." [for
posted by kliuless
on Apr 17, 2011 -
Out of thin air?
"Have you ever said something like 'Let me buy you a beer next week'? I'm sure you have. We all issue promises of this sort. And we frequently use such promises as a form of currency... I have just described a simple credit exchange. Societies rely heavily on promising-making and promise-keeping. It is the foundation of all financial markets. I'd like to point out something about the promises you make. They are made 'out of thin air.' " [more inside]
posted by kliuless
on Apr 14, 2011 -
in May's Vanity Fair ; Inequality: Of the 1%, by the 1%, for the 1%
Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret. (via
posted by adamvasco
on Apr 6, 2011 -
"The paper puts forward a small but novel idea of how we can cut down the incidence of bribery. There are different kinds of bribes and what this paper is concerned with are bribes that people often have to give to get what they are legally entitled to. I shall call these 'harassment bribes'. Suppose an income tax refund is held back from a taxpayer till he pays some cash to the officer. Suppose government allots subsidized land to a person but when the person goes to get her paperwork done and receive documents for this land, she is asked to pay a hefty bribe. These are all illustrations of harassment bribes. Harassment bribery is widespread in India and it plays a large role in breeding inefficiency and has a corrosive effect on civil society. The central message of this paper is that we should declare the act of giving a bribe in all such cases as legitimate activity
[PDF]. In other words the giver of a harassment bribe should have full immunity from any punitive action by the state." [more inside]
posted by vidur
on Mar 31, 2011 -
Why Not a Negative Income Tax?
"What kind of program could help protect every citizen from destitution without granting excessive power to bureaucrats, creating disincentives to work, and clogging up the free-market economy, as the modern welfare state has done? [Nobel-prize winning economist Milton] Friedman’s answer was the negative income tax, or NIT."
posted by shivohum
on Mar 14, 2011 -
"Towards a Sustainable Global
Golden Age" (four youtube links) is a talk by Carlota Perez comparing the current revolution in information and communications technologies (ICT) to four prior technological revolutions. She argues that each revolution has started with a long phase of experimentation driven by finance, which leads to a financial bubble and subsequent crash. The short phase of recovery from the crash is followed by a long phase of consolidation driven by concrete productivity gains and government policy. She believes that NASDAQ was the crash in the ICT revolution, and that we are still in the recovery phase, partly because cheap oil and manufacturing labor facilitated a reemphasis on unskilled-labor- and energy-intensive means of production. She speculates on what may come out of the consolidation phase she hopes we're now entering. [more inside]
posted by Coventry
on Mar 3, 2011 -
"We've had revolution in Tunisia, Egypt's Mubarak is teetering; in Yemen, Jordan and Syria suddenly protests have appeared. In Ireland young techno-savvy professionals are agitating for a "Second Republic"; in France the youth from banlieues battled police on the streets to defend the retirement rights of 60-year olds; in Greece striking and rioting have become a national pastime. And in Britain we've had riots and student occupations that changed the political mood. What's going on? What's the wider social dynamic?
posted by doobiedoo
on Feb 6, 2011 -
Scott Adams suggests
that if we assume that the solution to our fiscal problems is increased taxes on the wealthiest Americans, perhaps we should figure out how to make the taxation amenable to them... [more inside]
posted by bpm140
on Jan 30, 2011 -
, premier of China, is in the middle of his first state visit to the US, whose pomp and circumstance reflects China's growing economic stature and role in world affairs. Due to the linguistic and political differences between the US and China, few Americans know very much about Hu. Many of them will have had their first real look at him during an extended and surprisngly candid joint press conference
held with President Obama and lasting well over an hour - something which never happens in China. Fears (or possibly hopes) of a trade war between the US and China a year ago
have faded, and instead a trade deal involving $45 billion of American exports was announced, to mixed reactions
. He was received less kindly
by Congress, whose members expressed disquiet about everything from trade deficits to human rights and whose leaders declined
to discuss matters over dinner - perhaps because they did not wish to be lost in the high-powered crowd of attendees. [more inside]
posted by anigbrowl
on Jan 20, 2011 -
Why we're still fighting yesterday's economic war
Above all, like historians assessing the Maginot Line, we must avoid comforting ourselves with the judgment that the [financial] system's architects were naive and that therefore we might hope to do much better. Far more important is to be aware that defenses are vulnerable precisely where they are strongest and to be prepared to respond creatively and calmly when they fail, as they surely will again.
posted by Philosopher's Beard
on Jan 17, 2011 -