Category Archives: Research

“Is there really an empirical turn in economics?”

The recent “empirical” turn in economics should be known as an “applied” one and it is just one in a long series of related developments. Moreover, it is a move towards the historical roots of the discipline. Those are some lessons from Beatrice Cherrier‘s essay “Is there really an empirical turn in economics?“. Based on research conducted together with Roger Backhouse, she takes issue with the idea that there has been a revolution in economic research involving empirics. Some points I liked:

  • Empirical work has been live and well, what has changed is its recent larger role in top journals. Besides, the view of theory as dominating in economics is based on looking only at the last 50 years – pre- and immediate post-war economics used to be a lot more empirical.
  • Much theory has become more applied, often involving data. And John Bates Clark medal citations stress “applied,” often taken consisting of a mix of theory and empirics.
  • Increasing availablity of data is a development that has been ongoing since at least the 1960’s. Hype around and criticism of new, large sources of data were the same in the 1970’s as today.
  • Computerization is overrated, much modern empirical work is computationally and numerically very simple.
  • Oscar Morgenstern (of von Neumann and Morgenstern‘s Theory of Games and Economic Behavior fame) proposed that to become a fellow of the Econometric Society, it should be a requirement to “have done some econometric work in the strictest sense” and be “in actual contact with data they have explored and exploited for which purpose they may have even developed new methods.”

H/t: Erwin Dekker.

Television, Cognitive Ability, and High School Completion

That is the title of a just released working paper by Simen Markussen, Knut Røed, and myself. We show that access to commercial television channels during childhood and adolescence from the 1980’s onwards in Norway reduced cognitive ability scores and high school graduation rates of young men.

In a comment, Pat Sharp apologizes (true story! thanks to @JFiva).

“Can welfare conditionality combat high school dropout?”

I have a new working paper out, joint work with Simen Markussen and Knut Røed. Simen has written provocatively about the paper in the today’s Dagens Næringsliv, which is also running a companion piece. These are only in Norwegian (and behind a paywall), however, so here is a brief summary in English:

We investigate what happens when Norwegian social insurance offices increase their use of conditions would-be welfare recipients need to satisfy in order to receive welfare. Using the staggered introduction of this program and based on double and triple difference models, we find that such conditionality reduces the number of young people that receive welfare, and more importantly, increases the high school graduation rate. For young people from disadvantaged backgrounds, we find substantial and precise effects, whereas we find no effects on youth from more resourceful backgrounds, as expected. A few years later, we find that those who were exposed to new regime have more education, earn more, and are more likely to be employed. Thus even though activating these people may cost something upfront, it pays off in the long run.

The newspaper has an interview with a guy who got on track and gets some work experience through this system. Here is the abstract of the research paper:

Based on administrative data, we analyze empirically the effects of stricter conditionality for social assistance receipt on welfare dependency and high school completion rates among Norwegian youths. Our evaluation strategy exploits a geographically differentiated implementation of conditionality. The causal effects are identified on the basis of larger-thanexpected within-municipality changes in outcomes that not only coincide with the local timing of conditionality implementation, but do so in a way that correlates with individual ex ante predicted probabilities of becoming a social assistance claimant. We find that stricter conditionality significantly reduces welfare claims and increases high school completion rates.

Basic income pilot in Finland, headed by top economist

Via MarginalRevolution’s assorted links and others, a short BBC article about a pilot project in Finland on universal, basic income. Economist Ohto Kanninen, coincidentally a fellow student of mine from graduate school, describes the project:

The prime minister has expressed support for a limited, geographical experiment. Participants would be selected from a variety of residential areas.

Mr Kanninen proposes testing the idea by paying 8,000 people from low income groups four different monthly amounts, perhaps from €400 to €700.

They also have the Prime Minister on board:

Prime Minister Juha Sipila has praised the idea. “For me, a basic income means simplifying the social security system,” he said.

This sounds really exciting, and I cannot wait to see the working paper.

 

The hedonic treadmill exists even for basic necessities

Does people’s life satisfaction adapt to material improvements? In a recent paper (gated), Galiani, Gertler and Undurraga find that it does, even in a case of very poor people receiving a really basic service (housing). In a large-scale experiment, some poor households in El Salvador, Mexico and Uruguay were randomly selected to receive a ready-made small house. Receiving such housing increased the share of households reporting to be “satsfied” or “very satisfied” with the quality of their life by around around 40 %, from 0.53 to 0.73, thus confirming that it was something these households really needed. What about the effect in the long term? Eight months later, more than half of the gain had disappeared, highly consistent with the hedonic treadmill hypothesis.

Childhood predictors of adult outcomes

Two papers in The Economic Journal November 2014 deal with how childhood information may predict adult outcomes.

Frijters, Johnston and Shields consider the question Does Childhood Predict Adult Life Satisfaction? Using repeated surveys of people born in the UK in 1958, they are able to explain only 7 % of people’s adult life satisfaction with a very wide range of family and childhood variables. Interestingly, exploiting the panel dimension, they estimate that around 40 % of adult life satisfaction is a trait (i.e. fixed), so it is surprising that their first number is so low. It is as if type of childhood almost does not matter. Education and wages are predicted much better.

I do not know if information on time preferences would have helped, but Golsteyn, Grönqvist and Lindahl at least claim that Adolescent Time Preferences Predict Lifetime Outcomes in their article in the same issue. They find that Swedes who were future-oriented (had low discount rates) as children went on to obtain more education, better grades, higher incomes, and better health (obesity and mortality) as adults than their more impatient peers. The authors are admirably clear that they are not estimating causal effects.

Review: Intelligence: A Very Short Introduction

Since I am doing some work using intelligence test data, I wanted to read something introductory material on that topic. Enter Intelligence: A Very Short Introduction (2001) by Ian J. Deary. I found this a useful introduction to how psychologists/psychometricians have thought about these things. What I was really after was the foundational stuff in chapter 1, and that is what I will focus on here. (Though chapter 6 on the Flynn effect is also solid, and taught me that American SAT scores have been declining in the same period as IQ scores have been rising.)

Deary takes the test collection called Wechsler Adult Intelligence Scale III as a starting point. WAIS-III consists of 13 different tests, and strikingly,

“every single one of those 13 tests in the WAIS-III  has a positive correlation with every other one. People who are better at any one test tend to be better at all of the others. There are 78 correlations when we look at all the pairings among the 13 tests. Every single correlation is positive – a good score on one of the tests tends to bring with it a good score on the others. There are no tests unrelated to any other one, i.e. there are noe near-to-zero correlations. There are no tests that are negatively related with other ones. Even the lowest correlation between any two tests is still a modest 0.3 (between picture completion and digit span). […]

The first substantial fact, then, is that all of these different tests show positive associations – people good at one tend to be good at all of the others. […]

The second important fact is that some sub-groups of tests in the WAIS-III collection associate higher among themselves than with others. For example, the tests of vocabulary, information, similarities, and comprehension all have especially high associations with each other. So, although they relate quite strongly to every test in the WAIS-III collection, they form a little pool of tests that are especially highly related among themselves. The same thing occurs with digit span, arithmetic, and letter-number sequencing. They relate positively with all of the other tests in the collection, but they relate especially highly with each other (pp. 7-8).”

In the WAIS-II tests, there are four groups of tests that correlate particularly strongly (called “group factors”), labelled: Verbal comprehension, Perceptual organization, Working memory, and Processing speed, ref. the figure below (p. 3). Inline image 2

Positive correlations between the four group factors are high. This has often been taken to imply that the skills required to do well on each have some common source, which has traditionally been called g (“general factor”). Strictly speaking, the fact that the different test scores are positively correlated does not imply that they have something in common or that “g” corresponds to anything real. Deary is at one point fairly clear about this, writing: “The rectangles in Figure 1 are actual mental tests – the 13 sub-tests – that make up the Wechsler collection. The four circles that represent the ‘group factors’ and the circle that contains g are optimal ways of representing the statistical associations among the tests contained in the rectangles. The things in the circles, the specific/group factor abilities and ‘g’, do not equate to things in the human mind – they are not bits of the brain (p. 11).”

Though he muddles it somewhat when continuing with “The names we pencil into the circles are our common-sense guesses about what seems to be common to the sub-groups of tests that associate closely. The circles themselves emerged from the statistical procedures and the data, not from intuition about the tests’ similarities, but the labels we give the circles have to be decided by common sense (p.11),” and later much more by going on to treat ‘g’ as a valid stand-alone explanatory concept, and writing e.g. “We already know from Chapter 1 that there is general ability and there are […] specific types of mental ability (p. 85).”

Nevertheless, the book seems to be a good exposition of intelligence testing and how psychologists have viewed and continue to view the results of these tests.