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Disappointing Dishonesty

August 2, 2012 Leave a comment

It turns out science journalist, Jonah Lehrer, had been fabricating quotes and lying about it when questioned. Lehrer, it’s clear from the disclaimer on all his New Yorker blog posts, has also been recycling his own material without alerting his publisher or readers. I’m very disappointed by all of this. I disagreed from time-to-time with Lehrer, but I enjoyed his work enough to link him in my blogroll [now removed].

Lazy dishonesty has ruined the career of a promising young talent. In response, Sam Harris is offering his ebook, Lying, free for a week.

Categories: Jonah Lehrer

Printing Money and Predictions in Print

November 14, 2010 7 comments

I try not to make too many predictions on this blog. If I do the only prediction I’m likely to correctly make is that my predictions will be off. Jonah Lehrer shares the results of a big study that calls into question the ability of experts to accurately forecast.

How did the experts do? When it came to predicting the likelihood of an outcome, the vast majority performed worse than random chance. In other words, they would have done better picking their answers blindly out of a hat. Liberals, moderates and conservatives were all equally ineffective.

The reason so many experts were wrong was due to confirmation bias – they were confident they were right so they ignored evidence that undermined their preconceptions. While reading up on whether or not anyone should be concerned about inflation right now (due to Obama’s or the Fed’s policies) I feared ending up in that pitfall. So in my quest to find diverse viewpoints I discovered some older Art Laffer and others making predictions about future inflation because of Obama’s policies. Determined not to prove Lehrer wrong, who writes, “Famous experts were especially prone to overconfidence, which is why they tended to do the worst,” Laffer and gang’s predictions turned out to be almost exactly antithetical to reality.

On June 11, 2009, Laffer wrote a column Ehrlichianly titled, Get Ready for Inflation and Higher Interest Rates: The unprecedented expansion of the money supply could make the ’70s look benign. Now that we stand over a year later, let’s take a look at accuracy of some of his and other inflation Chicken Littles’ predictions.

It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits.

His primary evidence for his fears is this chart:

[Our Exploding Money Supply]

But let’s now check out this updated chart (upper-right), courtesy of Martin Wolf, from a few days ago.

Martin Wolf charts for Comment

The rate of change in M1 has plummeted and the new data doesn’t look so scary or out of place with history now, does it? M2 (the money in circulation) also dropped to very low levels. We can also see US inflation rate/expectations (lower-left) hit negative levels and currently floats under 2 (below the Fed’s target rate). With all the current talk about QEII and deliberately raising inflation expectations, the inflation alarmists are back, but as Martin Wolf points out, even if we were to see inflation growing too fast (which there is currently no evidence for) we could always just scale it back.

The hysterics then add that it is impossible to shrink the Fed’s balance sheet fast enough to prevent excessive monetary expansion. That is also nonsense. If the economy took off, nothing would be easier. Indeed, the Fed explained precisely what it would do in its monetary report to Congress last July. If the worst came to the worst, it could just raise reserve requirements. Since many of its critics believe in 100 per cent reserve banking, why should they object to a move in that direction?

Mark Thoma at his blog, Economist’s View, discusses further some mistakes that people worried about the growth in currency are currently making. It’s worth reading but here is the graph that he uses, which shows that the currency in circulation is not outside the historical norm.

Logcurr

Over at the American Principles Project, a conservative Christian organization, Samuel Gregg (who cites Laffer) also worries (7 July 2009) Obama’s policies are going to lead to 1970s style inflation – he even mentions Mugabe’s Zimbabwe.

More than one economist believes that it is only a matter of time before the third member of the 1970s trio – growing inflation – will be back to wreck havoc upon us.

Most amazingly, Gregg’s article stumbles onto an important insight about inflation. Since he takes for granted inevitable skyrocketing inflation, he spends the bulk of his article explaining why having to lower inflation will be so terrible.

Seriously fighting inflation entails a willingness to tolerate increasing unemployment. This is the price of reducing the excessive amounts of money sloshing through an economy.

So if lowering inflation will increase unemployment, what might raising inflation do? Yup, increase employment. Considering 15 million sit out of work right now, which is about 4 million people greater than the entire population of Greece, I think we could stand to raise the inflation rate a tad.

We can see that inflation expectations are low right now; it’s also worth going over some other measures of inflation and potential inflation. Here’s the Consumer Price Index.

FRED Graph

And here is core inflation (which is the CPI minus volatile items like food and energy):

FRED Graph

(By the way, you can have more fun data like this at the St. Louis Fed’s great website.)

Here’s our current core inflation overlaid with what happened in Japan (via Krugman):

DESCRIPTION

Here’s the Treasury Maturity Spread (via DiA). Yup, also low.

 

 

 

 

 

 

 

 

 

Many alarmists point to rises in gold and other commodity prices. What about those? First it is important to remember that we don’t usually consider volatile commodities when looking at inflation because unpredictable spikes can occur. They’re also traded on world markets so judging US inflation can be thrown off because of that. Consider if a huge new supply (or disruption) of oil or gold was discovered that could suddenly change the price of those commodities, but that wouldn’t really represent a significant change in inflation. Commodities aren’t entirely useless (they’re not all constantly and extremely volatile) and inflation predictors keep using them, so let’s take look at some of them anyway.

On gold, many have been unnerved by the “record high” of its price. Yet, as David Leonhardt points out, it’s not true.

Gold is at a record only if you fail to adjust for inflation. And you should almost always adjust for inflation.

[…]

This isn’t simply a question of math. Anyone who says gold is at a record high (or who said oil was several years ago) is getting the story wrong. Why? Because $10 today is not more valuable than $9 a few decades ago. Claiming otherwise is tantamount to saying that 10 rupees is more valuable than $9 because 10 is a bigger number than 9.

Here’s a graph (via Krugman) that isolates commodity prices for us.

DESCRIPTION

I don’t know about you, but it doesn’t really look like any historically high jump in commodity prices going on.

Everyone is entitled to make some bad predictions, but I’m not sure what Sarah Palin’s excuse is for her inability to predict the past. Here she is on grocery inflation.

“Everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so.”

The Wall Street Journal reporter who had the gall to question her responded.

The Nov. 4 Wall Street Journal article noted, in its first sentence, “the tamest year of food pricing in nearly two decades.” It does indeed report that supermarkets and restaurants are facing cost pressures that could push their retail prices higher — but it hasn’t happened yet on a large scale. Critics of the Fed’s quantitative easing policy are focused primarily on concerns about potential future inflation.

Let’s now take a look at few other predictions on inflation at about the time Laffer and Gregg wrote their pieces.

Paul Krugman (28 May 2009):

It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.

Seems he was correct.

Paul La Monica, CNNMoney Editor (4 June 2009):

So with all due respect to the Fed chair, he can talk as much as he wants about how he’s not too worried about inflation. But investors disagree. And Hoenig thinks that the Fed would be unwise to dismiss what’s going on with bond rates, currencies and commodities.

Score that one: Bernanke 1 – La Monica/Hoenig 0.

The Economist (22 Oct 2009):

In short, the likeliest triggers of an acute crisis—a lenders’ strike, a crash in the dollar or inflation—seem remote.

Cheers to the Brits on that one.

None of this should suggest that Krugman or The Economist is always correct or that La Monica, Laffer, and Gregg are always wrong (Palin I’m not so sure about). Remember Lehrer told us that “Liberals, moderates and conservatives were all equally ineffective.” But it does suggest to me that we shouldn’t keep listening to the same voices on a topic they’ve been so utterly wrong about until circumstances change (or they change) and indicate things might be different. For example, here’s Laffer –again in a WSJ Op-Ed– from 2 days ago.

Outlining his growth agenda he recommends,

2) Price stability. Congress should revise the Federal Reserve’s mandate, making it serve only the goal of price stability (and not also full employment). In addition, the Fed should follow a monetary rule, targeting either the quantity of money or the price level. There can be no prosperity without price stability. (my emphasis)

He’s still worried more about inflation than our current unemployment crisis. Can editors explain to me why we keep hearing more and more from those with such bad records? The inverse correlation between the voices of inflation alarmists and the actual inflation rate is surreal. We have plenty to worry about without concerning ourselves with phantoms and problems that only occur if we’re more successful.

I hope I’m not giving the impression that I think I know what will happen with our inflation rate or commodity prices. If I did I’d be in the markets right now, not writing blog posts. But what I can tell is that the bizarro Chicken Littles (“The ground is rising?!”) keep being wrong and the available data suggests we’re not in imminent danger of turning into Zimbabwe. So if you think Greece’s economy is bad and you realize that just because the overall health of our economy is better doesn’t mean that virtual unemployed nation we have living within our borders isn’t feeling real pain. Unconventional ways to further loosen monetary policy aren’t likely to solve all our problems but it could help alleviate a lot of needless suffering.

I’d rather not make a prediction, but I think we should put some money on this.

Confirming Things I Already Knew

September 9, 2010 1 comment

Jonah Lehrer shares with us research that should make most of us happy to hear.

Why Alcohol is Good For You:

Well, the anomaly has just gotten more anomalous: A new study, published in the journal Alcoholism: Clinical and Experimental Research, followed 1,824 participants between the ages of 55 and 65. Once again, the researchers found that abstaining from alcohol increases the risk of dying, even when you exclude former alcoholics who have now quit. (The thinking is that ex-drinkers might distort the data, since they’ve already pickled their organs.) While 69 percent of the abstainers died during the 20-year time span of the study, only 41 percent of moderate drinkers passed away. (Moderate drinkers were also 23 percent less likely to die than light drinkers.) But here’s the really weird data point: Heavy drinkers also live longer than abstainers. (Only 61 percent of heavy drinkers died during the study.) In other words, consuming disturbingly large amounts of alcohol seems to be better than drinking none at all.

Sex is Stressful But Good For You:

The takeaway lesson is that sex is both stressful and good for the brain. The “hedonic value” of the experience more than outweighs the temporary surge in corticosterone levels, at least in rats. Although sex appears to get less stressful the more we do it – we pump out fewer stress hormones during the act – such “chronic sex” still promotes all sorts of helpful neural habits, such as increased plasticity and new dendritic spines. (Of course, these findings probably only apply to pleasurable coitus. If you’re not enjoying the act, then don’t expect lots of neurogenesis in the dentate gyrus.) As I note in the article, these findings have led Gould to search for the additional molecules (let’s called them Molecules Y and Z) that modulate and mitigate the usually destructive chemistry of glucocorticoids, at least when we’re engaged in “naturally rewarding” activities. This data wouldn’t surprise Marvin Gaye, who sang so passionately about the benefits of “Sexual Healing”

Don’t worry both pieces are full of the requisite nuance. Of course the only lesson I’m going to take is get drunk and have sex… that’s the message, right?


(image)

Categories: Alchohol, Jonah Lehrer, Science, Sex Tags:

We Should Replace Every Grade With Kindergarten

David Leonhardt of The New York Times continues to put out great stuff one after the other. This latest piece excited as well as confused me.

Students who had learned much more in kindergarten were more likely to go to college than students with otherwise similar backgrounds. Students who learned more were also less likely to become single parents. As adults, they were more likely to be saving for retirement. Perhaps most striking, they were earning more.

[…]

Mr. Chetty and his colleagues — one of whom, Emmanuel Saez, recently won the prize for the top research economist under the age of 40 — estimate that a standout kindergarten teacher is worth about $320,000 a year. That’s the present value of the additional money that a full class of students can expect to earn over their careers. This estimate doesn’t take into account social gains, like better health and less crime. 

This is really exciting news if it is true, but the “not yet peer-reviewed” findings, as Greg Mankiw also wondered about, seem to contradict the evidence that suggests even parents’ actions don’t have much of an effect on children’s adult outcomes. 

Meanwhile Jonah Lehrer argues that preschool and early education programs don’t so much make you more intelligent but do affect our “non-cognative” abilities. 

How does preschool work its magic? Interestingly, the Perry Preschool didn’t lead to a lasting boost in IQ scores. While kids exposed to preschool got an initial bump in general intelligence, this dissipated by second grade. Instead, preschool seemed to improve performance on a variety of “non-cognitive” abilities, such as self-control, persistence and grit. While society has long obsessed over raw smarts – just look at our fixation on IQ scores – Heckman and Cunha argue that these non-cognitive traits are often more important. They note, for instance, that dependability is the trait most valued by employers, while “perseverance, dependability and consistency are the most important predictors of grades in school.” Of course, these valuable skills have little or anything to do with general intelligence. And that’s probably a good thing, since our non-cognitive traits are much more malleable, at least when interventions occur at an early age, than IQ. Preschool might not make us smarter – our intelligence is strongly shaped by our genes – but it can make us a better person, and that’s even more important. (my emphasis)

That helps explain things a little, but I’m still unclear why our parents wouldn’t be able to effect those same abilities. Until that is settled, I still think the public policy implication is obvious: spend more on early education. 

The economists calculate that, for every dollar invested in preschool for at-risk children, society at large reaps somewhere between eight and nine dollars in return. 

More from Leonhardt here.


(image: Robin Hood School, Stoneham, MA.)

Greater is Happiness is Worth Paying For

March 31, 2010 Leave a comment

If I told you about a policy that generates needed tax revenue, makes the economy more efficient, saves you substantial amounts of time, and greatly increases your happiness, and all comes at a low personal cost you’d probably think it is a no brainer, right? Well it is – and it’s congestion pricing. I pushed this a while back; now Matthew Yglesias and Jonah Lehrer are advocating the policy – both pieces are in response to David Brooks’ most recent column.  


Brooks:

The daily activities most associated with happiness are sex, socializing after work and having dinner with others. The daily activity most injurious to happiness is commuting. According to one study, joining a group that meets even just once a month produces the same happiness gain as doubling your income. According to another, being married produces a psychic gain equivalent to more than $100,000 a year.

Yglesias:

Brooks doesn’t pivot from this into any real policy specifics. But the upshot of the commuting point is very clear—we should charge people a fee to drive on crowded roads at peak hours. If you look at it in strict dollars and cents terms, the policy looks great. A relatively small fee can eliminate large economic losses due to congestion, and then the fee can finance useful public services or reductions in other taxes. But when you add in the fact that commuting time makes people miserable, you can see that the social gains from congestion pricing in our most-trafficked metro areas would be extremely large.

Lehrer:

Of course, as Brooks notes, that time in traffic is torture, and the big house isn’t worth it. According to the calculations of Frey and Stutzer, a person with a one-hour commute has to earn 40 percent more money to be as satisfied with life as someone who walks to the office. Another study, led by Daniel Kahneman and the economist Alan Krueger, surveyed nine hundred working women in Texas and found that commuting was, by far, the least pleasurable part of their day. 

I don’t want to overstate the benefits of a policy like this but it’s discouraging that policies like these that command strong support from policy experts still can’t find champions from many politicians.

Computers, Cortex, Cosmos, and Chess

January 31, 2010 Leave a comment


Chess is often a potent (however hackneyed) metaphor in films because of the many ways it provides insight on the human mind, human interaction, and humans’ relationship with machines. In his 1750 article, “The Morals of Chess”, Benjamin Franklin argues that chess teaches man the value of circumspection. Today, neuroscientists like Jonah Lehrer, argue that chess can teach us something about the nature of intuition.

Although we tend to think of experts as being weighted down by information, their intelligence dependent on a vast set of facts, experts are actually profoundly intuitive. When experts evaluate a situation, they don’t systematically compare all the available options or consciously analyze the relevant information. Carlsen, for instance, doesn’t compute the probabilities of winning if he moves his rook to the left rather than the right. Instead, experts naturally depend on the emotions generated by their experience. Their prediction errors – all those mistakes they made in the past – have been translated into useful knowledge, which allows them to tap into a set of accurate feelings they can’t begin to explain. Neils Bohr said it best: an expert is “a person who has made all the mistakes that can be made in a very narrow field.” From the perspective of the brain, Bohr was absolutely right.

And this is why we shouldn’t be surprised that a chess prodigy raised on chess computer programs would be even more intuitive than traditional grandmasters. The software allows him to play more chess, which allows him to make more mistakes, which allows him to accumulate experience at a prodigious pace.

Although ‘man vs machine’ has often been the story of chess computers, they don’t get enough credit for how their analytical way of looking at chess has improved human play. In the New York Review of Books, Garry Kasparov discusses the relationship between the human mind and artificial intelligence in chess programs. It turns out that computer programs don’t (can’t) just process every move imaginable finding the perfect solution to the game. The numbers for that are far too great. Thus, man’s tiny place in the universe is once again confirmed while simultaneously shedding light on the amazing power of our minds in the face of the tremendous.

The number of legal chess positions is 1040, the number of different possible games, 10120. Authors have attempted various ways to convey this immensity, usually based on one of the few fields to regularly employ such exponents, astronomy. In his book Chess Metaphors, Diego Rasskin-Gutman points out that a player looking eight moves ahead is already presented with as many possible games as there are stars in the galaxy. Another staple, a variation of which is also used by Rasskin-Gutman, is to say there are more possible chess games than the number of atoms in the universe.

How many other games allow us to peer so deeply into our technology, our psychology, our universe?

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