Dialogue on Randomization

Roger Bacon- Consider the diverse benefits of randomization. Piercing through the vagaries of chance and deception, it allows us to discern truly the causes and consequences of action.

 
Trollius Maximus- Yet, there are costs to randomization. A trial requires an exceeding amount of time and treasure, while other methods can be done in short time by a single natural philosopher of modest means. Even if trials were as easy to conduct, they are harder to generalize to far-away lands and eras. To say nothing of the ethics of rewarding one man while spurning another, all according to the flip of a coin.

Bacon: I do not say that randomized studies are the only way. Where traditional methods fail, or when the question is of true import, we will find the costs of randomization to be of little matter.

Trollius: Even the ethical costs? Will you so lightly toss aside the question of the good?

 
Bacon: What could be the flaw of helping one while passing another by, so long as I do no harm to the other? Does not every good deed only help one or a few, while the multitudes remain ignorant of the deed?

 
Trollius: Have you indeed done no harm to those passed over in your trial, or those who bear witness to your study? Have you not convinced them that the world was a more random place than they had thought, that their own actions matter little compared to the all-powerful, uncaring hand of chance?

Bacon: Perhaps I have. Indeed, I stand convinced. I shall demonstrate in a paper using a randomized trial that exposure to randomization undermines people’s conviction that they are the master of their fate, the locus of their control, and I shall show that this new belief causes them great harm.

Trollius: Your paper would roil the world of randomistas.

 
Bacon: Yet I worry that natural philosophers will still turn too readily to randomization, since they gain most of the benefits from doing such studies, while experiencing only a fraction of these costs. Witness how psychologists continue to use deception, while economists and others spam the world with audit studies.

Trollius: Ah, but your work would be so convincing, your brilliance could shatter the randomista movement with a single blow. They would return to running cross-country regressions, and Sophists will carry the day once more.

Bacon: I see. Your trolling has convinced me to stay silent, for the good of the world I must maintain the Noble Lie that randomization is the ideal and the future of natural philosophy.

Trollius: By silence, you mean not writing a paper. Certainly a blog post could do no harm; people would find it funny, rather than a failed attempt at cleverness and a lame imitation of Brad DeLong (who you shouldn’t be trying to imitate anyway).

Bacon: Indeed. To the blogosphere!

Does Politics Actually Make Us Dumber?

It is sometimes said that while talking about politics the average person loses 15 IQ points. You could look for evidence that this effect persists with a classic priming experiment: people are randomly assigned to answer questions about either current political issues or something innocuous before taking an IQ test. See if the people who recently had politics on the brain did worse than those who didn’t.

This test may already have been done inadvertently by someone trying to figure out which political groups have higher IQ scores, since the same experiment could also provide evidence on that front.

Bonus: If the experiment finds the predicted effect, calculate what the lengthening US election cycle may be doing to average effective IQ (and therefore GDP, et c).

Explaining the Puzzle of Congressional Popularity

There is a seeming paradox in the fact that the US Congress is extremely unpopular (its current approval rating is 17%), while most individual members of Congress are reasonably popular (approval ratings more in the 50% range, with incumbents extremely likely to be re-elected). People like each of the parts but hate the whole.

The simplest way to resolve this paradox is to say that people are irrational, and as an economist I am ashamed to say that this was always my reaction when I heard these facts. But there is a good reason for the usual economist’s assumption of rationality: saying people are irrational often serves as a curiosity-stopper. You see something puzzling, but you just say that people are weird and dumb and you can stop thinking about it. But often it doesn’t take much more thinking to realize how people could be rational after all. Here are some possibilities in this case:

1. Different congressional districts have voters with different political beliefs. Congresspeople should usually have beliefs closer to their own district than someone representing another district would. Voters in Philadelphia should like their representative better than Congress as a whole because their rep is liberal while Congress is moderate.

2. An important specific case of (1) is that people know their representative is trying to bring them pork, while literally no other person in Congress is doing so; in fact the other Congresspeople are all trying to redirect pork away from my district and towards their own.

3. Congresspeople campaign and advertise heavily in their own districts, but very little in other districts. Congress as a whole does essentially no advertising (except, I suppose, putting up signs beside ARRA projects).

4. We may simply like individuals more than groups; perhaps you could call this a kind of irrationality. Certainly people dislike “corporations” but like almost every individual corporation.  Then again, some things probably poll better collectively- the military, the Supreme Court.  This is an interesting question in its own right.

I wonder if political science papers have succeeded in determining the importance of each explanation (and what other explanations they have advanced). One could get data on political beliefs of politicians and their districts to see how unpopular diverging from your district makes you (or see if congress as a whole is more popular in more moderate districts). You could examine how much popularity congresspeople get from bring more pork home (or being seen trying to do so). You could get at the individual-vs-group question by asking people what they think of specific congresspeople in other districts.

How to care about Equality

Like many utilitarians and economists, I have a hard time caring about inequality for its own sake, even though many people seem to think it is very important.  Making poor people richer is good on standard utilitarian grounds, but it is hard to imagine wanting to make rich people poorer just to make everyone feel more equal.  How can utilitarians support wealth equality, and redistribution, without putting any value on equality itself?

One reason is as old as utilitarianism itself- the diminishing marginal utility of money.  If rich people don’t value $1000 as much as poor people, in theory we can increase total utility by taking from the rich and giving to the poor.  Wolfers’ finding that happiness rises with the natural log of income supports this.  Of course in practice this leads to incentive problems and an efficiency/equality tradeoff; this lowers the optimal amount of redistribution but gives us no reason to think it is zero.

Second is the fully general trump card against utilitarians (I hope a philosopher can tell me how to get out of this): other people say equality will increase their utility, and you say you want to increase utility, so you should support their desire for equality.

I think one version of this is influential in practice.  An economist like Greg Mankiw might not care about inequality himself, but everyone around him talks about it, so he thinks of more constructive things to say than “your values are silly”.

Another version is the “realpolitik” concern.  Bismark invented the welfare state not because he cared about equality or happiness but to stave off revolution.  Similarly, we might care only about happiness, but realize that voters may be more supportive of happiness-enhancing pro-market policies when inequality is small.  Look at the Economic Freedom of the World Index– Northern European countries like Denmark have high levels of redistribution but are otherwise very free markets.  Denmark is often rated the happiest country in the world.  I would like to see a poli-sci paper on this, or write one if none exists.  If you count the Republicans as the pro-market party (iffy), I have written a paper finding this for the US.  But one should look internationally, as well as looking at survey data on opinion in addition to actual outcomes.

There is one more utilitarian argument for redistribution that I don’t recall hearing, though I am sure it has been made.  Economists like to emphasize that the price system is an amazingly efficient mechanism for allocating resources to their highest valued use.  A common response to this point is that the system is inefficient and unfair, because a poor person who will get 10 utils from a good can be outbid by a rich person who makes 4 times as much money and gets 5 utils from the good.  Somewhere, a rich kid is ignoring or complaining about a toy that a poor kid would love to have but can’t afford.  What I have yet to hear is the obvious corollary of this criticism: the more equal incomes get, the more efficient, fair and utility-enhancing the price system becomes.  The price system more efficiently allocates resources in Denmark than in Mexico.  Perhaps Danish voters are more willing to let prices work because they actually work better in the more equal country of Denmark.