Vad säger oss — egentligen — statistiska regressioner?

30 September, 2018 at 20:16 | Posted in Statistics & Econometrics | Leave a comment

En grupp ‘högpresterande’ elever — Ada, Beda, och Cissi — söker in till en friskola. Ada och Beda blir antagna och börjar på den. Cissi blir också antagen, men väljer att gå på en kommunal skola. En annan grupp ‘lågpresterande’ elever — bestående av Dora och Eva — söker och blir både antagna till en friskola, men Eva väljer att gå på en kommunal skola.

drunkOm vi nu tittar på hur de presterar på ett kunskapsprov får vi följande resulatat: Ada — 22, Beda — 20, Cissi — 22, Dora — 12, Eva — 6. I den första gruppen får vi en provresultatskillnad mellan de elever som går på friskola och eleven som går i kommunal skola på -1 ((22+20)/2 – 22). I den andra gruppen blir provresultatskillnaden mellan eleven som väljer att gå på friskola och eleven som väljer gå i kommunal skola 6 (12-6). Den genomsnittliga provresultatskillnaden för grupperna tagna tillsammans är 2.5 ((-1+6)/2). Om man kör en vanlig OLS regression på datan — Skattade Provresultat = α + ß*Skolform + ζ*Grupptillhörighet — så får vi α = 8, ß = 2 och ζ = 12.

Kruxet med regressionsparameterskattningen är att det viktade genomsnittsvärdet — 2 — egentligen inte säger speciellt mycket om de gruppspecifika effekterna, där vi i den ena gruppen har en negativ ‘effekt’ av att gå i friskola och i den andra en positiv ‘effekt.’ Återigen har vi ett exempel där verklighetens heterogenitet riskerar ‘maskeras’ när man använder traditionell regressionsanalys för att skatta kausala ‘effekter.’

Advertisements

Curve-fitting methods

30 September, 2018 at 15:24 | Posted in Statistics & Econometrics | 1 Comment

 
curve_fitting

Søndag

30 September, 2018 at 13:24 | Posted in Varia | Leave a comment

 

Die Dynamik des Rechtsrucks

30 September, 2018 at 11:44 | Posted in Politics & Society | 1 Comment

Zehn Jahre lang, Woche für Woche, wurde ich merkwürdigerweise nicht müde, diese Nachweise immer und immer wieder abzuliefern. All die Jahre meinte ich, durch meine Tätigkeit als politische Kommentatorin unmittelbaren Einfluss auf den Meinungsbildungsprozess nehmen zu müssen … Erst werden sie reden, dann werden sie handeln. Wir müssen Rassisten, wo immer sie auftauchen, entlarven. Auf keinen Fall schweigen, nicht wegducken.

GERMANY-POLITICS-BUNDESTAGLangsam stellt sich aber heraus, dass die Dynamik des Rechtsrucks gerade aus diesem Reaktionsmuster erwächst. Weil sie genau wissen, dass wir anderen darauf konditioniert sind zu reagieren, werfen die Menschenfänger und Angstverbreiter ständig Köder aus, um Empörung und damit allgemeine Aufmerksamkeit zu generieren. Je mehr wir uns über ihre Provokationen entrüsten, umso mehr fühlen sich die Rechtspopulisten bestätigt und umso mehr gewinnen sie Sympathien in neuen Wählerschichten. Schließlich können sie sich so als Opfer von Zensur darstellen. Ihnen wird angeblich das Wort verboten. Ach Gottchen.

Schweigt man dazu, käme es einer Duldung gleich. Wenn man reagiert, hat man das Spiel in Kenntnis der Methode mitgespielt. Wie also Einspruch erheben? Der Schlüssel ist, die Methode Widerspruch ohne Konsequenz in Widerspruch durch Konsequenz zu ändern. Nur so lässt sich die Dynamik durchbrechen, indem man die Grenzüberschreitung als nicht hinnehmbare Haltung auch sichtbar macht.

Mely Kiyak

How do models relate to reality?

30 September, 2018 at 10:42 | Posted in Economics | 2 Comments

 

De Evige Tre

29 September, 2018 at 18:01 | Posted in Varia | Leave a comment

 

New Keynesian nonsense ‘proofs’

28 September, 2018 at 15:32 | Posted in Economics | 3 Comments

New Keynesians use mathematics to ‘prove’ some very odd stuff … Take, for example, a paper by Campbell Leith and Simon Wren-Lewis entitled Electoral Uncertainty and the Deficit Bias in a New Keynesian Economy. The thrust of the paper is that our particular form of party-based democracy naturally leads to ‘deficit bias’ … The authors identify the root problem to be one of ‘heterogeneity’ — the fact that different political parties will have different views about how to run the country. Let’s look at a snippet from the paper to see how they use maths to support this earth-shattering discovery:

leith wren

This lays bare a fundamental problem with the New Keynesians. Their model reduces the economy — the complexity of which is beyond the limits of human understanding — to a ridiculously simple model which bears no relation to reality. They then selectively prime the model with whatever data provides the desired answer. In this case they have defined a model economy with only two household types and then assume that a political party will ‘solely represent’ the interest of one of them. Is that really what politicians do?

Alan Hutchison

The Leith​ & Wren-Lewis paper is nothing but nonsense on stilts. And worse still — this kind of math-wanking is supposed to be taken seriously!

‘New Keynesian’ economists would be wise to — at least once — read what Keynes himself​ had to say about the kind of  nonsense-methodology they are using:

But I am unfamiliar with the methods involved and it may be that my impression that nothing emerges at the end which has not been introduced expressly or tacitly at the beginning is quite wrong … It seems to me essential in an article of this sort to put in the fullest and most explicit manner at the beginning the assumptions which are made and the methods by which the [results] are derived; and then to state at the end what substantially novel conclusions have​ been arrived at …
Quotation-Kenneth-Boulding-mathematics-economics-Meetville-Quotes-152829I cannot persuade myself that this sort of treatment of economic theory has anything significant to contribute. I suspect it of being nothing better than a contraption proceeding from premises which are not stated with precision to conclusions which have no clear application … [This creates] a mass of symbolism which covers up all kinds of unstated special assumptions.

Letter from Keynes to Frisch 28 November 1935

Requiem for my friend (personal)

28 September, 2018 at 10:21 | Posted in Varia | Leave a comment


Bengt Nilsson In Memoriam

A friend is someone who knows all about you and still loves you

Erdogan und die andere Türkei

27 September, 2018 at 18:28 | Posted in Politics & Society | Leave a comment

 

Instrumentalvariabler och heterogenitet — en kommentar (wonkish)

27 September, 2018 at 17:30 | Posted in Statistics & Econometrics | Leave a comment

Användandet av instrumentalvariabler används numera flitigt bland ekonomer och andra samhällsforskare. Inte minst när man vill försöka gå bakom statistikens ‘korrelationer’ och också säga något om ‘kausalitet.’

causation1Tyvärr brister det ofta rejält i tolkningen av de resultat man får med hjälp av den vanligaste metoden som används för detta syfte — statistisk regressionsanalys.

Ett exempel från skolområdet belyser detta väl.

Ibland hävdas det bland skoldebattörer och politiker att friskolor skulle vara bättre än kommunala skolor. De sägs leda till bättre resultat. Alltså: om vi tänker oss att man skulle låta elever från friskolor och kommunala skolor genomföra gemensamma prov så skulle friskolelever prestera bättre (fler rätt på provräkningar e d).

För argumentets skull antar vi att man för att ta reda på om det verkligen förhåller sig på detta sätt även i Malmö, slumpmässigt väljer ut högstadieelever i Malmö och låter dem skriva ett prov. Resultatet skulle då i vanlig regressionsanalytisk form kunna bli

Provresultat = 20 + 5*T,

där T=1 om eleven går i friskola, och T=0 om eleven går i kommunal skola. Detta skulle innebära att man får bekräftat antagandet — friskoleelever har i genomsnitt 5 poäng högre resultat än elever på kommunala skolor i Malmö.

Nu är ju politiker (förhoppningsvis) inte dummare än att de är medvetna om att detta statistiska resultat inte kan tolkas i kausala termer eftersom elever som går på friskolor typiskt inte har samma bakgrund (socio-ekonomiskt, utbildningsmässigt, kulturellt etc) som de som går på kommunala skolor (relationen skolform-resultat är ‘confounded’ via ‘selection bias.’)

För att om möjligt få ett bättre mått på skolformens kausala effekter väljer Malmös politiker  föreslå att man via lottning gör det möjligt för 1000 högstadieelever att bli antagna till en friskola. ‘Vinstchansen’ är 10%, så 100 elever får denna möjlighet. Av dessa antar 20 erbjudandet att gå i friskola. Av de 900 lotterideltagare som inte ‘vinner’ väljer 100 att gå i friskola.

Lotteriet uppfattas ofta av skolforskare som en ’instrumentalvariabel’ och när man så genomför regressionsanalysen med hjälp av denna visar sig resultatet bli

Provresultat = 20 + 2*T.

Detta tolkas standardmässigt som att man nu har fått ett kausalt mått på hur mycket bättre provresultat högstadieelever i Malmö i genomsnitt skulle få om de istället för att gå på kommunala skolor skulle välja att gå på friskolor.

Men stämmer det? Nej!

Om inte alla Malmös skolelever har exakt samma provresultat (vilket väl får anses vara ett rätt långsökt ‘homogenitetsantagande’) så gäller den angivna genomsnittliga kausala effekten bara de elever som väljer att gå på friskola om de ’vinner’ i lotteriet, men som annars inte skulle välja att gå på en friskola (på statistikjargong kallar vi dessa ’compliers’). Att denna grupp elever skulle vara speciellt intressant i det här exemplet är svårt att se med tanke på att den genomsnittliga kausala effekten skattad med hjälp av instrumentalvariabeln inte säger någonting alls om effekten för majoriteten (de 100 av 120 som väljer en friskola utan att ha ‘vunnit’ i lotteriet) av de som väljer att gå på en friskola.

Slutsats: forskare måste vara mycket mer försiktiga med att tolka vanliga statistiska regressionsanalyser och deras ‘genomsnittsskattningar’ som kausala. Verkligheten uppvisar en hög grad av heterogenitet. Och då säger oss regressionsanalysens konstanta ‘genomsnittsparametrar’ i regel inte ett smack!

RBC — nothing but total horseshit!

27 September, 2018 at 14:26 | Posted in Economics | Leave a comment

tobin_2049712cThey try to explain business cycles solely as problems of information, such as asymmetries and imperfections in the information agents have. Those assumptions are just as arbitrary as the institutional rigidities and inertia they find objectionable in other theories of business fluctuations … I try to point out how incapable the new equilibrium business cycles models are of explaining the most obvious observed facts of cyclical fluctuations … I don’t think that models so far from realistic description should be taken seriously as a guide to policy … I don’t think that there is a way to write down any model which at one hand respects the possible diversity of agents in taste, circumstances, and so on, and at the other hand also grounds behavior rigorously in utility maximization and which has any substantive content to it.

James Tobin

Real Business Cycle theory basically says that economic cycles are caused by technology-induced changes in productivity. It says that employment goes up or down because people choose to work more when productivity is high and less when it’s low. This is, of course, nothing but pure nonsense — and how on earth those guys that promoted this theory (Thomas Sargent et consortes) could be awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is really beyond comprehension.

In yours truly’s History of Economic Theories (4th ed, 2007, p. 405) it was concluded that

the problem is that it has turned out to be very difficult to empirically verify the theory’s view on economic fluctuations as being effects of rational actors’ optimal intertemporal choices … Empirical studies have not been able to corroborate the assumption of the sensitivity of labour supply to changes in intertemporal relative prices. Most studies rather point​ to expected changes in real wages having only rather little influence on the supply of labour.

Rigorous models lacking relevance is not to be taken seriously. Or as Keynes had it — It is better to be vaguely right than precisely wrong …

When should we believe the unconfoundedness assumption?

26 September, 2018 at 09:38 | Posted in Statistics & Econometrics | 1 Comment


Economics may be an informative tool for research. But if its practitioners do not investigate and make an effort of providing a justification for the credibility of the assumptions on which they erect their building, it will not fulfil its task. There is a gap between its aspirations and its accomplishments, and without more supportive evidence to substantiate its claims, critics — like yours truly — will continue to consider its ultimate arguments as a mixture of rather unhelpful metaphors and metaphysics.

In mainstream economics, there is an excessive focus on formal modelling and statistics. The models and the statistical (econometric) machinery build on — often hidden and non-argued for — assumptions that are unsupported by data and whose veracity is highly uncertain.

Econometrics fails miserably over and over again. One reason is that the unconfoundedness assumption does not hold. Another important reason why it does is that the error term in the regression models used is thought of as representing the effect of the variables that were omitted from the models. The error term is somehow thought to be a ‘cover-all’ term representing omitted content in the model and necessary to include to ‘save’ the assumed deterministic relation between the other random variables included in the model. Error terms are usually assumed to be orthogonal (uncorrelated) to the explanatory variables. But since they are unobservable, they are also impossible to empirically test. And without justification of the orthogonality assumption, there is, as a rule, nothing to ensure identifiability:

Paul-Romer-727x727With enough math, an author can be confident that most readers will never figure out where a FWUTV (facts with unknown truth value) is buried. A discussant or referee cannot say that an identification assumption is not credible if they cannot figure out what it is and are too embarrassed to ask.

Distributional assumptions about error terms are a good place to bury things because hardly anyone pays attention to them. Moreover, if a critic does see that this is the identifying assumption, how can she win an argument about the true expected value the level of aether? If the author can make up an imaginary variable, “because I say so” seems like a pretty convincing answer to any question about its properties.

Paul Romer

Keynes e il ruolo dello stato nell’economia

25 September, 2018 at 19:48 | Posted in Economics | Comments Off on Keynes e il ruolo dello stato nell’economia

 

Regression analysis — a constructive critique

25 September, 2018 at 08:34 | Posted in Statistics & Econometrics | Comments Off on Regression analysis — a constructive critique

As a descriptive exercise, all is well. One can compare the average salary of men and women, holding constant potential confounders. The result is a summary of how salaries differ on the average by gender, conditional on the values of one or more covariates. Why the salaries may on the average differ is not represented explicitly in the regression model …

berkMoving to causal inference is an enormous step that needs to be thoroughly considered. To begin, one must ponder … whether the causal variable of interest can be usefully conceptualized as an intervention within a response schedule framework [a formal structure in which to consider what the value of the response y would be if an input x were set to some vaue]. Once again consider gender. Imagine a particular faculty member. Now imagine intervening so that the faculty member’s gender could be set to ‘male.’ One would do this while altering nothing else about this person …

Clearly, the fit between the requisite response schedule and the academic world in which salaries are determined fails for at least two reasons: The idea of setting gender to male or female is an enormous stretch, and even, if gender could be manipulated, it is hard to accept that only gender would be changed. In short, the causal story is in deep trouble even before the matter of holding constant surfaces …

This is not to imply that it never makes sense to apply regression-based adjustments in causal modeling. The critical issue is that the real world must cooperate by providing interventions that could be delivered separately …

As a technical move, it is easy to apply regression-based adjustmens to confounders. Whether it is sensible to do so is an entirely different matter …

The most demanding material [is] the examination of what it means to ‘hold constant’ … The problem [is] the potential incongruence between the mechanics of regression-based adjustments and the natural or social world under study.

Why capitalism​ always will create bullshit jobs

24 September, 2018 at 14:02 | Posted in Economics | Comments Off on Why capitalism​ always will create bullshit jobs

 

Re-examining economic laws

24 September, 2018 at 11:25 | Posted in Economics | 2 Comments

In mainstream economics, there is a lot of talk about ‘economic laws.’ The crux of these laws that allegedly do exist in economics, is that they only hold ceteris paribus. That fundamentally means that these laws only hold when the right conditions are at hand for giving rise to them. Unfortunately, from an empirical point of view, those conditions are only at hand in artificially closed nomological models purposely designed to give rise to the kind of regular associations that economists want to explain. But — since these laws do not exist outside these socio-economic machines, what is the point in constructing thought experimental models showing these non-existent laws? When the almost endless list of narrow and specific assumptions necessary to allow the ‘rigorous’ deductions are known to be at odds with reality, what good do these models do?

Deducing laws in theoretical models is of no avail if you cannot show that the models — and the assumptions they build on — are realistic representations of what goes on in real life.

Conclusion? Instead of restricting our methodological endeavours at building ever more rigorous and precise deducible models, we ought to spend much more time improving our methods for choosing models!

julianThere is a difference between having evidence for some hypothesis and having evidence for the hypothesis relevant for a given purpose. The difference is important because scientific methods tend to be good at addressing hypotheses of a certain kind and not others: scientific methods come with particular applications built into them … The advantage of mathematical modelling is that its method of deriving a result is that of mathematical​ proof​: the conclusion is guaranteed to hold given the assumptions. However, the evidence generated in this way is valid only in abstract model worlds while we would like to evaluate hypotheses about what happens in economies in the real world … The upshot is that valid evidence does not seem to be enough. What we also need is to evaluate the relevance of the evidence in the context of a given purpose.

Why does someone have to die?

19 September, 2018 at 15:55 | Posted in Varia | Comments Off on Why does someone have to die?


Sad, sad, sad, news reached me today of my oldest and dearest friend.
No more blogging this week.

The mainstream-heterodoxy divide in Swedish economics

19 September, 2018 at 09:49 | Posted in Economics | Comments Off on The mainstream-heterodoxy divide in Swedish economics

20180919_094444_001-132514322.jpgIn situations with a dominant style of thought and marginal heterodoxies, this creates an exclusionary mechanism that tends to favour the dominant style. I have shown how this is expressed in the analysed evaluation reports through the consensus on a disciplinary conception of quality that aligns with the disciplinary style of reasoning … Sometimes, reviewers are even explicit about work being outside of the mainstream as a sufficient argument against it, which amounts to a sort of pure boundary work that doesn’t spend time on elaborate justification.

How to control confounding (wonkish)

18 September, 2018 at 17:55 | Posted in Statistics & Econometrics | Comments Off on How to control confounding (wonkish)

 

Tony Lawson vs Uskali Mäki

17 September, 2018 at 17:10 | Posted in Theory of Science & Methodology | 3 Comments

We are all realists and we all — Mäki, Cartwright, and I — self-consciously present ourselves as such. The most obvious research-guiding commonality, perhaps, is that we do all look at the ontological presuppositions of economics or economists.

title-methodology-image_tcm7-198540Where we part company, I believe, is that I want to go much further. I guess I would see their work as primarily analytical and my own as more critically constructive or dialectical. My goal is less the clarification of what economists are doing and presupposing as seeking to change the orientation of modern economics … Specifically, I have been much more prepared than the other two to criticise the ontological presuppositions of economists—at least publically. I think Mäki is probably the most guarded. I think too he is the least critical, at least of the state of modern economics …

One feature of Mäki’s work that I am not overly convinced by, but which he seems to value, is his method of theoretical isolation (Mäki 1992). If he is advocating it as a method for social scientific research, I doubt it will be found to have much relevance—for reasons I discuss in Economics and reality (Lawson 1997). But if he is just saying that the most charitable way of interpreting mainstream economists is that they are acting on this method, then fine. Sometimes, though, he seems to imply more …

I cannot get enthused by Mäki’s concern to see what can be justified in contemporary formalistic modelling endeavours. The insights, where they exist, seem so obvious, circumscribed, and tagged on anyway …

As I view things, anyway, a real difference between Mäki and me is that he is far less, or less openly, critical of the state and practices of modern economics … Mäki seems more inclined to accept mainstream economic contributions as largely successful, or anyway uncritically. I certainly do not think we can accept mainstream contributions as successful, and so I proceed somewhat differently …

So if there is a difference here it is that Mäki more often starts out from mainstream academic economic analyses accepted rather uncritically, whilst I prefer to start from those everyday practices widely regarded as successful.

Tony Lawson

Lawson and Mäki are both highly influential contemporary students of economic methodology and philosophy. Yours truly has learned a lot from both of them. Although to a certain degree probably also a question of ‘temperament,’ I find Lawson’s ‘critical realist’ critique of mainstream economic theories and models deeper and more convincing than Mäki’s more ‘distanced’ and less critical approach. Mäki’s ‘detached’ style probably reflects the fact that he is a philosopher with an interest in economics, rather than an economist. Being an economist it is easier to see the relevance of Lawson’s ambitious and far-reaching critique of mainstream economics than it is to value Mäki’s often rather arduous application of the analytic-philosophical tool-kit, typically less ambitiously aiming for mostly conceptual and terminological ‘clarifications.’

Emanuel Macron — l’arrogance du pouvoir

17 September, 2018 at 11:08 | Posted in Politics & Society | Comments Off on Emanuel Macron — l’arrogance du pouvoir

 

Reasons to dislike DSGE models

16 September, 2018 at 18:57 | Posted in Economics | 1 Comment

wrong-tool-by-jerome-awFirst: They are based on unappealing assumptions. Not just simplifying assumptions, as any model must, but assumptions profoundly at odds with what we know about consumers and firms …

Second: Their standard method of estimation, which is a mix of calibration and Bayesian estimation, is unconvincing …

Third: While the models can formally be used for normative​ purposes, normative implications are not convincing …

Fourth: DSGE models are bad communication devices …

Olivier Blanchard

Ist die Integration gescheitert?

16 September, 2018 at 18:48 | Posted in Politics & Society | 1 Comment

 

Hatte Karl Marx doch recht?

14 September, 2018 at 23:15 | Posted in Economics | Comments Off on Hatte Karl Marx doch recht?

 

But once, we were here (personal)

14 September, 2018 at 20:26 | Posted in Varia | 1 Comment

 

 

In loving memory of my brother Peter ‘Uncas’ Pålsson — truly ‘a red man deep inside.’

RCTs risk distorting our knowledge base

13 September, 2018 at 14:14 | Posted in Theory of Science & Methodology | Comments Off on RCTs risk distorting our knowledge base

Grade-4-RCTThe claimed hierarchy of methods, with randomized assignment being deemed inherently superior to observational studies, does not survive close scrutiny. Despite frequent claims to the contrary, an RCT does not equate counterfactual outcomes between treated and control units. The fact that systematic bias in estimating the mean impact vanishes in expectation (under ideal conditions) does not imply that the (unknown) experimental error in a one-off RCT is less than the (unknown) error in some alternative observational study. We obviously cannot know that. A biased observational study with a reasonably large sample size may well be closer to the truth in specific trials than an underpowered RCT …

The questionable claims made about the superiority of RCTs as the “gold standard” have had a distorting influence on the use of impact evaluations to inform development policymaking, given that randomization is only feasible for a non-random subset of policies. When a program is community- or economy-wide or there are pervasive spillover effects from those treated to those not, an RCT will be of little help, and may well be deceptive. The tool is only well suited to a rather narrow range of development policies, and even then it will not address many of the questions that policymakers ask. Advocating RCTs as the best, or even only, scientific method for impact evaluation risks distorting our knowledge base for fighting poverty.

Martin Ravaillon

The debate about RCTs is over. The randomistas lost. We won.

13 September, 2018 at 10:30 | Posted in Statistics & Econometrics | Comments Off on The debate about RCTs is over. The randomistas lost. We won.

 

Better now

13 September, 2018 at 10:18 | Posted in Varia | Comments Off on Better now

 

If life were only like this!

12 September, 2018 at 19:30 | Posted in Varia | Comments Off on If life were only like this!

When listening to — or reading — all the postmodern mumbo-jumbo​ that surrounds​ us today in social sciences and humanities, I often find myself wishing for that special Annie Hall moment of truth:

Agni Parthene — Valaam Brethren Choir

12 September, 2018 at 18:01 | Posted in Varia | Comments Off on Agni Parthene — Valaam Brethren Choir

 

Next Page »

Create a free website or blog at WordPress.com.
Entries and comments feeds.