9 ms·

The Story of a Lucky Economist

133 points by apsec112 10y ago

cperciva 10y ago
This sort of occasional oversized impact is not limited to economics. Take bsdiff for example: I wrote it because I was a poor university student and wanted to make sure usage of FreeBSD Update didn't push me beyond my free bandwidth tier; making updates faster wasn't really a priority (the speedup from downloading binaries vs. recompiling dwarfed everything else) and I wasn't at all sure if anyone else would want to use bsdiff. It turns out that bsdiff has now saved thousands of lifetimes of people waiting for software updates to download. Even a small impact becomes huge if you scale it up to billions of users.
- tomrod 10y ago
  That is so cool! Thanks for bsdiff.
rtfs 10y ago
good post. add some stories about dealing with lobbyists as an economist, and the post will be even more interesting.
- AllegedWisdom 10y ago
  In most agencies, economists almost never interact with lobbyists. The lobbyists always aim at senior management, and almost all lobbying takes the form of 'We care about X and we want you to validate that by signalling that you also care about X' or 'We are presenting a credible threat to sue you if you do Y'. This is useful political and tactical information for management, but it does not affect the economic numbers at all. In theory a lobbyist could present useful information about a hard-to-research topic that informs our analysis, but I've never seen that happen.
caseysoftware 10y ago
It's worth remembering the opposite of his example of "C" (the economist who pushed back against the water standards).. The faceless bureaucrats in these positions have the ability to destroy livelihood, whole towns, and even industries with the stroke of a pen. And they suffer zero consequences as a result.
- pjc50 10y ago
  The stakes are rather high on both sides of this. The same chemist was responsible for both leaded petrol and CFCs: https://en.wikipedia.org/wiki/Thomas_Midgley_Jr https://en.wikipedia.org/wiki/Thomas_Midgley_Jr. Safety regulations can wipe out businesses. Not having (or following!) regulations can wipe out lives on an enourmous scale: https://en.wikipedia.org/wiki/Bhopal_disaster https://en.wikipedia.org/wiki/Bhopal_disaster The point is not to say "regulation good" or "regulation bad", but that these decisions are important and should be taken seriously with submissions from those involved as well as experts. The process has to be sound, and we need to de-partisanise it where possible.
  - cperciva 10y ago
    For all the environmental damage they caused, I'm not convinced that CFCs were a net negative. We have better alternatives now, but the refrigerants R12 replaced at the time were really really nasty; how many lives would you be willing to sacrifice to avoid damaging the ozone layer?
    - jopsen 10y ago
      The question is how many lives were lost due to a damaged ozone layer? (increased risks of skin cancer, etc). The point is that regulation is important. Whether you have good regulation, bad regulation or no regulation it has impact and the discussion is important.
      - cperciva 10y ago
        Right. My point is just that people tend to condemn CFCs based on their costs while completely ignoring the benefits they brought at the time.
scandox 10y ago
> the 'PhD Economist' credential is a signal that you might be the kind of person who can escape groupthink I am open to this concept but I don't think I'm being cynical when I say that most people would surely think the opposite when they hear the expression PhD Economist.
- aaron695 10y ago
  > I am open to this concept but I don't think I'm being cynical when I say that most people would surely think the opposite when they hear the expression PhD Economist. Classic groupthink :)
- pjc50 10y ago
  Don't worry, economics has multiple schools of groupthink.
  - crdoconnor 10y ago
    Only one particular form of it is usually welcome at policymaking meetings though.
- xapata 10y ago
  > most people would surely think An example of groupthink? If you haven't studied economics in graduate school, you may not be aware that the field is very different than what is taught in traditional undergraduate economics classes. There are different branches, of course, but the field emphasizes modeling and acceptance of initially-unintuitive results based on careful analysis of system dynamics. Many people can think through the second-order effects (and beyond) of some policy change. Economists are just one group that has been trained to do so.
  - gone35 10y ago
    An example of groupthink? Freshwater macro, for one.
    - 10y ago
southbridge 10y ago
Can someone go more into what is meant by framing and anchoring? Is this like 'sandbagging?' Does one fail on purpose to set a low standard so that they can have an easier time reaching a goal?
- maaaats 10y ago
  We did an experiment at work. Half the group was asked if they thought a person was above 165cm tall, which he was. The other group was asked if they thought the same person was below 190cm, which he also was. Then after, both groups were asked to guess his height. The second group guessed significantly higher than the first. Since both groups were told a number first, their response got anchored/biased towards that value.
- cperciva 10y ago
  If you present people with several options, they'll be biased towards selecting options in the middle of the range. This is particularly relevant to SaaS startups and pricing plans; but in the article the author was using it to steer the decision maker towards the option he had already determined to be optimal.
  - southbridge 10y ago
    So it's like suggestion; the ability to make people believe?
  - AllegedWisdom 10y ago
    The optimal cutoff would probably have been $20 million rather than the $10 million that was chosen, but that change would have been too much for a lot of people. If I had only presented options from $1M up to $20M, then the group probably would have chosen $5M no matter how much I argued for $20M. I had to put the $50M number in people's heads so $10M seemed less of a jump.
    - southbridge 10y ago
      Ya that's kind of what it seems like you did... throwing a big number out on purpose so that $9M jump would be "rational." The math in my head says you could weight figures on estimated acceptance probability. By throwing out a low probability figure first before a relatively higher probability acceptance figure - versus just presenting them with a reasonably high probability figure - give a better result. It is almost like expected value.
kabbalf 10y ago
I bet the other people in that room feel equally proud of their great contributions to society. For the rest of us they are just bureaucrats producing thousands of pages of regulations dictating how we should live. And we pay their salary.
skookumchuck 10y ago
This is a good article about the costly unintended consequences of well-meaning regulations. The author seems to think, however, that this can be resolved by hiring more educated economists, but I seriously doubt it.
- willbw 10y ago
  My takeaway from the article is that the author completely missed the point, which is that centralised bureaucracy and decision making can be very harmful. Why are we reliant on an economist to pick up on this irrigation issue? You at least need people from industry to be consulted before regulations like this. Lucky that this particular person noticed the problem, but there probably shouldn't be a lawyer, a scientist and an economist making centralised farming regulations.
  - skookumchuck 10y ago
    The central problem with regulators is you need people who know what they're regulating, meaning industry insiders. But then you have conflicts of interest. Centralized economic planning never works well, anyway, regardless of how many trained economists are at the helm.
    - maxxxxx 10y ago
      There is centralized economic planning in the area of patents, copyright, theft and many other things. Is that also burdensome regulation?
      - skookumchuck 10y ago
        Do you think the patent and copyright system is well run? As for theft, that is the justice system, and is not economic management.
  - hwillis 10y ago
    >Why are we reliant on an economist to pick up on this irrigation issue? You at least need people from industry to be consulted before regulations like this. It's naive to think that effective, efficient regulation can happen without consulting the people actually affected. It's also naive to think those people should be the ones making regulations. Even beyond the inherent problem with industries regulating themselves, they are just not capable of doing so in many cases, especially farming. What does a farmer know about public health, or water-borne pathogens, or heavy metals? Farmers know what makes plants grow or not. They don't know how those plants affect the people that eat them. Plus, says who that irrigating with drinkable water is even a bad idea? It's the most accessible standard. Drinking water is everywhere. It's literally the most unscientific reasoning possible that manure is dirty, therefor water can be dirty too. Self righteous, pretentious stories like this are everywhere, where the clever, down to earth common guy stumps all the big brains. The fact is that the people who study the effects of an industry are in a far better position to assess regulation. Yes- a producer will be able to say that a regulation may be burdensome. They will definitely not be the best person to know if it's warranted or not.
hive_mind 10y ago
This guy seems obsessed with "impact". People such as this usually embellish what impact they have.
- ____a 10y ago
  If he is embellishing, he is certainly doing it in an understated way by saying he's impacted/saved fewer than 1,000 lives.

133 points by apsec112 10y ago

This sort of occasional oversized impact is not limited to economics. Take bsdiff for example: I wrote it because I was a poor university student and wanted to make sure usage of FreeBSD Update didn't push me beyond my free bandwidth tier; making updates faster wasn't really a priority (the speedup from downloading binaries vs. recompiling dwarfed everything else) and I wasn't at all sure if anyone else would want to use bsdiff. It turns out that bsdiff has now saved thousands of lifetimes of people waiting for software updates to download. Even a small impact becomes huge if you scale it up to billions of users.

tomrod 10y ago
That is so cool! Thanks for bsdiff.

rtfs 10y ago

good post. add some stories about dealing with lobbyists as an economist, and the post will be even more interesting.

AllegedWisdom 10y ago
In most agencies, economists almost never interact with lobbyists. The lobbyists always aim at senior management, and almost all lobbying takes the form of 'We care about X and we want you to validate that by signalling that you also care about X' or 'We are presenting a credible threat to sue you if you do Y'. This is useful political and tactical information for management, but it does not affect the economic numbers at all. In theory a lobbyist could present useful information about a hard-to-research topic that informs our analysis, but I've never seen that happen.

caseysoftware 10y ago

It's worth remembering the opposite of his example of "C" (the economist who pushed back against the water standards).. The faceless bureaucrats in these positions have the ability to destroy livelihood, whole towns, and even industries with the stroke of a pen. And they suffer zero consequences as a result.

pjc50 10y ago
The stakes are rather high on both sides of this. The same chemist was responsible for both leaded petrol and CFCs: https://en.wikipedia.org/wiki/Thomas_Midgley_Jr https://en.wikipedia.org/wiki/Thomas_Midgley_Jr. Safety regulations can wipe out businesses. Not having (or following!) regulations can wipe out lives on an enourmous scale: https://en.wikipedia.org/wiki/Bhopal_disaster https://en.wikipedia.org/wiki/Bhopal_disaster The point is not to say "regulation good" or "regulation bad", but that these decisions are important and should be taken seriously with submissions from those involved as well as experts. The process has to be sound, and we need to de-partisanise it where possible.
- cperciva 10y ago
  For all the environmental damage they caused, I'm not convinced that CFCs were a net negative. We have better alternatives now, but the refrigerants R12 replaced at the time were really really nasty; how many lives would you be willing to sacrifice to avoid damaging the ozone layer?
  - jopsen 10y ago
    The question is how many lives were lost due to a damaged ozone layer? (increased risks of skin cancer, etc). The point is that regulation is important. Whether you have good regulation, bad regulation or no regulation it has impact and the discussion is important.
    - cperciva 10y ago
      Right. My point is just that people tend to condemn CFCs based on their costs while completely ignoring the benefits they brought at the time.

scandox 10y ago

> the 'PhD Economist' credential is a signal that you might be the kind of person who can escape groupthink I am open to this concept but I don't think I'm being cynical when I say that most people would surely think the opposite when they hear the expression PhD Economist.

aaron695 10y ago
> I am open to this concept but I don't think I'm being cynical when I say that most people would surely think the opposite when they hear the expression PhD Economist. Classic groupthink :)
pjc50 10y ago
Don't worry, economics has multiple schools of groupthink.
- crdoconnor 10y ago
  Only one particular form of it is usually welcome at policymaking meetings though.
xapata 10y ago
> most people would surely think An example of groupthink? If you haven't studied economics in graduate school, you may not be aware that the field is very different than what is taught in traditional undergraduate economics classes. There are different branches, of course, but the field emphasizes modeling and acceptance of initially-unintuitive results based on careful analysis of system dynamics. Many people can think through the second-order effects (and beyond) of some policy change. Economists are just one group that has been trained to do so.
- gone35 10y ago
  An example of groupthink? Freshwater macro, for one.
  - 10y ago

southbridge 10y ago

Can someone go more into what is meant by framing and anchoring? Is this like 'sandbagging?' Does one fail on purpose to set a low standard so that they can have an easier time reaching a goal?

maaaats 10y ago
We did an experiment at work. Half the group was asked if they thought a person was above 165cm tall, which he was. The other group was asked if they thought the same person was below 190cm, which he also was. Then after, both groups were asked to guess his height. The second group guessed significantly higher than the first. Since both groups were told a number first, their response got anchored/biased towards that value.
cperciva 10y ago
If you present people with several options, they'll be biased towards selecting options in the middle of the range. This is particularly relevant to SaaS startups and pricing plans; but in the article the author was using it to steer the decision maker towards the option he had already determined to be optimal.
- southbridge 10y ago
  So it's like suggestion; the ability to make people believe?
- AllegedWisdom 10y ago
  The optimal cutoff would probably have been $20 million rather than the $10 million that was chosen, but that change would have been too much for a lot of people. If I had only presented options from $1M up to $20M, then the group probably would have chosen $5M no matter how much I argued for $20M. I had to put the $50M number in people's heads so $10M seemed less of a jump.
  - southbridge 10y ago
    Ya that's kind of what it seems like you did... throwing a big number out on purpose so that $9M jump would be "rational." The math in my head says you could weight figures on estimated acceptance probability. By throwing out a low probability figure first before a relatively higher probability acceptance figure - versus just presenting them with a reasonably high probability figure - give a better result. It is almost like expected value.

kabbalf 10y ago

I bet the other people in that room feel equally proud of their great contributions to society. For the rest of us they are just bureaucrats producing thousands of pages of regulations dictating how we should live. And we pay their salary.

skookumchuck 10y ago

This is a good article about the costly unintended consequences of well-meaning regulations. The author seems to think, however, that this can be resolved by hiring more educated economists, but I seriously doubt it.

willbw 10y ago
My takeaway from the article is that the author completely missed the point, which is that centralised bureaucracy and decision making can be very harmful. Why are we reliant on an economist to pick up on this irrigation issue? You at least need people from industry to be consulted before regulations like this. Lucky that this particular person noticed the problem, but there probably shouldn't be a lawyer, a scientist and an economist making centralised farming regulations.
- skookumchuck 10y ago
  The central problem with regulators is you need people who know what they're regulating, meaning industry insiders. But then you have conflicts of interest. Centralized economic planning never works well, anyway, regardless of how many trained economists are at the helm.
  - maxxxxx 10y ago
    There is centralized economic planning in the area of patents, copyright, theft and many other things. Is that also burdensome regulation?
    - skookumchuck 10y ago
      Do you think the patent and copyright system is well run? As for theft, that is the justice system, and is not economic management.
- hwillis 10y ago
  >Why are we reliant on an economist to pick up on this irrigation issue? You at least need people from industry to be consulted before regulations like this. It's naive to think that effective, efficient regulation can happen without consulting the people actually affected. It's also naive to think those people should be the ones making regulations. Even beyond the inherent problem with industries regulating themselves, they are just not capable of doing so in many cases, especially farming. What does a farmer know about public health, or water-borne pathogens, or heavy metals? Farmers know what makes plants grow or not. They don't know how those plants affect the people that eat them. Plus, says who that irrigating with drinkable water is even a bad idea? It's the most accessible standard. Drinking water is everywhere. It's literally the most unscientific reasoning possible that manure is dirty, therefor water can be dirty too. Self righteous, pretentious stories like this are everywhere, where the clever, down to earth common guy stumps all the big brains. The fact is that the people who study the effects of an industry are in a far better position to assess regulation. Yes- a producer will be able to say that a regulation may be burdensome. They will definitely not be the best person to know if it's warranted or not.

hive_mind 10y ago

This guy seems obsessed with "impact". People such as this usually embellish what impact they have.

____a 10y ago
If he is embellishing, he is certainly doing it in an understated way by saying he's impacted/saved fewer than 1,000 lives.