Motu research analysts on effective altruism, worm wars, what would happen if the EU let anyone in, Why Angus Deaton deserved the Nobel Prize in Economics & more

Motu research analysts on effective altruism, worm wars, what would happen if the EU let anyone in, Why Angus Deaton deserved the Nobel Prize in Economics & more

This week's guest Top 10 was compiled by Nathan Chappell, Judd Ormsby, Corey Allan and Eyal Apatov, research analysts at economic and public policy research institute Motu.

As always, we welcome your additions in the comment stream below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1) Don’t let the Nobel Prize fool you. Economics is not a science.

Since the Nobel Prize for Economics was given last week to Angus Deaton (more on him in number 2), many of the usual criticisms of economics have come up. A good suggestion is that the economics prize be extended to include all social sciences (economics is, after all, a social science). However, most of the critiques of economics are many of the same old ones that have been going around for years.

The author seems to focus his critiques on macroeconomics and finance, ignoring the advances in microeconomics that have been made over the last 20 or so years, thanks in part to fantastic new longitudinal datasets. He also ignores the methodological revolution in development economics with the use of randomised controlled trials (RCTs). Will economists in general be free from association with the GFC at some point? Noah Smith gives a fun response to some of the criticisms here.

2) Why Angus Deaton deserved the Nobel Prize in Economics.

Angus Deaton works on the economics of consumption, poverty and welfare. Development economist Chris Blattman gives a personal account of why Deaton’s prize is well deserved. See also Tyler Cowen and Justin Wolfers on Deaton. Interestingly, although Deaton is in many ways the father of empirical economics, he pushes back against the focus on randomised control trials in development today.

“Deaton helped bring about this data and measurement revolution in several ways. One was to help establish expenditures and consumption as the best of a bunch of bad measures of poverty. Annual income works fine in a country like the United States where most people earn a regular salary from one source, but it’s meaningless when a household has dozens of small activities, varying day to day, most of which produce things the family consumes themselves. The other contributions were to show just how much we could pull out of these simple data….” 

3) Worm wars explained.

A 2004 study found, among other things, that mass deworming (pills that kill worms living inside you) increased school attendance and health. The effects were found in students at treated schools, and some spilled over to untreated schools nearby. This paper was huge in development economics -- famous authors, a top journal, a small army of research assistants, loads of citations -- yet when a team of epidemiologists tried to replicate the paper, some… issues arose. This Vox article is a nice summary of the disagreements. To illustrate the size of the fallout the World Bank’s Anthology of the controversy has around 50 links on it. 

4) Science isn’t broken.

Given recent controversies in the scientific literature (e.g. the worm wars), it’s understandable if your confidence in science is a little shaken. This article discusses the problem of ‘p-hacking’, or publishing only significant results. There is a really cool infographic that illustrates what p-hacking is and interactively shows how decisions about what to include or exclude in your data can lead to vastly different conclusions. The main thrust of the article is that science isn’t broken, it’s just really, really hard to do. Scientists are people and, like all people, have biases and different ways of interpreting the same data.

They also have different ideas about what data it is reasonable to include or exclude from their analysis. The main takeaway is that science as a process is the best method we have for discovering the truth. However, scientific knowledge is not based on one study on a given topic, but a huge range of studies. If we want to know the answer to a question, we should look at the whole range of scientific literature on the topic, not just the first link that pops up in a Google search.

5) Discounting government projects.

Why does the New Zealand Treasury use an 8% discount rate? Miles Kimball came for a short stay at the Treasury earlier this year and was unhappy with the practice. His basic argument: an 8% real discount rate would only make sense if government earns an 8% real return on its savings. Which it does not.

“The underlying logic of the 8% per year real discount has to be that the opportunity cost of a project is that the money could be put into the stock market … if it weren’t used for the project. This logic requires (a) that if funds weren’t used for the project that it is in fact realistic the funds would be added to the Superfund and (b) that the extra funds in the superfund would be earning an 8% per year real return.”

Also see philosopher Derek Parfit arguing for a 0% discount rate (after considering opportunity costs) in his tome ‘Reasons and Persons’. Or read him teaming up with economist Tyler Cowen against discount rates. 

6) Effective altruism.

Philosopher Peter Singer argues in favour of effective altruism, the movement stating that we should do the most good we can. This involves not only donating, but donating wisely to causes that are backed with evidence. Also read the reply from last week’s Nobel Prize winner Angus Deaton, who criticises the movement for being too narrow and not considering the broader changes needed to lift the poor out of poverty. Peter Singer counter-replies: this is just an empirical question. If pushing for systemic change is the way to do the most good, then effective altruists should work towards that. 

Relatedly: Engels was the father of effective altruism. A warning to those arguing that effective altruists should push for systemic change.

“Effective altruism is based on a very simple idea: we should do the most good we can. Obeying the usual rules about not stealing, cheating, hurting, and killing is not enough…. Living a minimally acceptable ethical life involves using a substantial part of our spare resources to make the world a better place. Living a fully ethical life involves doing the most good we can.”

7) Video of Jeffrey Sachs interview with Tyler Cowen.

Long! But brilliant. A fascinating interview with a famous economist. The talk is largely about understanding growth, in particular for developing countries. And Sachs is direct: on Acemoglu and Robinson’s book Why Nations Fail:

“One of my least favorite books. I think it is just a bad book, because it takes one thought and tries to drive it as the only explanation of history. That’s not a good approach in my view to history, which is a very interesting, complex tableau.”

On corruption’s influence on economic growth:

“It depends. Some places are so corrupt you first wouldn’t want to step foot in them and I’ve had the experience repeatedly when I’m talking to a head of state or a finance minister and I watch their eyes glaze over and realize they’re not interested in what you’re talking about. Those places can be driven absolutely into the ground by corruption.

Other places have been corrupt for a long time – I’m thinking of New York, Washington, Lagos, Beijing, and other places – and you get a lot of economic progress. In that sense, there is no purity in the world. I’m not a fan of corruption for a lot of reasons that have started with ethics.”

It’s interesting that Sachs emphasizes throughout the importance of context and different prescriptions for different countries. Duflo and Banerjee attack Sachs for being overly simplistic in the first chapter of their book Poor Economics. Maybe this is some development craze where everyone likes to say everyone else is too simple. Tyler Cowen is doing a whole series of interviews with famous economists, which you can check out here.

8) What would happen if the European Union simply let in anyone who wanted to enter?

Could the European welfare states collapse following a sudden large-scale migration influx? Michael Clemens from the Centre for Global Development discusses these, and other migration related issues. 

9) Berk Ozler (of the World Bank, and previously briefly at the University of Otago) on Cash Transfers. This is an hour long video that gives an excellent summary of one of the hottest topics in both development economics and effective altruism: cash transfers. All the evidence discussed comes from one of the hottest methodologies in economics, RCTs. 

10) For a final light-hearted link, David Mitchell shares his thoughts regarding the recent economic downturns, which makes as much sense as most other business-cycle theories.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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I am cynic, #6 is the same as all the other bleeding heart notions of altruism that assumes all who cry out are in dire need and must be accommodated. I stand willing to offer assistance to those tragically affected who are working to improve their lot as best they can but are short of the resources they require. I will happily walk past a panhandler or, re #8, deny entry to those who are the privileged, entitled rats opportunistically abandoning their homeland. They leave the truly displaced languishing in the camps, they jump the queue to safe havens and they fail in their responsibility to effect change for good where they come from. Many countries have suffered strife and the misery which comes with it over human history, it was never solved by running away.

So you suggest those caught been Russian bombing campaigns, regime barrel bombs, and Isis beheadings stay put to 'effect good where they come from'? How would you go about that? How would it solve the problem? I'd run away for sure. Hell, New Zealanders have only just stopped running away to Australia for the prospect of a better job.

I am also not surprised there are those shreikers unable to think this through without injecting sensationalizing trash such as this. Move out of harms way by all means, but the way to do that is not exclusively to emigrate to Germany. For many, the insistence that they can only go to 1 specific place belies the true intent. The shoving hordes at the borders in Europe, quickly angered when asked their intentions or impeded by due process are not the ones in the most need of assistance. They are the ones with the means to run, the means to return and rebuild. My attention is first drawn to orphans and widowed women with children from poorer parts who are truly displaced by the destruction and most likely unable to return as all they had is now gone. like the scene of an accident, those making noise are alive, first priority is to check on those without a voice.

how does one 'move out of harms way' without 'opportunistically abandoning their homeland.'?

Don't forget that Merkel has invited the migrants to Germany, you can hardly blame those with means for taking up the invitation and leaving the refugee camps of Turkey behind.

Personally i think it was crazy offer by the Germans. If they want to help in this way they should be taking in migrants from the front-line camps in an organised orderly manner rather than offer to take in those who make it to their borders.

I'm sure your ancestors wouldn't appreciate your characterization of them as rats Spinanch. I'm sure your it wouldn't have been that far back that they arrived here either. Moreso they weren't brought here by conflict and war unlike the people from Syria, Libya, and Afghanistan.

I have no issue with the movement of humans around the planet as such. It is necessary as populations cannot be supported by the local environment that they be dispersed. My point is that while some, but not all, areas within a country will be badly affected, there are those who are choosing to abscond rather than being ready to be part of the fix. Also that some with means are hammering on the doors of countries of their choice demanding to be first in line and I don't believe they should be considered ahead of those who were unable to make the journey. Despite the hand wringing and tears many are just economic migrants, who are avoiding the fighting for sure, but were not and will not be persecuted on return.

Easy for you to judge when you're safe behind your laptop screen and not having to dodge an errant bomb, not constantly threatened by drone strikes, forcibly recruited by nutcase militias, or ruled by insane pre-medieval religious fanatics.

NATO countries due to their shared culpability for this present crisis are duty bound to provide shelter to those displaced by the violence precipitated by their insane foreign policy interventions.

Yes, very easy for me and I recognize my privilege. But it does not make it wrong to say that the loudest and richest don't automatically deserve to be first inline for respite offered by others. Syria is part of the cradle of human civilization and has had some long time for locals to put in place a system of government which allow all its people to continue to live in safety. Yet to date they have not for many and varied reasons. The spillover and fallout from their ridiculous and self serving regime is being foisted on the rest of the world. If it were my country I would want to act to resolve it rather than run away crying, but that is just me.

May I just say simply the problems should have been fixed at the source,not exported, but the vested interests support the nefarious and various with a warm supply of weapons and support.

And that does include our Western Allies and the Eastern Bloc and others who will remain nameless megalomaniacs (we do not want to be declared Xenophobic, do we)...who delight in pushing the Boundaries at the demise of others.

I will State and State again, it is a war of attrition and high finance, unfortunately it is the poor, weak and mainly the minorities who suffer, totally unsupported by the so called United Nations and the likes of Putin and other factions United in opposing them.

Now the muscle man Putin is showing his manly war chest, hoping to get the Middle Eastern and his own neck out of the mainly Monetary noose, imposed by the Oilygarky of the West.

The poor sods in the Middle do not count, except when it suits, the suits.

A lot of talk, a lot of posturing and puffing up the war chests and then millions will be displaced.....and maybe more trillions made.

#1 the problem with sciences like Economics is that they are based on theory, and much of the economics practised today is based on a theory that had many components based on idealism or narrow criteria that are not reflected in the real world. Thus people become subject to experiments based on a theory that cannot or will not be adjusted to ensure that opportunity is available for all. Hence we have a world where 99% of the wealth is controlled by 1% of the population, and Governments not willing to change economic practice because the hands that feed them (as opposed to the ones that vote for them) dictate the end result. Thus the manifestation of economics of greed as individuals are able to manipulate real systems due to flawed theoretical systems, to satiate their own greed and lust for power.

Interesting trend in the slaughter steer market... "This afternoon's history-making flight also delivers a fresh definition of flying cattle-class from Australia to China on a 747 jumbo jet, he said.

“The way prices are going at the moment, the cattle will be travelling above deck at the pointy end of the plane in first class and the passengers will be in the cargo section below,” the Federal Agriculture and Water Resources Minister told Fairfax Media.

Mr Joyce’s witticism helped launch the first shipment of live slaughter-cattle bound for Chongqing in Southwest China which departed Melbourne’s Tullamarine airport this afternoon."

http://www.theland.com.au/news/agriculture/cattle/beef/jet-set-cattle-fl...

First Thomas Piketty , now Angus Deaton, banging on about poverty , equality and taxing the "rich"

Are these are the new Marx and Engels " LITE "

#1 "For 19 of the past 20 centuries China was the largest single component of the global economy. But we all traded with it very little and so it was of no great moment to us. But now it’s well on the way back to being the largest single economic entity globally and we all trade the heck with it. It’s thus a hugely important influence on how the rest of us decide our own public policy. For example, whether or not American interest rates should rise. The Federal Reserve is really keeping an eye on two things to decide that: the American unemployment rate and the Chinese growth rate.

And sadly, that second number, we really just don’t know. And more worryingly we’re not sure if the Chinese government does either."

http://www.forbes.com/sites/timworstall/2015/10/19/china-reports-gdp-up-...