Demystifying Sociology

Economics can be baffling, especially to students who learn it in only the theoretical sense. If, for example, your worldview is formed by going through micro/macro classes alone, reality can often be confusing.

Does identity—one’s concept of self—influence economic behavior in the labor market? I investigate this question in rural India, focusing on the effect of caste identity on labor supply. In a field experiment, casual laborers belonging to different castes choose whether to take up various real job offers. All offers involve working on a default manufacturing task and an additional task. The additional task changes across offers, is performed in private, and differs in its association with specific castes. Workers’ average take-up rate of offers is 23 percentage points lower if offers involve working on tasks that are associated with castes that rank higher than their own. This gap increases to 47 pp if the castes associated with the relevant offers rank lower than workers’ own in the caste hierarchy. Responses to job offers are invariant to whether or not workers’ choices are publicized, suggesting that the role of identity itself—rather than social image—is paramount. Using a supplementary experiment, I show that 43% of workers refuse to spend ten minutes working on tasks associated with other castes, even when offered ten times their daily wage. This paper’s findings indicate that identity may be an important constraint on labor supply, contributing to misallocation of talent in the economy.

Oh, S. (2019). Does Identity Affect Labor Supply?. Job Marker Paper, Columbia University.

To make the point clearer: microeconomics teaches you that if you are offered ten times your daily wage to do a task for ten minutes, well, duh, you should take it. Reality (well, ok, this paper) teaches you you’d be wrong 43% of the time. At which point, you should begin to ask why.

Sociology gets a bad rap for being an ultra boring field, and there is, one has to admit, some truth to the charge. There are many Dave Barry columns that deserve multiple readings, but this particular one is particularly funny (and relevant):

For sheer lack of intelligibility, sociology is far and away the number one subject. I sat through hundreds of hours of sociology courses, and read gobs of sociology writing, and I never once heard or read a coherent statement. This is because sociologists want to be considered scientists, so they spend most of their time translating simple, obvious observations into scientific-sounding code. If you plan to major in sociology, you’ll have to learn to do the same thing. For example, suppose you have observed that children cry when they fall down. You should write: “Methodological observation of the sociometrical behavior tendencies of prematurated isolates indicates that a casual relationship exists between groundward tropism and lachrimatory, or ‘crying,’ behavior forms.” If you can keep this up for fifty or sixty pages, you will get a large government grant.

http://www.xent.com/FoRK-archive/summer96/0342.html

The column is particularly funny because it is particularly true – not just about sociology, but about college in general. Please read the whole thing.

Anyways, back to sociology: yes, boring af, but also helps us economists get a better grip on reality, by pointing out that the world often doesn’t work the way our models would like it to. Thaler* puts this maddening behavior on part of the world down to what he calls Supposedly Irrelevant Factors (SIF’s) (slide 6, if you can’t be bothered to go through the whole thing, although you really should.)

So what is sociology? Here’s the English definition:

Sociology is the study of human behavior. Sociology refers to social behavior, society, patterns of social relationships, social interaction, and culture that surrounds everyday life.

https://en.wikipedia.org/wiki/Sociology

… and click here if you want the definition of sociology by a sociologist (consider yourself warned). It is, in essence, a field of enquiry that asks what explains the behavior of people in a society, and also if living in society itself influences how people will behave.

Economic sociology, a subset of sociology, is “the sociological perspective applied to economic phenomena”**. And the reason it is a field of study worth exploring in its own right is because it helps us make sense of potentially baffling results such as the one Suanna Oh came up with.

Read the paper, please (section 6.3 for those of you who are curious about whether the author has really thought things through) – and while you’re at it, learn more about economic sociology. I’m trying to learn more myself, and will keep you guys updated as we go along.

*Yes, that’s from behavioral economics, but the point holds over here too, and is more than mildly relted.

** Smelser, N. J., & Swedberg, R. (Eds.). (2010). The handbook of economic sociology. Princeton university press.

A Well Played Century

Congratulations to Pranay Kotasthane and RSJ on a well deserved century over at Anticipating the Unanticipated. It is one of the best newsletters out there on matters related to public policy, and I would strongly encourage you to subscribe, in case you haven’t already.

And to borrow a metaphor from cricket commentary, they brought up their century in style, with a fascinating piece about the Bombay Prohibition Act of 1949:

The notorious Bombay Prohibition Act of 1949 was passed when Desai was the state’s Home Minister. To enforce the ban, the government created elaborate compliance machinery, misdirecting the limited policing capacity towards apprehending tipplers instead of protecting victims of other crimes. By the time this act was watered down in 1964, more than four lakh people had been convicted under Prohibition!

https://publicpolicy.substack.com/p/100-intoxicating-eardrops-

The paragraph I excerpted this from begins by saying that the BPA is rather well known, but I must have missed the memo. 4 lakh people – convicted for alcohol consumption. Because, of course, that was the most pressing issue facing a newly independent India: alcohol consumption. Pah.

Please, I implore you, read the entire post to understand how markets work when faced with arbitrary supply constraints in the face of palpable demand. (And a note to Pranay and RSJ: I’m dying a little, because for me, the perfect title for the post would have been Sharaabi Aankhein Gulaabi Chehra)

The post goes on to speak about another piece of genius policy regarding the “sale and holding” of gold, and the impact it had on status within Indian society. I often joke in classes on introductory economics about how Bollywood filmmakers needed unemployment benefits because “ismugglers” as a tribe began to dwindle post liberalization.

Or put another way, there’s a reason the title had to be “Once Upon A Time in Mumbai“.

The post also refers to another excellent blog worth following, written by Nitin Pai, and shows this graphic:

Source: http://acorn.nationalinterest.in/2014/01/29/what-causes-corruption-and-erosion-of-moral-values/

I’d only add one thing here – the second last level (“Unscrupulous and corrupt people become role models because they are successful”) is actually an even bigger problem, because interventions such as bans (and others, to boot: read the whole post) also stop honest people from being successful.

Put another way, Deewar is a great movie, but also a problematic one, because the audience’s Walter Mitty moments were related to Vijay, not Ravi.

There is much more in the 100th post, including a rant on education which I wholeheartedly agree with, but we’ll leave that for another day. Once again, congratulations to Pranay and RSJ, and here’s to the double century: cheers!

Signal: Pricing and Privacy

This will not inspire confidence, but still: I am one of those idiots who actually paid Whatsapp money before it got taken over by Facebook.

Back in the day, before Facebook had completed its takeover of Whatsapp, the service used to charge a nominal fee for its users. Actually, even that fee was a farce, because after the first year (which was always free), you could in effect simply continue to use Whatsapp without paying a dime.

But so impressed was I with the app, and so much of a believer in paying for what I really liked, that I went ahead and actually paid up.

Doesn’t much inspire confidence in my ability to understand economics, let alone teach it, but there you go.

We all know what happened next of course, including Facebook swallowing up Whatsapp, and then the change in the terms and conditions of 2016 – and now of course, the latest proposed change. Which, if you’ve been keeping track, has itself been pushed out to a later date.

Never a dull moment, as they say.

And the whole brouhaha has resulted in Signal and Telegram seeing record sign-ups. A couple of Whatsapp groups that I am a part of have also migrated over to Signal, because of Whatsapp’s (Facebook’s, really) privacy issues, and because I am a sucker for trying new things, I have installed the app and the desptop version.

Which so far isn’t actually going all that well, because all that has happened is I now have two messaging apps and two desktop apps, but let’s see how it goes. Signal, of course, is much more about privacy than Whatsapp:

…our engineers spend all their time fixing bugs, adding new features and ironing out all the little intricacies in our task of bringing rich, affordable, reliable messaging to every phone in the world. That’s our product and that’s our passion. Your data isn’t even in the picture. We are simply not interested in any of it.

Now, I usually provide a link to the place I take the excerpt from, as indeed I should. In this case, I didn’t because I wanted to spend some time speaking about where I was a little sneakt. I took it from not the Signal website, but the Whatsapp blog. This particular post was from 2012, and it actually begins with a quote from Fight Club. Yes, seriously.

So, as I was saying, I’ll give Signal a shot, but I’m not holding my breath this time around. Without some way to get people to pay for what they use, things are not likely to work out, and that’s just the way it is. You pay with your money, or you pay with your information – unless you’re Wikipedia, and even they need the occasional helping hand.

That Whatsapp blogpost ends with this line:

When people ask us why we charge for WhatsApp, we say “Have you considered the alternative?”

https://blog.whatsapp.com/why-we-don-t-sell-ads

… and my current view is, there isn’t one. You can pay with your information, or you can pay with your money, but as I said in a Principles of Econ course I taught last semester, you gotta pay one way or the other.

But it’s the other way that I wanted to speak about today, by citing an idea that more people should be thinking about: dominant assurance contracts. Lengthy excerpt follows:

The dominant assurance contract adds a simple twist to the crowdfunding contract. An entrepreneur commits to produce a valuable public good if and only if enough people donate, but if not enough donate, the entrepreneur commits not just to return the donor’s funds but to give each donor a refund bonus. To see how this solves the public good problem consider the simplest case. Suppose that there is a public good worth $100 to each of 10 people. The cost of the public good is $800. If each person paid $80, they all would be better off. Each person, however, may choose not to donate, perhaps because they think others will not donate, or perhaps because they think that they can free ride.

Now consider a dominant assurance contract. An entrepreneur agrees to produce the public good if and only if each of 10 people pay $80. If fewer than 10 people donate, the contract is said to fail and the entrepreneur agrees to give a refund bonus of $5 to each of the donors. Now imagine that potential donor A thinks that potential donor B will not donate. In that case, it makes sense for A to donate, because by doing so he will earn $5 at no cost. Thus any donor who thinks that the contract will fail has an incentive to donate. Doing so earns free money. As a result, it cannot be an equilibrium for more than one person to fail to donate. We have only one more point to consider. What if donor A thinks that every other donor will donate? In this case, A knows that if he donates he won’t get the refund bonus, since the contract will succeed. But he also knows that if he doesn’t donate he won’t get anything, but if does donate he will pay $80 and get a public good which is worth $100 to him, for a net gain of $20. Thus, A always has an incentive to donate. If others do not donate, he earns free money. If others do donate, he gets the value of the public good. Thus donating is a win-win, and the public good problem is solved.

https://www.cato-unbound.org/2017/06/07/alex-tabarrok/making-markets-work-better-dominant-assurance-contracts-some-other-helpful

Will this work for Signal? Can those of us who believe in paying an amount (how much is a function of which country, how generous you are feeling, how much you use the app, how much revenue you stand to earn by using the app etc, etc) be coordinated by a rather visible hand?

I don’t know the answer, but if any budding microeconomist out there is looking for a cool problem to play around with, I have a free blogpost to sell to you.

(For the budding microeconomist, further reading: Vitalik Buterin not getting what’s so cool about dominant assurance contracts, and an MR post about the issue. Further further reading: be sure to take a look at Rahul’s comment in the MR post.)

On T20 and Reading

I was completely, gloriously wrong about the IPL, and about T20 in general.

Test cricket is where it’s at was (and remains) my stance, and that led me to disparage everything about that version of cricket. But the impact that T20 has had on the sport is undeniable – the quality of fielding, the level of fitness being just two examples.

But Aakash Chopra, in a recent column over on ESPNCricinfo, wonders if the pendulum has swung too far over to the other side.

Changes reflect the times, and that’s the case with batting techniques too. Anyone brought up on a steady diet of white-ball cricket will invariably develop their game to suit its demands. The shorter formats are played on identical (read flat) surfaces across the world and no longer require different skill sets to succeed in all conditions. One size does fit all now.

https://www.espncricinfo.com/story/aakash-chopra-modern-batsmen-do-not-focus-on-their-feet-and-that-is-mostly-okay-1246221

Now, before you think that I am using this quote as a way to show how I was right all along, that is not the point I am making. As Aakash Chopra goes on to say, batsmen are behaving perfectly rationally.

Across the three formats, Test cricket is played the least, and even in the few Tests played, you come across challenging conditions only on occasion. The returns on the time invested to develop different skill sets don’t justify the effort.

The parallel I wish to draw is between the sport of cricket and reading habits. The emergence of shorter reading formats: tweets, book summaries, blogposts (ahem) are easier to read, quicker to digest and most importantly for the era we live in, save us a lot of time.

And that, unfortunately, means that most readers today (myself included) are akin to T20 batsmen. It turns out that we are very, very good at consuming very large amounts of snippets of information – in fact, we positively excel at it.

But the opportunity cost (and it is always there, isn’t it?) is that we struggle to sit and consume a full length book. I can’t remember the last time I sat down and read a classic, for example, and struggle to read in one sitting an entire book. We’re today a generation of T20 readers, as it were. To borrow from another Aakash Chopra column from way back in the day, we’re all Murali Vijay now.

There’s useful advice in that column for readers today:

We need to realise that openers and spinners need to radically change their techniques to suit the demands of the various formats of the game. While the more experienced players know how to make that switch, the younger lot aren’t equipped to strike that balance. Which is why there aren’t enough openers and spinners on the domestic circuit who can make it to Test level.

https://www.espncricinfo.com/story/aakash-chopra-where-are-india-s-next-test-openers-598370

Training ourselves to add in the odd difficult, lengthy, thought-provoking book to our diet, in other words, may not be the worst idea ever.

If you’re curious, by the way, this post is 500 words.

Mancur Olson in Afghanistan (And Thakur in Sholay!)

Who is (was) Mancur Olson?

An American economist of some note, who is perhaps not as widely known as he should be. Let me be honest upfront and say that I have never read a single book of his cover to cover, in spite of repeated attempts – they are really hard going, at least for me. But even dipping into them every now and then, based on snippets I pick up here and there is by fun, and rewarding. (One such snippet was provided by The Economist recently, about which more in a second.)

Olson is perhaps most well known for his theory of the “roving” and “stationary” bandit. Here’s Wikipedia:

In his final book, Power and Prosperity (2000), Olson distinguished between the economic effects of different types of government, in particular, tyranny, anarchy, and democracy. Olson argued that under anarchy, a “roving bandit” only has the incentive to steal and destroy, whilst a “stationary bandit”—a tyrant—has an incentive to encourage some degree of economic success as he expects to remain in power long enough to benefit from that success. A stationary bandit thereby begins to take on the governmental function of protecting citizens and their property against roving bandits. In the move from roving to stationary bandits, Olson sees the seeds of civilization, paving the way, eventually for democracy, which by giving power to those who align with the wishes of the population, improves incentives for good government. Olson’s work on the roving vs. stationary bandits is influential in analysis of the political and economic order structured in warlord states and societies.

https://en.wikipedia.org/wiki/Mancur_Olson

And here’s the Economist, writing about the current state of Afghanistan:

At the edge of Kabul, the boss of a company which imports cooking gas says the security of his tankers has actually improved over the past year, because the Taliban control more roads. They charge 35,000 afghanis ($455) for every lorry travelling from Herat, on the Iranian border, to Kabul. “In the past there were no Taliban taxes,” he says. “But they used to shoot us with RPGs [rocket-propelled grenades]. So we are happy with the taxes.”

https://www.economist.com/asia/2020/11/18/as-america-pulls-out-of-afghanistan-the-taliban-fight-on

The trick (for the bandit) lies in getting the quantum of taxation just right, of course…

Cowen and Tabarrok Talk Coivd-19

That’s all you need to say, no?

Tweets for 7th November, 2020

Nobody. Nobody does puns better. Yes, life goals.

Internet Explorer jokes are something else:

Very, very late to this, but FWIW:

Whatay reading list!

This deserves a blog post of it’s own – next week, hopefully!

End of the week reading list: 6th Nov, 2020

The NYT comes up with a lovely selection of Agatha Cristhie novels. Light Diwali vacation reading if you are new to her works, perhaps?
(Also, every time I am reminded of this book below, I feel this urge to apologize to that one friend I inadvertently revealed the ending to – so once again, I’m really sorry!)

That would be “The Murder of Roger Ackroyd,” the story of a wealthy man slain in his study less than a day after the woman he hoped to marry commits suicide. Although — as Hercule Poirot discovers — the dead man’s assorted friends, relatives and servants have reasons to wish him ill, “The Murder of Roger Ackroyd” will still leave you reeling. When you find out who the murderer is and begin leafing through the pages, looking for missed clues, you’ll realize just how completely Christie snookered you.

https://www.nytimes.com/2020/10/25/books/best-agatha-christie-books-murder-mystery.html

On the race to redesign sugar:

As public opinion turns against sugar, food companies have outdone one another in pledges to cut the quantities of it that appear in their products. Pepsi has promised that by 2025 at least two-thirds of its drinks will contain a hundred calories or fewer from added sweeteners. A consortium of candy companies, including Mars Wrigley, Ferrero, and Russell Stover, recently declared that by 2022 half of their single-serving products will contain at most two hundred calories per pack. Nestlé has resolved to use five per cent less added sugar by the end of this year—though, as of January, it still had more than twenty thousand tons of the stuff left to eliminate.

https://www.newyorker.com/magazine/2020/09/28/the-race-to-redesign-sugar

A short (and delightful) history of mashed potatoes:

During the Seven Years War of the mid-1700s, a French army pharmacist named Antoine-Augustin Parmentier was captured by Prussian soldiers. As a prisoner of war, he was forced to live on rations of potatoes. In mid-18th century France, this would practically qualify as cruel and unusual punishment: potatoes were thought of as feed for livestock, and they were believed to cause leprosy in humans. The fear was so widespread that the French passed a law against them in 1748.

https://www.mentalfloss.com/article/627023/mashed-potatoes-history

The excerpt below was an excerpt in the post I am linking to (if you see what I mean), but well worth your time, the entire blog post:

70% of us think that the average household income of the top 1% is more than ₹2.5L. In fact, a majority of us guess it is more than ₹5L. Similarly, a majority of the respondents assume that the average income of the top 10% of households is more than a ₹1L… We think of the top 1% as super-rich people. A majority of the respondents estimate that all of the top 1% have 4-wheelers. And 70+% feel that at least 90% of the top 1%-ers have 4-wheelers.

http://gulzar05.blogspot.com/2020/09/more-india-middle-class-facts.html

Robin Hanson wonders about taking rest:

While we seem to “need” breaks from work, many of our break activities often look a lot like “work”, in being productive and taking energy, concentration, and self-control. So what exactly is “restful” about such “rest”?

https://www.overcomingbias.com/2020/11/why-do-we-rest.html

Calling Bullshit: An Appreciation

This past Tuesday, I went on a long rant about exams in general, and exams especially in the year 2020. That rant was inspired by a Twitter thread put out by Prof. Carl Bergstrom.

Now, if you happen to share my views on examinations, I’m guessing you were already likely to be a fan of Prof. Bergstrom. Today, your fandom might just go up a couple of notches. Check out the first paragraph on my favorite discovery of 2020 so far – Calling Bullshit:

The world is awash in bullshit. Politicians are unconstrained by facts. Science is conducted by press release. Higher education rewards bullshit over analytic thought. Startup culture elevates bullshit to high art. Advertisers wink conspiratorially and invite us to join them in seeing through all the bullshit — and take advantage of our lowered guard to bombard us with bullshit of the second order. The majority of administrative activity, whether in private business or the public sphere, seems to be little more than a sophisticated exercise in the combinatorial reassembly of bullshit.

https://www.callingbullshit.org/

He and his collaborator on the project, Prof. Jevin West, are nothing if not thorough:

What do we mean, exactly, by bullshit and calling bullshit? As a first approximation:

Bullshit involves language, statistical figures, data graphics, and other forms of presentation intended to persuade by impressing and overwhelming a reader or listener, with a blatant disregard for truth and logical coherence.

Calling bullshit is a performative utterance, a speech act in which one publicly repudiates something objectionable. The scope of targets is broader than bullshit alone. You can call bullshit on bullshit, but you can also call bullshit on lies, treachery, trickery, or injustice.

In this course we will teach you how to spot the former and effectively perform the latter.

https://www.callingbullshit.org/

There’s a book, there’s videos of the course lectures (yes, you can earn credits for learning about bullshit), there’s a list of heuristics about detecting bullshit when it comes to interpreting visualizations, reading academic papers, and facial detection algorithms. There are case studies too!

And hey, if you insist on being politically correct (there’s merit in the argument that you shouldn’t, but hey, entirely your call) – well, they got you covered:

If you feel that the term bullsh!t is an impediment to your use of the website, we have developed a “sanitized” version of the site at callingbull.org. There we use the term “bull” instead of “bullsh!t” and avoid other profanity. Be aware, however, that some of the links go to papers that use the word bullsh*t or worse.

https://www.callingbullshit.org/FAQ.html

Some weeks ago, I promised somebody that I would come up with a lecture on demystifying statistics – and set myself the challenge of trying to come up with lecture notes without using a single equation.

As is the case with 95% of the things I really want to do, I promptly forgot all about it.

I haven’t seen all the videos yet on Calling Bullshit, but it does seem as if outsourcing this exercise – at least in part – to this fantastic website would be a really good idea.

Check out the syllabus here. A part of me is tempted to say that I would like to run this module as a summer school at GIPE, but you will remember what I said about things I really want to do.

But hey, there’s always hope, right?

Or should I be calling bullshit on myself?

Five Links About – Well, What Else?

It doesn’t matter whether you support Trump, Biden – or even Kanye. It doesn’t matter whether you read this at 10 in the morning on the 4th of November 2020, which is when I’ll be scheduling this post, or much later (and that could be hours, days, weeks or months later). I’ve tried to collate five sources that will give you the long view of whatever might happen on this day. With that in mind, here we go:

Ezra Klein speaks about the American divide, and posits that it isn’t about Republicans v Democrats (and read the whole excerpt, and then the whole book!):

Over the past decade, the dreams of democratic theorists everywhere actually came true. The internet made information abundant. The rise of online news gave Americans access to more information — vastly more information, orders of magnitude more information — than they had ever had before. And yet surveys showed we weren’t, on average, any more politically informed. Nor were we any more involved: Voter participation didn’t show a boost from the democratization of political information. Why?



But among those with cable and internet access, the difference in political knowledge between those with the highest and lowest interest in cable news was 27 percent. That dwarfed the difference in political knowledge between people with the highest and lowest levels of schooling. “In a high-choice environment, people’s content preferences become better predictors of political learning than even their level of education,” Prior wrote.



Misperceptions were particularly high when people were asked to describe the other party. Democrats believed 44 percent of Republicans earned more than $250,000 a year; it’s actually 2 percent. Republicans believed that 38 percent of Democrats were gay, lesbian, or bisexual; the correct answer is about 6 percent. Democrats believed that more than four in 10 Republicans are seniors; in truth, seniors make up about 20 percent of the GOP. Republicans believed that 46 percent of Democrats are black and 44 percent belong to a union; in reality, about 24 percent of Democrats are black and less than 11 percent belong to a union.



Here’s the kicker: As the charts below show, the more political media people consumed, the more mistaken they were, in general, about the other party. This is a damning result: The more political media you absorb, the more warped your perspective of the other side becomes.

https://www.vox.com/2020/1/28/21077888/why-were-polarized-media-book-ezra-news

… while Bruno Macaes hypothesizes that the split is between fiction and reality (and interpret that any way you will)

The main binary in American politics is not between left and right, but between fiction and reality. One experiences particular fictions, but at some point they must be revealed as no more than fictions. They must be switched off, in anticipation of new stories.

https://brunomacaes.substack.com/p/biden-the-kill-switch

This article is impossible to excerpt from, but deserves to be read in full, multiple times. Ross Douthat on what the right, the centre and the left learned from four years of Trump.

A worthwhile read on – no matter the outcome, whenever you read this – the Nate Silver/Taleb debate:

Because FiveThirtyEight only predicts probabilities, they do not ever take an absolute stand on an outcome: No ‘skin in the game’ as Taleb would say. This is not, however, something their readers follow suit on. In the public eye, they (FiveThirtyEight) are judged on how many events with forecasted probabilities above and below 50% happened or didn’t respectively (in a binary setting). Or, they (the readers) just pick the highest reported probability as the intended forecast. For example, they were showered with accolades when after, ‘calling 49 of 50 states in the 2008 presidential race correctly’ Nate Silver was placed on Times 100 most influential people list. He should not have accepted the honor if he didn’t call a winner in any of the states!

https://towardsdatascience.com/why-you-should-care-about-the-nate-silver-vs-nassim-taleb-twitter-war-a581dce1f5fc

And hey, take the long view!

In 44 chronological episodes, the “Presidential” podcast takes listeners on an epic historical journey through the personality and legacy of each of the American presidents. Created and hosted by Washington Post reporter Lillian Cunningham, “Presidential” features interviews with the country’s greatest experts on the presidency, including Pulitzer Prize-winning biographers Doris Kearns Goodwin, David McCullough, Jon Meacham and Bob Woodward. Start listening at the very beginning, with the life of George Washington, or jump ahead to any president whose story you want to better understand.

https://www.washingtonpost.com/graphics/business/podcasts/presidential/