Stata and parentheses

Just ordered a personal copy of Stata 13 (I wanted to go all out and get Stata MP, but the little voice of reason in my head convinced me to buy a one-year licence for Stata IC instead), and two things have jumped out at me already.

  1. Man, it runs nicely on my new iMac. The computers at UOW weren’t too bad, and the IT department there keeps them on a reasonably generous upgrade cycle, but top-notch new tech makes a hell of a difference.
  2. This might be a new feature in Stata 13, or it might be due to the OS change (I used Stata in a windows environment for my honours), or I may just not have had the good sense to find and activate the feature before, but in my .do files selecting a parenthesis causes its partner to be highlighted in red. Seems simple, but already in my short life as an economist I have spent a non-trivial amount of time debugging my code only to discover that I either omitted or inverted a parenthesis somewhere. This small feature should therefore make a difference to my mental health in the long run.

Any other nice aspects of Stata 13 or Stata on a Mac OS that I should know about? Let me know in the comments section.

Vocabulary and signalling

Before we start, go and check out this link: Test Your Vocabulary.Daniel's known vocabulary (from the site)

As an economist, anything with a sample size in the millions (!) has me drooling, even if a test administered over the internet is going to be unavoidably biased. The idea behind what they’re doing – constructing a measure to predict someone’s vocabulary from observable characteristics – will, if nothing else, highlight any flaws in tests like the SATs in the United States.

Tests such as the SAT and GRE aim to measure how likely an individual is to succeed at university study. Evidently, success is related to factors such as discipline, intelligence, existing knowledge, etc., all of which are difficult to measure. Instead, the tests shoot for something easier: vocabulary size. The underlying assumption is that individuals with larger vocabularies will be smarter, harder working, more knowledgeable – in short, possess a larger dose of the unobservable qualities that make for a good university student.

Trouble is, it’s widely known that these tests feature a vocabulary component. Individuals who therefore are not the best cut out for university can attempt to appear as though they are by developing their vocabularies specifically to ace these tests. To spell it out more clearly: universities want a certain calibre of student, which they attempt to identify. Individuals who are not in this group can still falsely signal that they are by improving their abilities to score high marks in the test (rather than actually improving their general abilities and hence moving into the group of desired students).

The data from the ‘test your vocab’ site might help to shed some light on this – it’s a lot harder to fake your abilities in the real world, so the correlation between vocabulary and earnings (a much better proxy for ability, but one which is typically observed after an individual has concluded their studies) will show whether knowing lots of words is a good signal for general intelligence.

Secondly, it will also be interesting to discover some of the good predictors of vocabulary size. Using vocabulary as a proxy for ability isn’t much good if some demographic characteristic (e.g. ethnicity or socioeconomic status) is a stronger determinant of it than underlying capability for success. For the record, that’s my bet. I’m not willing to throw vocabulary out entirely as a proxy for ability, but I predict that it is actually a much less accurate measure than universities hope.

Airline Price Discrimination

Whenever I explain price discrimination to one of my microeconomics classes, I have two go-to examples: cinemas (think students and pensioners) and airlines. The latter example is a lot richer and more fun to use, since there are so many layers of differential pricing for the same product.

I recently found a post that attempts to unpack some of the elements in the price calculation. A good site to stumble across, both as a consumer of air travel and also as an economist. It’s got me thinking about the different categories into which travellers can be sorted, and therefore charged different prices.

What does that have to do with airlines? Oh, wait...Categories of air passengers

  • Hyper-organised OCD-type – buys tickets as soon as they are released. Will pay a premium to reduce risks and cover all bases. Identified by length of time between purchase date and flight date.
  • Business traveller – my default example of price discrimination. Often need to fly somewhere with little notice, and will hence buy tickets close to the departure date. Won’t be covering the costs out of their own pocket: far less price sensitive than a leisure traveller.
  • Families – probably fairly price sensitive, but will also want to keep the kids and adults seated together. Can therefore be induced to pay a premium for joined blocks of seats. Easy to identify – 3+ tickets in one purchase, mixture of adults and children.
  • Technologically-incapable individuals – may purchase tickets over the phone (!), or could possibly scrape together the technical aptitude necessary to find an airline’s website. Unlikely to be cluey enough to do any extensive shopping around or use a cheap flight search site, therefore will bear a reasonably high price, particularly if it is presented as though it’s a bargain. Again, pretty easy to identify – look for the consumers using Internet Explorer.
  • Affluent flyers – if your wage is high, the opportunity cost of your time is high, and therefore any extra time spent travelling will involve a big loss of surplus. Airlines cash in on this by whacking a decent surcharge on non-stop flights.

Far from a complete list, but there’s five to get the ball rolling. Suggestions for more types of flyers in the comments!

Social science research = big(ger) data?

Google Trends - ResearchPaul Frijters is an economist from UQ who likes to ponder the mysteries of life, and one of his blog posts concerns the great existential question facing social scientists everywhere – why are we here? More specifically, what is the point of all of the social science research being done?

Note that we’re not talking about the debate over whether social sciences deserve the label ‘science’, or if obtaining a PhD is worth all the effort. Frijters’s soul-searching query cuts to the heart of life as a researcher: does the knowledge I am producing actually make any difference to the world?

The question arises from an awareness of the vast quantities of research done every single day. With so many results constantly being tabulated, published, and disseminated, how does any one article stand a chance of even attracting the attention of others in the discipline, let alone having an effect on policy? Frijters ponders aloud whether social scientists may, in truth, be writing for the benefit of some imaginary deity with the capacity to comprehend and use all of the vast quantities of insights. More depressingly, he postulates that perhaps we social scientists are simply earning a crust and ignoring the vast elephant-shaped emptiness in the room.

Happily, I disagree with the proposed answers to his question. Instead, I suggest an alternative: research findings are like single observations in an overarching dataset, and this will be yet another area in which man + machine will make great gains over unaided humans.

That is, instead of thinking of the results from research as being the end product, useless unless converted into further research or policy, they should be considered as pieces of a puzzle – perhaps intrinsically interesting, but far more so in conjunction with all of the other pieces. And this is where the technology + human team comes into its own. Machines can quickly sort through and find patterns in the super-dataset comprised of all of the individual findings. Humans are useful at either end of this process – suggesting areas for the machine to concentrate its search, and making sense of what it turns up.

So don’t despair, social scientists – your hard work is contributing to a better tomorrow, just in a more elementary way than you may have expected…

Kitchen equipment, opportunity-cost style!

Pseudo-confession time: I love cooking. And when I say cooking, I mean roasting, baking, sautéing, frying – you name it. As a lexicographically well-endowed person, it is my eternal shame that I use the word ‘cooking’ to refer to all of the aforementioned techniques, but for this I blame my family.

Cookies in Daniel's kitchen (still baking)

The struggle for me over the last few years has been balancing my culinary inclinations with my limited budget as a student. As much as I’d love to have the latest all-in-one super kitchen gadget, there were more pressing budget items, such as the food itself. Opportunity cost strikes again! So with my (extremely) finite resources, I had to prioritise which items were most important to my dream kitchen, and which would have to go on the backburner.

For the benefit of all of my fellow suffering student-chefs out there, here is my top five list of kitchen implements that are worth the investment. To clarify, I’m assuming you already have the mundane items such as cutlery, plates, etc.

Daniel’s Top Five Kitchen Items

  1. Good chef’s knife. The capacity to dismember things is vital in any kitchen, and precision is required. Decent knives seem a little expensive at first glance (a single one can set you back anywhere between $20 and $100), but remember that price is often signal of quality – that holds true here. Plus, investing in a decent knife will not only pay dividends in terms of food quality, it will also save you time and mental anguish. Take it from someone who suffered through blunt, crap knives for years.
  2. Quality frypan. Pans can be obtained pretty cheaply, and for most of your needs the seven-piece set from Kmart will serve you just fine. For messy, sticky jobs like dahl, frittatas, or eggs, you want something non-stick with a nice, thick base. Again, partially this is for quality reasons, but it is more for your health – both physical (cheap frying pans tend to impart bits of themselves onto your food) and mental (washing up a teflon pan is like bathing an angel compared to scrubbing for seemingly hours at its dreadful predecessor).
  3. Slow cooker (aka Crockpot). Boy, do I love my slow cooker. It does everything from soups to casseroles to slabs of meat, and has two big advantages: volume and intertemporal substitution of effort. The volume part speaks for itself (my slow cooker holds 5.5 litres, which usually does four days of dinners for two), and by intertemporal substitution of effort I mean you can do all of the hard work at the start of the day while you’re still fresh, and then come home to a cooked dinner and delicious-smelling house after uni or work. Plus they’re pretty cheap these days, so the cost/benefit ratio is comfortably in its favour.
  4. Electric mixer. This one is more for the baking-enthusiasts out there, since it doesn’t add much to main-meal preparation. As far as the production function for things like pancakes and choc-chip biscuits goes, though, substituting this small piece of capital can save you a whole lot of labour. In fact, I’d go so far as to say that if you want to delve into fancy creations like pavlovas or crèmes brûlées, an electric mixer is a sine qua non.

Actually, it turns out that I can only think of four indispensable kitchen items – with the above, plus the usual gear such as bowls, spoons, oven (don’t laugh – one of the apartments we inspected recently didn’t have one!), etc., I’ve made it through my student years in pretty good culinary and dietary shape!

What are your opportunity cost kitchen implements? Share your thoughts in the comment section 🙂

Are you a maths person?

Maths - derivative of a parabolaMaths-philic or maths-phobic? Reading the post title, most people would assume that the answer is fixed – I mean, someone is either born with a knack for maths or they aren’t, right? Well, I disagree, and a recent article featured on Quartz backs me up. Miles Kimball and Noah Smith (who shows a similar affection to mine for using punny eponyms to title his blog) argue that one’s internal narrative – the stories we tell ourselves – is a huge determinant of mathematical success, especially at an early age. Students who believe that they can improve if they work hard enough do so, and thus create a self-fulfilling prophesy.

The authors focus on internal determinants of engagement with maths, but external factors are just as important. An individual doesn’t form their self-beliefs in a vacuum – their peers, family, and community all contribute. That explains why certain trends are difficult to reverse: the idea that girls are bad at maths, the tendency for low educational achievement to run in families, and certain cultural stereotypes.

Moral of the story? Next time you’re tempted to think to yourself (not that any of my readers would be in this category, but still) “Oh, I can’t do [insert life/uni problem involving maths here], I’m not a maths person”, wash that mouth out with soap! Instead, say: “Wow, that’s a hard maths problem! Lucky thing anyone willing to put in a bit of work can learn how to solve it!”

Don’t get me wrong – I’m not asking everyone to go and tackle the Millennium Problems (not until you’ve had a look at some of my other blog posts, anyway). My point is simply that if you think you can’t do maths, you’ll prove yourself right. Be ye not afraid – change your thinking and tackle those problems head-on!

My Thoughts on Fiverr

In setting up this website, I came across Fiverr, an online marketplace based on a $5 price point for, well, basically everything. In his blog Marginal Revolution (which is excellent), Tyler Cowen regularly refers to the idea of ‘markets in everything’, a feature of the information age. If Fiverr isn’t evidence for ‘markets in everything’, I don’t know what is.

Some quick thoughts on the site:

  • This is outsourcing gone wild, and more interestingly, gone micro-level. $5 is only a fraction of the hourly wage a skilled professional can earn in a developed economy, yet here it buys you web design, proofreading, and translation. Possibly grim news for white collar workers in first world countries…
  • Huge gains to consumers. I suspect that before the internet (Fiverr is not the first site to do this, although they seem to do it well), Joe Schmoe may have had difficulty finding someone to write a message using pills for him. Not any more, Joe. Not any more.
  • As with eBay, seller reputation will be incredibly important as a signal to buyers. This is what the company is banking on, since potential reputation loss will deter serious parties from trying any funny business. That said, I was pretty happy to go with an unknown seller and take the risk of low quality because, hey, it’s only $5.

Check out the site, and let me know what you think in the comment section!

DTconomics blog is back and better than ever!

So my DTconomics blog has been on hiatus for almost a year now, as my loyal readers have probably noticed. I’m sorry for the fanfare-less disappearance, but work and honours got the better of me.

But I’m back now, with a fresh new look and more attitude than ever! In fact, I got so sassy this past 12 months that I decided to try my hand at creating my own website, both to host this blog and to showcase some other aspects of my life and work.

Early days yet – I’m still experimenting with the whole web design thing. I’m planning to make the blogging a more regular occurrence than ’twere previously, so stay tuned for more cool content. If you have suggestions or ideas for the website or topics for posts, either let me know in the comments or shoot me an email 🙂