Underlying factors

Three more for the "underlying factors cause most observed correlations" files.

Item the first: Limited numerical ability predicts mortgage default for reasons not related to choice of mortgage contract. That is, those who are bad at maths are more likely to default even after correcting for sociodemographic characteristics and other measures of cognitive ability.

Item the second: Men in the control group who remembered to take their placebos had higher survival rates than those in the control group who forgot to take their placebos.

Item the third (via Jason Collins): those higher in conscientiousness (as measured by survey question answers) also report higher happiness and life satisfaction (also as measured by answers to survey questions).

The first suggests that banks weren't really putting the "can't do maths" clients onto contracts that would ensure default but rather that those who are bad at maths wind up more likely to screw up things like figuring out whether they can afford a given mortgage or structuring their affairs such that they can consistently make their mortgage payments. If banks weren't able to lay off mortgage risk on the government, and if they were legally allowed to do it, they might then wish to administer a maths test for prospective mortgage clients and provide a bit more hand-holding and advice for those who fail.

The second follows on nicely from Linda Gottfredson's work suggesting that IQ is the fundamental underlying health determinant. Sure, low-income predicts poor health. But that's mostly because low IQ predicts low income. And low IQ or low conscientiousness seems likely to predict forgetting to take the full course of prescribed medicines, as well as a pile of other health-relevant behaviours. It also suggests that the returns from quality nurses are higher than the returns from doctors: having better nurses who can help low IQ clients understand and follow doctor's orders seems a worthwhile investment. Or at least one more likely to yield reasonable returns than using income redistribution as health policy.

Remember how Van Halen would hide a line about M&M provision in their concert rider as a way of checking whether the venue had followed all of their stage direction instructions? I wonder whether doctors mightn't add some markers to their prescriptions that aren't themselves necessarily medically useful but that would show up on a patient's tests afterwards to indicate whether they're likely following doctor's orders.

The third perhaps tells us something about links between income and happiness. If conscientiousness drives both income and happiness, then perhaps it isn't low income that's the sole driver of low happiness among those on low income. I'm always a bit sceptical about these studies: questions about conscientiousness are pretty loaded with "how I want to see myself" and social desirability confounds. But there's a reasonably simple (albeit limited) test: if the link between before-tax-and-transfer income and happiness is stronger than the link between after-tax-and-transfer income and happiness, that's pretty consistent with underlying type driving things. We can't rule out underlying type if it goes the other way though as the effects of the change in income could dominate the effects of type.

Marijuana snark

Ole Rogeberg produced a pretty thoughtful critique of the Dunedin Longitudinal Survey group's finding that marijuana use reduced IQ. And, he subsequently wrote a very nice summary of the dispute, along with some musings about whether scientific progress is helped or hindered by media sniping.

Rogeberg's critique wasn't based on replication of the Dunedin study. Indeed, Rogeberg couldn't even get some summary stats out of the Dunedin group. He writes:

When I originally started looking into this last August, I sent an e-mail to the corresponding author asking for a couple of tables with information on “pre-treatment” differences between the exposure groups. I did not receive this. This is quite understandable, given that they were experiencing a media-blitz and most likely had their hands full. I therefore turned to past publications on the Dunedin cohort to see if I could find the relevant information there. 

Do read the whole thing. It has a whole lot of very substantial critique. But this bit above piqued my interest. Because he was criticized by Dunedin's Prof Poulton for, well, you read it:

Rogeberg said the political approach to cannabis could change depending on whether there was a change in young smokers' IQ because of the drug itself, or because of living conditions.

He said his study did not mean the results of the Dunedin study were discredited, but it was fair to say the New Zealand study's methodology was flawed and the results premature.

But Professor Richie Poulton, co-author of the Dunedin research, said Rogeberg's data was not taken from real people.

"Rogeberg's challenge is based on simulations, but we used actual data on 1000 people to carry out the analyses he suggested," he said. [emphasis added]

I'm going to take this as Poulton offering to share his data with Rogeberg. Because it would be rather, well, gauche to criticize somebody for failing to use data you've refused to share.

I completely understand the Dunedin Longitudinal folks' unwillingness to share data given the rather high costs they've incurred in collecting it; it just seems off to critique somebody for having used simulations rather than data after you've refused to share the data.

Paternalism - for children, and for the lower orders

Will Wilkinson's excellent post at The Economist highlights the less-than-hidden classist underpinnings of New York's soda ban.

GIGANTIC sugared soft drinks are disgusting. Let's just get that out of the way. Can we also agree that the high-calorie drinks rich people like to consume—red wine, artisanal beer, caramel frappuccinos, mango smoothies with wheatgrass and a protein boost—aren't at all disgusting? At any rate, we yuppie pinot-drinkers know how to look after ourselves. In contrast, the wretched classless hordes, many of them being of dubious heritage, lack the refinement of taste necessary to make autonomy unobjectionable. Those who abuse their liberty, filling the sidewalks of our great cities with repulsive shuffling blimps, can't expect to keep it, can they? 

But should we really be surprised that paternalistic regulation would be so-targeted? When I work backwards from the set of paternalistic regulations to the most plausible underlying motives, I still wind up with the conclusion I'd reached a year ago:

The behaviours of the lower orders disgust me [the regulator]. They give in to base animalistic sensory pleasures. We need to fix them. Tax and regulate them until they stop being noticeably annoying. We'll say it's for their own good, but we'll really stick to the kinds of things that annoy us. So things like making sure everyone in low decile schools takes a course in basic personal finance so they understand how hire-purchase works and avoid making mistakes with loans, we'll not worry about that. But we'll tax fatty foods because obese people are unpleasant to look at and we'll tax the kinds of booze that the lower orders drink because few things are more unpleasant than poor drunk idiots.

It's not implausible that poorer cohorts are more in need of paternalistic regulation than higher income cohorts, if only because of differences in intelligence across cohorts. Do flip back to the linked post and consider the stylized facts there presented:

• The kinds of alcohol that poor people like get taxed far more heavily relative to overall price than do the kinds of alcohol that rich people like. That isn't unreasonable where the external costs of alcohol use are proportionate to the pure alcohol consumed, but when we start going for minimum price regulation and specific taxes on RTDs, it looks an awful lot more targeted.
• Official government agencies ignore the evidence on the J-curve and instead promote an abstinence only line. The only sense I can make of this is the noble lie: dumb people who'd otherwise be tempted to drink too much if they drink at all shouldn't drink; smart people can see through the official line.
• The war on drugs is more heavily enforced against poor people than against rich people.
• "Fat taxes" would disproportionately hit the poor. The tax will be a greater portion of the purchase price of hamburger meat compared to scotch fillet, even if the fat proportions are identical. And, the higher the proportion of ingredient cost in total price (as opposed to say the input of a high quality chef), the greater will be the the proportionate burden of an ingredient tax. Any bets on whether the price of a McDonald's burger goes up by more, percentage-wise, than a Ruth's Chris steak if we put in a fat tax?
• If the point of an "internality" tax like a fat tax is to force the individual to weigh the health costs to himself when purchasing, we'd need to scale those taxes by income if we think that rich people respond less to a small per unit increase in food prices than do poor people but suffer from similar behavioural anomalies; if we think that smart rich people are already weighing up those costs and compensating with increased exercise, then it doesn't matter that the per unit charge has less effect on the that group.
• There's all kinds of talk of mandating that fast food restaurants prominently display nutritional information and calorie counts. But folks tend to overestimate calorie counts at fast food places and underestimate them at the fancier restaurants where rich people eat. Because everybody expects fast food to have lots of calories.
• Finally, high IQ folks may be better able to route around whatever regulations are put in place.

It still looks to me as though paternalistic regulation is generally targeted at annoying behaviours exhibited by poor people, with sufficient route-arounds to keep the regulations from being too annoying for higher income cohorts. Bloomberg's soda restrictions were just a bit more blatant than most. Again, pulling from last year's post:

One of the better critiques of policy prescriptions based on behavioural economics is that it requires the modeller to step out of the system and to assume that he and the regulator who implements his policies are less subject to the problems ascribed to the regulation's subjects. Public choice folks worry that the paternalistic regulators suffer from the same behavioural foibles as everyone else but have worse incentives than do individuals who have to suffer the consequences of their own decisions. But if the implicit model is that all of this behavioural stuff really only applies to those people over there - poor dumb people, then there's good reason to keep the modeller out of the system.

Recall that Berggren found very few articles in behavioural economics advancing policy prescriptions consider the possibility that regulators might also be subject to behavioural anomalies; I think it's because of a general assumption that they do in fact sit above those they're regulating.