Economics and Politics: Ignorance is bliss

First, a little back story. I began studying Economics during the 2008 election season. I regularly found myself debating some economic idea or another, and wanted to understand the subject better so I could evaluate my intuition and form more-educated opinions. I began reading books and blogs, following economists on Twitter, and studying for my MBA.

Rather than becoming more comfortable with the subject, I’ve become frustrated and regret taking the red pill.

I could probably write thousands of words on this 1, but here’s a quicker way for me to express this frustration:

The surprising part isn’t that the policy ended up being bad, but that President Obama ever believed it could possibly be good. Politicians promote bad policies all the time. But this one is such an obviously-bad policy that it gives me pause – it’s literally an Econ 101 mistake whose awfulness is self-evident. I usually suspect politicians understand that the policies they push aren’t optimal for everyone, but they support those policies anyway because they benefit their constituents; they don’t really think the policy will be good for everyone, but maybe it won’t be bad for everyone, and their constituents will benefit, so it’s ok.

But in this case – the Chinese-tire tariff – I think it’s obvious that President Obama thought this policy would be great for America. He bragged about it in a recent speech. So the problem doesn’t seem to have been his intentions, but his understanding of very basic economics. The problem wasn’t with his spin of the policy, but that the policy was simply an awful policy with a bad economic outcome for Americans.

If the President’s intuition is this bad on basic economics, how much worse is he at predicting the economic effects of routing federal dollars to specific areas research? Fiscal policy? Labor policy?

Nancy Pelosi, when promoting Obamacare, said overhauling healthcare would provide “lower cost, improved quality” healthcare“, and it might… or it might not. The issue for me is that I don’t believe the President understands basic economics well enough to do a real analysis of the possible effects of such complicated policies. If he couldn’t predict that a tariff on Chinese tires would cause prices to rise for Americans – a prediction most first-year, Econ 101 undergrads would’ve made – then how could he possibly predict the economic impact of capping profit margins for health insurance companies (only a few of the 2,000 pages in the ACA) on healthcare costs?


Need a story? Blame the refs!

Full disclosure: I’m a psychotic Florida Football fan. I spent almost six years as an undergrad at UF, and I’m there now working on my MBA. I may be biased. But so is everyone else who follows or reports on sports, so I’m not alone. In this article, I will try to be as objective and rational as possible, which means I won’t be trying to write this during any Gator games.

As always, the sports world has been awash in controversy and conspiracy theories this year. After all, who would watch ESPN if it were just a bunch of talking heads reporting scores that could be found freely on the web? Sports journalists’ jobs are to report facts and generate buzz. Buzz generates viewers. Viewers help generate revenue. And while I think that business model is fine, I think maybe sports journalists should be held to a higher standard than they currently are.

True, sports journalists aren’t typically reporting on significant world events — tragedies, politics, technological and medical breakthroughs, etc. — but, as with mainstream journalism, what they report can have real-world consequences. Usually, those consequences can be measured in dollars, and sometimes they can be measured in affected lives. But even without measuring the effects of what sports journalists report, I think it’s important that they report truth (or what they know to be true) and that they do their due diligence and find some evidence to support what they’re “reporting”.

Do Florida and Alabama get all the calls?

“There’s a conspiracy to get Florida and Alabama into the National Title game!” This statement has been made both explicitly and implicitly by many over the past several months. Mike Wilbon very, very strongly implied it. I think he stopped short of actually saying, “There’s a conspiracy theory.” when Tony asked him point-blank if that’s what he thought. Ultimately, Mike fell back on claiming there’s an “environment” that is cultivated that causes this stuff to happen. Other bloggers and sports media personalities have alluded to it as well. And, true, these people aren’t “journalists” per se, but they’re sort of the cyclists of the car-and-pedestrian world: they get all the privileges of being journalists, but don’t have to follow any of the rules.

The mostly commonly cited indicator of the alleged conspiracy is that Florida and Alabama “get all the calls” in order to give them an edge against their opponents. In other words, the refs are either blowing calls, or making the wrong calls in order to give Florida an edge. I have yet to see any real evidence to support this claim. And yet the claim itself could have some very real consequences for people. For example, the refs for the Arkansas vs. UF and LSU vs. UGA games were suspended after the LSU vs. UGA game. That means they didn’t get paid. And it means their reputations have taken a hit. And it means their careers as refs could be shortened substantially. After all, if they’re trying to rig games, they’re responsible for defrauding a LOT of people, and they’ll likely end up in jail like Tim Donaghy. So, they’ve given up quite a bit to get UF and Alabama into the BCS Championship game picture, haven’t they? And what have they gained by giving up all that? Nothing that I can think of. It seems like the only possible compensation they might’ve received for assuming all that risk is cash. But where’s the paper trail? In the end, I think the onus is on the conspiracy theorists to gather some kind of evidence to back up their claims. Without any evidence, it’s just speculation. And that’s not “reporting”, is it? Even sports journalists are responsible for following some kind of “good reporting standard”, aren’t they?

Statistics is 99% certain it knows the answer

Let’s take a look at some rudimentary analysis of the claim that Florida and Alabama “get all the calls” to help them win games.

It’s actually really easy to see who’s getting all the calls in the Florida and Alabama match-ups this season. I did some basic statistical analysis of the penalties called against Florida and Alabama relative to their respective opponents. I looked at total number of penalties called against, and total penalty yards assessed against each team. Here are the numbers (all of these are averages) through the end of the regular season:

UF: 6.5 penalties called against for 49.5 yards per game.

UF Opponents: 6.17 penalties called against for 50.17 yards per game.

Alabama: 5.25 penalties called against for 46.25 yards per game.

Alabama Opponents: 6.08 penalties called against for 51.33 yards per game.

So, on average UF is flagged .33 fewer times per game and is penalized .67 yards fewer per game. And, on average Alabama draws .83 fewer flags per game and is penalized 5.08 yards fewer per game.

It turns out that these differences are not statistically significant. Specifically, we I can say that I’m 99% confident that neither UF nor Alabama have fewer penalties and yards assessed per game than their respective opponents due to real world factors such as bias or skill.

I’ve been running the numbers for both teams every week since Week 6 of the season, and there has never been a statistically significant difference between either UF or Alabama and their respective opponents with respect to aggregate number of penalties and yards called against.

Ultimately, I think there are two factors at play here: first, the media feels compelled to generate stories; second, there is some observer bias and that is clouding the media’s judgment. I don’t think my first factor really needs any explanation. It’s pretty obvious that the media in general, and specifically the sports media, thrive on controversy, tragedy, intrigue, etc. They actively look for these types of stories and, occasionally, they manufacture them to keep viewers interested. But the second one isn’t explored very often. For example, after the Arkansas vs. UF game, there were many cries of conspiracy to get UF into the Championship game. But where were the cries when the refs blew four big calls in the Tennessee vs. UF game earlier in the year? That game was close all the way (at least on the scoreboard), and the refs called an excessive celebration penalty against Florida that they didn’t call in a similar situation against UT later, and they wrongly called intentional grounding against Florida and totally blew an obvious intentional grounding call against Tennessee later. But those plays are never mentioned when the conspiracy theories are being discussed. Only plays that support the theorists’ hypothesis are discussed.