July 2012 – RE-DESIGN

I have always considered scatterplots to be the best available device to show relationships between variables. But it must be even better to have the regression table and a full description of the results in addition, right? Not so fast: A new paper shows that professional economists make largely correct inferences about data when looking at a scatterplot, but get confused when they are shown the details of the regressions next to the scatterplot, and totally mess it up when they are shown only the numbers without the plot! Wow! If you needed any more persuasion that graphing your data and your results are more important than those regression tables with zillions of numbers, now you have it. P.S. The authors of this research could have done a better job themselves in communicating visually their findings… [via Felix Salmon] The illusion of predictability: How regression statistics mislead experts Emre Soyer& Robin M. Hogarth Abstract Does the manner in which results are presented in empirical studies affect perceptions of the predictability of the outcomes? Noting the predominant role of linear regression analysis in empirical economics, we asked 257 academic economists to make probabilistic inferences given different presentations of the outputs of this statistical tool. Questions concerned the distribution of the dependent variable conditional on known values of the independent variable. Answers based on the presentation mode that is standard in the literature led to an illusion of predictability; outcomes were perceived to be more predictable than could be justified by the model. In particular, many respondents failed to take…

Red Plenty is Francis Spufford’s semi-fictional book about the efforts to apply economic planning in the Soviet Union during the 50s and 60s. It is a great book and has been already extensively discussed elsewhere. (Don’t miss Cosma Shalizi’s post in particular). Here is what I learned from ‘Red Plenty’: 1. Linear programming has been developed in the Soviet Union as a technique to optimize centralized economic planning. It has been later re-discovered in the US. 2. During the 50s Soviet scientists have been developing a successful independent line of computer technology, later to be dropped at the expense of copying the West. 3. In a centralized economy, consumers always face the greatest shortages because they are the end of the supply line. 4. Nikita Khrushchev has expressed doubt and remorse for the violence of the Soviet regime during the 30s and 40s in his memoirs. 5. The Soviets built in the midst of Siberia Akademgorodok – an entire city for scientists from all sorts of academic disciplines. With an artificial sea next to it. 6. A Clockwork Orange is inspired by a violent Soviet youth subculture. 7. Women in the Soviet Union have been forbidden to experience pain during birth. In a softer form, the Soviet programs for ‘natural’ birth have been later revamped in Western Europe. 8. The Americans have charmed Soviet citizens in their first exhibition in Moscow by showing shiny plastic consumer goods and appliances and a dazzling video display. 9. In the Soviet planned economy being able to buy staff requires similar skills (and middlemen) as being…

Month: July 2012

Scatterplots vs. regression tables (Economics professors edition)

Ten things I learned from ‘Red Plenty’