Thursday, November 5, 2009

Economics is ... romantic

I had a professor and mentor at BYU (James McDonald*) who tried to convince us that

Economics is Fun.
Economics is Easy.
Economics is Your Friend.

One of his classes made a bronze plaque out of it for him. He also tried to convince us that Economics is Romantic because this one guy took a girl to his class on a date and she married him anyway. Because he was one of the economists I've tried to model my life after, I've always been on the lookout for ways to convince people that economics is, in fact, fun, friendly, easy, and romantic.

Here is Bill Easterly today [actually, last week - dunno why this post didn't get posted earlier] blogging about how marriage search is like development, and in the process talking about how unromantic economists can be.
I recently helped one of my single male graduate students in his search for a spouse.

First, I suggested he conduct a randomized controlled trial of potential mates to identify the one with the best benefit/cost ratio. Unfortunately, all the women randomly selected for the study refused assignment to either the treatment or control groups, using language that does not usually enter academic discourse.

With the “gold standard” methods unavailable, I next recommended an econometric regression approach. He looked for data on a large sample of married women on various inputs (intelligence, beauty, education, family background, did they take a bath every day), as well as on output: marital happiness. Then he ran an econometric regression of output on inputs. Finally, he gathered data on available single women on all the characteristics in the econometric study. He made an out-of-sample prediction of predicted marital happiness. He visited the lucky woman who had the best predicted value in the entire singles sample, explained to her how he calculated her nuptial fitness, and suggested they get married. She called the police.

He goes on from there to describe how he eventually did find a mate and makes the comparison with development. But this is where my comments pick up as I discussed the problem of ignoring the incentives women have and their corresponding actions:

1 – He ignored the self-selection bias. Regressions only tell us what the 'average' effects are, that is the effect for the 'average' person. It’s only about qualities that make the average guy happy if he is the average guy. Economists being the strange lot we are, it is likely that it takes a special kind of woman to marry one of us. He needed to find a bunch of guys very similar to himself and examine the qualities that made a difference from among (and this is key) the population of women willing to marry guys like him - the women who self-select themselves into our group. If he then approached a women who was not in that group, no wonder he was rejected. Speaking as a Mormon economist-in-embryo who read Shakespeare in the original Klingon as it were, who carried a briefcase in junior high, who preferred slacks to jeans, and who felt the downfall of music began with the electric guitar, I knew I had my work cut out for me when I was only 13. Small sample sizes indeed.

2 – He ignored endogeneity. Instead of trying to convince her that research showed she would make him happy, he needed to present research that demonstrated he would make her happy, and that’s the other half of the regression: male qualities on marital happiness. No wonder she rejected him: his regressions didn’t answer her question!

Personally, I took more of a Bayesian approach. Bayesians believe that a lot of things in life [like regression coefficients] are random and over time we get better and better signals about where the truth is, but we only ever approach it by degrees. First, by trying to become a friend, I identified if she was in the group of people who might marry someone like me. Each interaction gave me more information about the error term and the regression coefficients about fostering a happy, loving friendship that could endure. After any failed relationship, I had a new variable or two to add to my equations and I understood the ‘relationships’ between relationship variables better. That might be about finding out more or different things I needed [hunh, so her political affiliation isn't as important as I thought and her willingness to smile at me is vital] or about learning more and better policies over time that I could enact to make her happier [tips for being a better listener or learn to identify her love languages and feed them to her, instead of your own, regularly].

In the end, I’ve married someone who has all the good qualities in the best people I dated and avoids all of the relationship-ending problems, and I’ve learned how to promote her happiness so I can keep her. It's so wonderful. Thank you, Joy, for saying yes.

* - Actually, the quote is about Econometrics, his specialty within economics, but I trust he wouldn't object to my making the model more general.

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