Tuesday, September 21, 2010

Set-up for ongoing discussions

While I wait for my new friend to show up, I figured I'd take the opportunity to define a few terms that I think were causing hangups in our discussion.

The one that drove me nuts (maybe because of my background) was savings. Typically, we define savings as the residual of income after paying all expenses. This seems consistent with Keynes (Y=C+S or something) and Friedman, who had the "lifetime wealth" formulation. This makes sense to me, but then I'm trained to think in a certain way. I'm open(ish) to debate on this issue.

The other thing is aggregate demand. This is my bad. I always think AD means consumer spending. But it does include investment and government spending and net exports (I imagine). So I promise to keep that in mind.

Any suggestions as to what else to include?

Tuesday, September 14, 2010

Statistical Insights in Movies

I am watching "Death Wish" with Charles Bronson right now. About halfway through, Bronson's character is at a party, and he walks by a man and woman talking about the recent vigilantism. The man says something like: "Is it any question he's a racist? He's killing more blacks than whites!" and the woman responds: "Or for Heaven's sake! More muggers are black than white! What do you want us to do, increase the proportion of white muggers?"

This is some cleverness I don't expect you'd see in PC movie-land we have today. The killings reflect the underlying distribution of muggers. The result, while skewed in a certain direction, isn't because the agent is discriminatory. It's because the underlying distribution is composed in a certain way. Selection bias. Brilliant.