David R. Henderson  

Highlights from Nate Silver Interview

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Small sample sizes, global poverty, basketball and the Golden State Warriors, legalizing drugs, herd behavior in the media, and media as cheerleaders.

Recently, Tyler Cowen interviewed Nate Silver of five thirtyeight.com in front on audience at the Mercatus Center. Here are some highlights I found particularly interesting, along with my comments.

On the problem with small sample sizes:

It [the Trump phenomenon] just made me consider that a lot of assumptions a lot of people made about how American politics work are really based on a relatively narrow slice of history, post-World War II through 2000 or so, maybe even briefer, 1980 through 2000. It's not really a lot of history.

With that said, for one thing, we're dealing with a fairly small sample of relevant elections. People look at, in the primaries, going back to 1972. One very basic lesson is that when you have a sample size, let's say it's roughly 15, there's nothing you can do to make it not a sample size of 15.

No matter how compelling you can make your rationalization to say, "Well but, you know, we have theory as well as empirics here," still, 15 cases is 15 cases. I think maybe making people more cautious about saying "Unlikely" versus "Never." Now, the record will show we said "Unlikely" and not "Never," but still it's a lot of things to think about.

The world is getting better:
There is a lot of wonderful news in the world in terms of poverty rates going down globally, income inequality going down, diseases being eradicated, but I wondered, to some extent, how much the media culture tends to focus a lens on negative aspects of society, lower people's happiness level, and all this type of stuff.

On basketball and the Golden State Warriors:
The Golden State Warriors might be one of the best examples, where --

Unfortunately, Tyler cuts him off. But read the linked article by Kirk Goldsberry.

My comment: I find it quite striking how hostile so many in the sports media are to Steph Curry and the Warriors: from Galen Rose's dismissiveness and even rooting for other teams to beat them to Charles Barkley's claim that all Steph is good at is shooting (which led to Kevin Durant's classic reply "I don't think Charley Barkley watches basketball.")

I would have loved to hear what Nate had to say about the Warriors. Would it have been simply rehashing Goldsberry's excellent article or would he have pointed out that one undermentioned fact about the Warriors is that they play team basketball?

Asked whether legalizing drugs is overrated or underrated:

By this crowd, probably rated properly.

I mean, I don't know. I'm enough of a lowercase L libertarian where I think that the government ought to have a stronger reason to intervene in choices that people are making instead of a lesser reason, necessarily.

To me, it clearly makes no sense to treat marijuana as being a more serious substance than alcohol, for example. I don't think, in my heart of hearts, if I were running for office or in the Senate or something, that I would vote for a bill to legalize heroin or cocaine, but decriminalizing it, perhaps.

But I don't know. I think the consequentialist case, for a long time, probably underrated and may have gone a little bit too far in the other direction. But again, I would say if it's close, then you give people the choice.

But look, it's the case where, unlike drug legalization -- where there are not a lot of countries where drugs apart from marijuana are even there fairly rarely -- worldwide, people are much more relaxed about gambling, and it's normalized.

Notice that he's a little nervous about legalizing drugs beyond marijuana because so few countries have had experiences with legalizing drugs beyond marijuana. But this argues for going beyond his small sample size--countries at this point in time--and looking at countries a little over 100 years ago. Prime candidate: the United States where marijuana, heroin, opium, and cocaine were legal. He needs to remember his earlier point about sample sizes.

On herd behavior in the media:

the political press corps literally is kind of a herd. It's the perfect example of it. You have a few hundred journalists who travel around together, who are all reading one another on Twitter, who are all talking to one another.

It's not 500 really smart people. It's one or two really smart people, and 489 followers instead.

On the media as a participant rather than an umpire:
But I think having that skepticism and seeing the media as a political actor instead of a benevolent umpire is to a first approximation the right way to do things

I saw this up close when I was sitting at an American Economics Association annual meeting in Boston (circa 1994) with my then-friend Sylvia Nasar, who was covering a confrontation between Robert Solow and Robert Barro. We saw the same thing but what she wrote the next day in the New York Times, though correct, left out so many important details that it was as if we hadn't been watching the same thing.

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CATEGORIES: Economic Methods

COMMENTS (8 to date)
Don Boudreaux writes:

It's interesting that Nate Silver (rightly) identifies and is critical of herd behavior among media types, but then, in his own way, follows the herd when it comes to the question of legalizing drugs other than marijuana. True, not many countries have legalized such drugs, but is that itself a sufficient reason for any one country, such as the U.S., not to do so - not to break free of the herd?

GregS writes:

On the topic of drug legalization, I really don’t understand how drug prohibition is supposed to work. And by “work” I mean not just “decrease drug use,” I mean “pass a cost-benefit test.” To make someone stop using drugs, you have to increase the cost that a drug user faces when deciding whether or not to use. If that cost already includes money and time spend acquiring and using, plus all the inherent harms of drug use (which let’s remember are routinely, grossly exaggerated), you have to impose a pretty tremendous “tax” to have any meaningful deterrent effect. Suppose the demand for drugs follows a relationship like “doubling the cost cuts use rates in half,” the effect of doubling the cost of drug use is a wash! You’d have half as many users, but they’d each be “paying” twice the cost. (And remember with terms like “tax” and “cost”, we’re actually talking about subjecting people to police harassment, jailing or imprisonment, destroying their families, subjecting IV drug users to HIV epidemics and potentially lethal fluctuations in drug purity, and a host of other morally dubious effects of drug prohibition.) Surely my naïve demand curve is missing something important; there are many other dimensions to this topic. But my gut tells me it can’t be *that* far off. The additional harm you have to impose on drug users to achieve deterrence surely scales up with the amount of deterrence (and the presumed benefit from deterred drug use). When I see public intellectuals like Nate Silver discuss this issue, I don’t see any recognition of this basic point: To get you to stop doing something, I have to threaten to harm you *and* follow through on the threat. There is always a nod to legalization and then some (IMO unjustifiable) hesitation.

I’m curious, has anyone worked this out in detail? Something like, “Here is the empirical (or most plausible) demand curve, here’s how it shifts when transitioning from a regime of legalization to prohibition, here is the net harm or benefit”? It seems like people who are really in favor of drug prohibition should have worked this out. The closest I can think of is a paper by Gary Becker and Kevin Murphy on rational addiction, but it doesn’t render a verdict.

David R. Henderson writes:

Interesting thought, GregS. I’m pretty sure no one has done it, but your approach shows promise. Are you interested in doing a joint (no pun intended) paper on this? I’m not promising because I’m pretty busy, but I would like to think it through with you.

GregS writes:

@ David R Henderson
Yes! Send me an e-mail.

John Thacker writes:

I seem to recall Steven Landsburg pointing out (in the Armchair Economist, perhaps) that once you actually count the costs to users it's quite a lot.

The point about US politics is interesting. It wasn't too long ago that Republicans and Democrats were both big-tent on ideology, with membership determined by ethnicity (and how you fought in the Civil War.) In Massachusetts people were Republican because they were Brahmins or black (or at a certain point, Jewish) or Democrats because they were Irish; that is why there was so much ideological diversity within the parties.

It's not entirely crazy (based on history) to imagine that again, with a white-based Republican party versus a non-white Democratic party, but both diverse on ideology. I recoil from that idea, but it's a party structure that's existed for longer than our current ideology-based party structure.

Maniel writes:

Prof. Henderson, GregS,

On the topic of drug legalization, I really don’t understand how drug prohibition is supposed to work. And by “work” I mean not just “decrease drug use,” I mean “pass a cost-benefit test."
I think that a C/B analysis of drug prohibition is fine, but isn’t the result a foregone conclusion, known even to politicians? Proof: Prohibition is prohibition and the 21st Amendment is part of the Constitution.
To make someone stop using drugs,…
may have been the stated reason for the so-called “War on Drugs,” but it never goes away because there are vested interests in the judicial and law-enforcement communities. As Prof. Friedman would remind us, “Nothing is so permanent as a temporary government program.” As you may remember, Al Capone was not convicted of murder or selling whiskey. Plus ça change…
Roger McKinney writes:

The text Microeconomics by Hubbard and O'Brien (3rd ed.) estimates the price elasticity of demand for cocaine at -0.28, cigarettes at -0.25 and beer at -0.23.

That's a place to start.

I was listening to a radio talk show on which the host said that 1) heroine use had sky rocketed and was an epidemic and 2) law enforcement worked to reduce use. I don't know how a person can hold both thoughts in his head at the same time without it exploding!

GregS writes:

Roger McKinney, thanks for the reference. Those numbers match pretty well with the elasticities I found with some casual googling. Demand for drugs is *inelastic*. I think that bolsters my point about how the costs of prohibition scale up faster than the benefits. If prohibition manages to deter 1% of drug use, it must do so by raising the cost faced by the user by *more than* 1%. Crudely using the -0.28 figure for cocaine, doubling the cost of cocaine reduces use to 72% of its former level. (It's probably not appropriate to extrapolate an elasticity over such a big price swing, but you get the same kind of answer if you use a smaller price change: costs scale up faster than benefits.) The total harm *to the users themselves* has increased to 2 x 72% = 144% of its former level. And this leaves out many of the true costs of prohibition.

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