Sunday, December 4, 2011

Finally, Some Useful Information from an Econometrician: A Tip on How to Beat the College SATs

....but it doesn't have anything to do with economics.

In a profile on recent Nobel Prize winners Thomas J. Sargent and Christopher A. Sims, NYT shows they are pretty confused about economics:
Mr. Sims and Mr. Sargent neither prescribe cures nor forecast the future. Nor do they deal in the sound bites of talking heads on cable TV. They are reluctant celebrities, men whose work can baffle even Ph.D.’s.

So it comes as a surprise, not least to Mr. Sims and Mr. Sargent, that these two now find themselves thrust into an uncomfortable spotlight. Conservative voices, like the editorial page of The Wall Street Journal, have claimed them as their own. The men’s work on economic cause and effect and the theory of rational expectations — which maintains that people use all the information available in making economic decisions — proves that Keynes had it wrong, these commentators say.

It would be a provocative thesis — if it were true. But Mr. Sims and Mr. Sargent say their work is being misread. Both, in fact, are longtime Democrats who maintain that government can, and should, play a role in economic affairs. They stand behind many recent policies of the Obama administration and the Federal Reserve...

They won their Nobel for “their empirical research on cause and effect in the macroeconomy,” in the academy’s words. What that means, in part, is that they have done some serious math
Since there are no constants in the field of human action (which includes mathematics) there is no correct "empirical research on cause and effect in the macroeconomy" that can be conducted.

As Ludwig von Mises put it:

Every quantity that we can observe is a historical event, a fact which cannot be fully described without specifying the time and geographical point. The econometrician is unable to disprove this fact, which cuts the ground from under his reasoning. He cannot help admitting that there are no behavior constants.
But, their mathematical work can be of value in relatively static environments, card counting in blackjack comes to mind, or in static creations such as SAT tests. And here Sims shines and becomes of value to any college student who has to suffer through the test. Because of his elitist connection and his skill in math, we learn:
His [Sims']parents were exceptional, too. His father, Albert, was a diplomat, and young Chris lived in Germany a few years as a child. The family later moved to the Washington suburbs before settling in Greenwich. His father became an executive at the Institute of International Education and at the College Entrance Examination Board in New York. During the Kennedy administration, he helped start the Peace Corps

Because of his father’s College Board connections, Mr. Sims got hold of an old SAT exam, which he and Mr. Willoughby used to conduct a statistical analysis. They found that on multiple-choice questions in English and social studies, the “longer answers tended to be correct.” In math, they determined that the number that was “closest to all of the other numerical choices” was probably the right one. Willoughby says Mr. Sims got perfect scores on SATs...

1 comment:

  1. If any other readers have ever taken the California P&C insurance exam, the analysis given in this article is strikingly similar.

    After the state mandated 40-hour course, students were given a 'crash course' that included repetition of actual test questions with the example names changed. We were also given two helpful tips; 1) the longest answer is always correct, or 2) 'all of the above' is always correct choice.

    Using those two tips I passed quickly and easily without even reading the majority of the questions.