Tuesday, April 10, 2018

Econometric Nonsense at George Mason University

Delusion on steroids: Alex Taborrok, George Mason Univerity econometrician 
George Mason University economist Alex Tabarrok attempted to "measure" federal regulation and come up with a numerical calculation as to the regulation in the country. This is surely an absurd attempt. It is econometrics gone totally insane. It is delusion on steroids.

Here is the absurd method used to "measure" regulation:
A few years ago, Tabarrok got a new toy to play with. Until recently, there was never great data available for researchers who wanted to empirically study the effects of regulation. But, in 2014, two other Mercatus Center research fellows developed a new public-use database called RegData, which captures everything published in the Code of Federal Regulations each year. Measuring regulation has always been surprisingly tricky, because when an agency puts out a rule, it can contain any number of new individual legal requirements. RegData addresses that problem by scrubbing the Code for key words such as “shall,” “required,” and “may not.” The theory is that this more accurately measures the number of regulations than simply counting the total number of pages in the Code, as past studies tended to do. RegData also uses artificial intelligence techniques to predict which industry each regulation will affect. The upshot is that, for the first time, economists could more confidently measure federal regulations over time and by industry. 
Does the case really need to be made that "Businesses shall not pay a wage less than $15.00 per hour" is a more restrictive regulation than "It is required that all business shall post the rights of workers at the place of work"? even though the latter regulation has more key words?

Yet, Tabarrok marched on with his absurd measure. The result? An outrageous story in Washington Monthly titled: The Libertarian Who Accidentally Helped Make the Case for Regulation.

The piece begins this way:
Alex Tabarrok is no one’s idea of a big-government liberal. A libertarian economist at George Mason University, he’s best known for cofounding Marginal Revolution, one of the most popular economics blogs on the internet. A deep skeptic of government bureaucracies, he has written favorably of private prisons, private airports, and even private cities.

That’s why a study he co-published earlier this year is so noteworthy. When Tabarrok and his former grad student Nathan Goldschlag set out to measure how federal regulations impact business growth, they were sure they’d find proof that regulations were dragging down the economy. But they didn’t. No matter how they sliced the data, they could find no evidence that federal regulation was bad for business.
-Robert Wenzel  


  1. I must be missing something, but a researcher was trying to measure the number of regulations... how did that jump to "a researcher proved that regulations have no impact!" It seems the Statist Monthly, er Washington Monthly, made quite the leap regarding his work. Dumb work or not.

  2. "No matter how they sliced the data, they could find no evidence that federal regulation was bad for business."

    Surely this must be a journalist misreading the study? If that really were Tabarrok's conclusion, he'd be in that illustrious group of economists who misses the "seen" part of Bastiat, never mind the next part.