Asymmetrical Information - Megan McArdle

11.01.12

Treat the Symptom, Not the Measurement

We are seduced by numbers to look away from reality

Tyler Cowen is uneasy:  

I get uneasy when I read sentences such as “inequality caused X.” “Inequality” didn’t cause anything.  Inequality is a statistical residue of some other actual processes.  It is better to say what caused X (say “the rage and poverty of inner city residents”) and, if relevant, connect this to inequality as well.  Except that the cyclically adjusted deficit is an even more problematic causal concept than “inequality” because it relies on measurement of a modal, namely potential output.  

A common complaint among patient groups is doctors who "Treat the numbers, not the patient".  Thyroid patients used to be given thyroid hormone until their symptoms stopped.  Then we developed the ability to test for thyroid stimulating hormone, which your body produces when it's not getting enough action from your thyroid.  High levels presumably mean low thyroid hormone, as your body keeps prodding your thyroid to get moving.  Guidelines were developed: hypothyroid was anyone with TSH higher than 5.  You might be desperately fatigued, growly-voiced, overweight, and losing all your hair, but if your TSH was 4.9 it was "normal" and your doctor would tell you to get on the treadmill and stop eating so much, fatty.  They were treating a snapshot of a blood level, not the disease.  So a lot of patients stayed sick. 

We're constantly in danger of doing that with the economy, because the stuff that we can measure is not necessarily the stuff that is wrong.  But it's easy to talk about the stuff that we can measure, and it certainly seems easier to build policy around it--even if, as in the case of our undertreated thyroid patients, we're not actually affecting the problem very much.  

Inequality is a number on a page; you could alter that number without necessarily making anyone obviously better off. The important questions are about the processes and effects that inequality involves.  

Do the wealthy get political privileges that the rest of us don't?  I'd argue that this is not as true as people think.  

Do the children of the wealthy get opportunities while the children of the poor get stuck in a marginal job market where it's hard to get ahead?  I'd argue that this is true, that it's getting worse, and it matters a whole lot.  

Do the wealthy get to live in nicer houses and drive nicer cars than the poor?  Yes, but I'm not sure how much this matters.  I find the absolute quality of the housing stock and cars available to the poor much more important than the relative fanciness.  Are their abodes warm and dry and safe?  Are their cars reliable?  As PJ O'Rourke once remarked, "The biblical injunction is to clothe the poor, not style them."  You can argue that the poor do not have enough--enough safe homes, education, health care, reliable automobiles, etc.  But they wouldn't have enough even if Bill Gates lost half his money.  

Are the jobs available to the poor decent jobs, capable of supporting a family, and a decent family life?  That's the million dollar question.  And there is no number that will tell us the answer.