Tag Archives: data

Can You Have Theory Without Data?

A bit of philosophizing in this post — if that’s not for you, avert your eyes!

In response to Paul Krugman’s thoughtful post in which he comments on the relationship between data and theory, Noah Smith says that you can’t have theory without data:

A theory is always about something that you think is going on in the world, so you can’t have something to theorize about without first seeing something happen in the world (i.e. data). For example, suppose my theory – which I deduced from some sort of a priori assumptions – is that watching Charlie Kaufman movies ruins one’s sex life. I couldn’t have made that theory without observing the existence of Charlie Kaufman movies.

Hmm. I see Noah’s point: generally our economic theory has some grounding in reality — economists don’t usually theorize about flying purple elephants (though I’ve read set-theory questions that do make claims about flying purple elephants; I’ll spare you). But Noah is kind of stretching the definition of data as it is applied in economics. Sure, that Charlie Kaufman movies exist is technically a piece of data that we observe, but it is not data that we have collected for the purpose of analysis.

One can theorize plenty without that kind of data. I could very easily make up an industrial organization model without having any prior data (this would be easier to make up without data than making up a model of the macroeconomy, about which I have bits of data floating around in my head). And technically, I suppose it would be based on data I’ve seen in my work life and the bit of facts I’ve collected through the years. But it most certainly would not be based on datasets collected by economists or statisticians. In other words, I could build a perfectly functioning model without any more than the bits of facts I’ve collected in my head.

And, technically, if I wanted to push the envelope a bit, I could come up with an economic model about things I have never observed, things that I just made up in my head. That is, I could make a theory without data. Say, for instance, I was interested in the flying purple elephants I mentioned earlier because, while I have never seen one myself, I believe they exist. I could make a well-functioning model that describes how they choose between labor and leisure. Now there’s a model with no data at its foundation.

So, contra Noah,  I would say than you can theorize without data, though it’s probably not a common practice in economics because even the pure-theory papers are usually based on at least a little bit of data.

How to Dismantle a Gross Domestic Product

This post isn’t going to be so much about some great insight (in fact, there’s nothing totally new in here at all). It’s about an observation I made that I never really spent too much time thinking about before, and I figured chances are some others might find this interesting as well. The basic realization I had was this: the US and Europe (or, more accurately for my purposes, the Eurozone) both cover massive areas of land, inhabited by millions of people. Yet for one of them, we get one ‘core’ statistic: US GDP. For the other, we get 17 different national GDP figures, one for each member state. Imagine the news stories if instead of focusing on Greece (Greece, I tell you!), we focused solely on aggregate Eurozone GDP vs. US GDP:

I mean sure, the US gets going much faster and the Eurozone has a double dip recession, which is a fundamental difference. And it’d still make for bleak forecasts and depressing headlines. But it’s not nearly looking as bad as Spain, Italy or Greece do when compared to the US individually:

The difference is even stronger when looking at unemployment (feel free to check FRED, but this post really can’t take any more graphs than these two and the next one). The Eurozone as a whole stacks up a lot better compared to the US than some of its members do on their own. So I’ve been asking myself why it is that we choose to look at the GDP and unemployment figures of single European countries instead of looking at the Eurozone as a whole. Likewise, why is it that we choose to look at aggregate US GDP, instead of dividing that up by state?

It’s not that the US moves totally in tandem, and so policy recommendations wouldn’t differ depending on which measure you use. There are really strong differences in states’ reactions to the financial crisis:

Michigan not looking so great, and even California wasn’t quite back on track in 2012 (these data tend to be available a little later than the aggregate figures for the US as a whole). But look at Texas, only a short period of stagnation (beginning before the crisis), and that’s basically it. And North Dakota just breezes past everybody else, not even noticing the crisis.

If these states had all had separate central banks and fully independent governments, I’d wager their reactions to the crisis would have been vastly different. Yet because the US has a federal government, they all implemented the same policy. They all got the same federal funds rate, the same QE, and the same stimulus bill. Which means that this policy probably wasn’t exactly ideal for any of them.

Europe didn’t really have individual policies either, because there’s only one ECB and austerity measures were enacted across the continent. Which definitely wasn’t ideal for anybody (by a long shot).

I don’t want to discuss here whether the aggregate figures are better or worse than the more detailed state-level figures. I haven’t thought about this enough myself to really render judgement here. At this point, I just find it fascinating to see how big the differences in GDP movements are when looking at either aggregate or lower-level measures. And maybe someone else shares that sentiment.

Are You Aware of the Risk of Using Smartphones?

We use wi-fi every day, in school and at home. But is it really secure to use wi-fi? Recently, more and more people are aware about the wi-fi risk we are experiencing, but what secrets actually our phone is sharing about us? According to WSJ, companies now use sensors to track shoppers as they move in the city. The sensors, each about the size of a deck of cards, follow signals emitted from Wi-Fi-enabled smartphones. That allows them to create portraits of roughly 2 million people’s habits as they have gone about their daily lives, traveling from yoga studios to restaurants, to coffee shops, sports stadiums, hotels, and nightclubs.               (What Secrets Your Phone Is Sharing About You)

A company named Turnstyle in Canada is using this technology more broadly to follow people where they live. They collect people’s names, ages, genders and social media profiles when they log in Facebook. People are completely exposed to the public in this way. The websites they use, the food they prefer and people’s secrets they want to hide, nothing could be hidden in technology.

Another great concern is about location data. We use Google map every day and it makes our life easier especially we go to somewhere not very familiar. During travelling, I use it every time I want to find my next location. Nowadays, I cannot even imagine how people traveled in the past since they didn’t have Google map and smartphones. Paper maps are clearly not convenient to search for small spots on the way.

However, Google apps have the ability to periodically track our location, regardless of whether we are using them or not. The fact that Google is sorting this data, associating it with your account and making it accessible to a user-friendly format is largely in character with the search giant’s approach to data collection. What we should afraid is how Google uses those data. (Google Remembers Where You Were)To make a better Google service of course, but they do provide those data to other services. For example, advertisements shown on the phone always the ones we are interested in. But why? It’s because of our browsing history which is collected by other servers.

With time passing by, perhaps our phone knows us better than ourselves by collecting all our behavior’s data. It’s not a good thing for us since we don’t want us to be exposed to unknown people and companies, but we could not avoid such sort of things.

Everything has its pros and cons, if we really care about our information, the only choice is not to use wi-fi, phones or internet. Obviously, it’s impossible. So just let it go, take advantage of our technology convenient life.