Adaptive partial policy innovation: coping with ambiguity through diversification

This paper develops a broad theme about policy choice under ambiguity through study of a particular decision criterion. The broad theme is that, where feasible, choice between a status quo policy and an innovation is better framed as selection of a treatment allocation than as a binary decision. Study of the static minimax-regret criterion and its adaptive extension substantiate the theme. When the optimal policy is ambiguous, the static minimax-regret allocation always is fractional absent large fixed costs or deontological considerations. In dynamic choice problems, the adaptive minimax-regret criterion treats each cohort as well as possible, given the knowledge available at the time, and maximizes intertemporal learning about treatment response.

Economic Analysis of Social Interactions

Economists have long been ambivalent about whether the discipline should focus on the analysis of markets or should be concerned with social interactions more generally. Recently the discipline has sought to broaden its scope while maintaining the rigor of modern economic analysis. Major theoretical developments in game theory, the economics of the family, and endogenous growth theory have taken place. Economists have also performed new empirical research on social interactions, but the empirical literature does not show progress comparable to that achieved in economic theory. This paper examines why and discusses how economists might make sustained contributions to the empirical analysis of social interactions.

Statistical Treatment Rules for Heterogeneous Populations: With Application to Randomized Experiments

This paper uses Wald's concept of the risk of a statistical decision function to address the question: How should sample data on treatment response be used to guide treatment choices in a heterogeneous population? Statistical treatment rules (STRs) are statistical decision functions that map observed covariates of population members and sample data on treatment response into treatment choices. I propose evaluation of STRs by their expected welfare (negative risk in Wald's terms), and I apply this criterion to compare two STRs when the sample data are generated by a classical randomized experiment. The rules compared both embody the reasonable idea that persons should be assigned the treatment with the best empirical success rate, but they differ in their use of covariate information. The conditional success (CS) rule selects treatments with the best empirical success rates conditional on specified covariates and the unconditional success (US) rule selects a treatment with the best unconditional empirical success rate. The main finding is a proposition giving finite-sample bounds on expected welfare under the two rules. The bounds, which rest on a large-deviations theorem of Hoeffding, yield explicit sample-size and distributional conditions under which the CS Rule is superior to the US rule.

Fractional Treatment Rules for Social Diversification of Indivisible Private Risks

Should a social planner treat observationally identical persons identically? This paper shows that uniform treatment is not necessarily desirable when a planner has only partial knowledge of treatment response. Then there may be reason to implement a fractional treatment rule, with positive fractions of the observationally identical persons receiving different treatments. The planning problems studied here share some important features: treatment is individualistic, social welfare is a strictly increasing function of a population mean outcome, and outcomes depend on an unknown state of nature. They differ in the information that the planner has about the state of nature and in how he uses this information to make treatment choices. In particular, I compare treatment choice using Bayes rules and the minimax-regret criterion. Following the analysis, I put aside the literal notion of a planner who makes decisions on behalf of society and consider the feasibility of implementing fractional treatment rules in functioning democracies.

Academic Ability, Earnings, and the Decision to Become a Teacher: Evidence From the National Longitudinal Study of the High School Class of 1972

Perceived shortcomings in the quality of American education at the elementary and secondary school levels have drawn much public attention recently. In particular, concern with the composition of the teacher force has been prominent. Informed assessment of the various proposals for increasing the quality of the teaching force is possible only if we can forecast the extent to which these proposals, if enacted, would influence the occupational choice decisions of high ability young adults. Until now,there has been no basis for making such forecasts.The research reported here examines the relationships between academic ability, earnings, and the decision to become a teacher through analysis of data from a national sample of college graduates. Inspection of the data reveals that the frequency of choice of teaching as an occupation is inversely- related to academic ability. Conditioning on sex and academic ability, the earnings of teachers are much lower, on average, than those of other working college graduates. Conditioning on sex, the earnings of teachers tend to rise only slightly, if at all, with academic ability. An econometric analysis suggests that in the absence of a minimum ability standard, increases in teacher earnings would yield substantial growth in the size of the teaching force but minimal improvement in the average academic ability of teachers. If teacher salaries are not increased, institution of a minimum ability standard would improve the average ability of the teaching force but reduce its size. The average ability of the teaching force can be improved and the size of the teaching force maintained if minimum ability standards are combined with sufficient salary increases. It appears that the average academic ability of teachers can be raised to the average of all college graduates if a minimum SAT score (verbal +math) of 800 is required for teacher certification and teacher salaries are raised by about ten percent over their present levels.

The influence of storing high moisture-content rough rice on milling quality

The objective of this research was to determine the influence on drying characteristics of storing high-moisture content (MC) rough rice under various conditions and durations before drying. Two cultivars of rice, \u27Bengal\u27, a medium-grain cultivar, and \u27Cypress\u27, a long-grain cultivar, were used. The MC of \u27Bengal\u27 was 24.8%1 and that of \u27Cypress\u27 was 20.4% at harvest. Immediately after harvest, drying runs were performed with samples of both cultivars under two drying air conditions: one at 51.7°C (125°F) and 25% relative humidity (RH), and the other at 60°C (140°F) and 17% RH. Storage treatments using the high MC rice were also initiated immediately after harvest. Both cultivars of rough rice were stored for one month (i.e., 27 d) and three months (i.e., 76 d) in either a walkin freezer at –9°C (15°F), a household refrigerator at 3.5°C (38.3°F) or a walk-in cooler at 4°C (38.5°F). After one month and three months of storage, all samples were dried under the same two drying air conditions as at harvest. The head rice yield (HRY) was determined for all the dried samples. There were no differences in the HRYs of samples that were stored for one or three months and then dried and in those HRYs of samples dried immediately after harvest; this finding was consistent across the three storage temperatures for both cultivars. The trends in HRY reduction were similar to previously reported drying trials using these drying air conditions. This research indicates that it is possible to store rough rice at high MCs for up to three months under storage temperatures varying from –9°C to 4°C without affecting HRY

Private and Social Incentives for Fertility: Israeli Puzzles

Whereas most of the world has experienced decreasing fertility during the past half century, Israel has experienced a puzzling mix of trends. Completed fertility has decreased sharply in some ethnic-religious groups (Mizrahi Jews and non-Bedouin Arabs) and increased moderately in other groups (non-ultra-orthodox Ashkenazi and Israeli-born Jews). In a phenomenon that can only be described as a reverse fertility transition, fertility has increased substantially (from about 3 to 6 children per women) among ultra-orthodox Ashkenazi and Israeli-born Jews. This paper explores how private and social incentives for fertility may have combined to produce the complex pattern of fertility in Israel. Theoretical analysis of the social dynamics of fertility shows that this pattern could have been generated by the joint effects of (a) private preferences for childbearing, (b) preferences for conformity to group fertility norms, and (c) the major child-allowance program introduced by the Israeli government in the 1970s. Econometric analysis of fertility decisions shows that fundamental identification problems make it difficult to infer the actual Israeli fertility process from data on completed fertility. Hence we are able to conjecture meaningfully on what may have happened, but we cannot definitively resolve the Israeli fertility puzzles.

How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers

The Michigan Index of Consumer Sentiment (ICS) and other indices of consumer confidence are prominent in public discourse on the economy but have little presence in modern economic research. The sparsity of modern research follows an earlier period when economists scrutinized in some depth the methods and data used to produce consumer confidence indices. The literature to date has focused on the predictive power of the survey data used to form the indices; there has been very little study of their micro foundations. This paper analyzes the responses to eight expectations questions that have appeared on the Michigan Survey of Consumers in the period June 2002 through May 2003. Four questions elicit micro and macroeconomic expectations in the traditional qualitative manner; two are components of the ICS. Four questions use a percent chance' format to elicit subjective probabilities of micro and macroeconomic events; versions of these questions have previously appeared in the Survey of Economic Expectations.

Confidence intervals for partially identified parameters

In the last decade a growing body of research has studied inference on partially identified parameters (e.g., Manski, 1990, 2003). In many cases where the parameter of interest is realvalued, the identification region is an interval whose lower and upper bounds may be estimated from sample data. Confidence intervals may be constructed to take account of the sampling variation in estimates of these bounds. Horowitz and Manski (1998, 2000) proposed and applied interval estimates that asymptotically cover the entire identification region with fixed probability. Here we introduce conceptually different interval estimates that asymptotically cover each element in the identification region with fixed probability (but not necessarily every element simultaneously). We show that these two types of interval estimate are different in practice, the latter in general being shorter. The difference in length (in excess of the length of the identification set itself) can be substantial, and in large samples is comparable to the difference of one — and two—sided confidence intervals. A complication arises from the fact that the simplest version of the proposed interval is discontinuous in the limit case of point identification, leading to coverage rates that are not uniform in important subsets of the parameter space. We develop a modification depending on the width of the identification region that restores uniformity. We show that under some conditions, using the estimated width of the identification region instead of the true width maintains uniformity.