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9 What the Sizeless Stare Costs, Economically Speaking The economic approach seems (if not rejected owing to aristocratic or puritanic taboos) the only device apt to distinguish neatly what is or is not contradictory in the logic of uncertainty. bruno de finetti 1971, 486–87 You cannot “test” mechanically for nonzero along some scale that has no dimension of substance and cost. How many molecules do you suppose you share with William Shakespeare? We mean molecules in your body that were once in his? Surprisingly, the correct answer, in view of the immense number of molecules in a human body and the operation of decay and Brownian motion, is “quite a few.” But for most questions—such as “What is the chance I will be the next Shakespeare?”—the correct answer is “negligible; roughly zero.” Real scientific tests are always a matter of how close to zero or how close to large or how close to some parameter value, and the standard of how close must be a substantive one, inclusive of tolerable loss. If the Employment Subsidy Is Good for White Women, Then . . . Testing economic hypotheses in no particular dimension yields a spacedout economics, and points to the wrong policies. Consider, for example, an article in the American Economic Review in the 1980s that estimated benefit-cost ratios in an Illinois experiment concerning unemployment insurance . We have mentioned it several times. In brief, the experiment paid 98 a cash bonus for giving an unemployed person a job (September 1987). In the so-called Employer Experiment the firms were given “a marginal wage-bill subsidy, or training subsidy, . . . [in order to] reduce the duration of insured unemployment” (517). In the control group the workers were paid the same subsidy, only this time the check was mailed directly to their homes. The main benefit of the training subsidy from the point of view of the state of Illinois was the reduction in unemployment benefits needed once the worker is back in employment. To this should be added, among other things, the benefit in the self-respect of the worker and the amount her labor adds to state economic output. But suppose we consider only the simplest cash accounting, as it appears the authors did. The “cost” of the experiment was the dollars of tax money spent on the subsidy. So a benefit-cost ratio of 4.29 means that the state saved $4.29 for each dollar it spent. Here is how the authors interpreted their findings: “The fifth panel . . . shows that the overall benefit-cost ratio for the Employer Experiment is 4.29, but it is not statistically different from zero. The benefit-cost ratio for white women, . . . however, is 7.07, and is statistically different from zero. . . . The Employer Experiment affected only white women” (1987, 527; italics supplied). The 7.07 ratio “affects,” they said, the 4.29 did not. This is a mistake. The best guess of the researchers was that the state got $4.29 for every dollar spent. The estimate was fuzzy, speaking of random sampling error alone. But that does not mean it is to be taken as zero. The program worked very well. By reporting that the 4.29 ratio was not “significant,” and therefore supposing that it was in fact zero, and therefore not telling the policymakers that they should use it, the economists hurt the taxpayers of Illinois and immiserized the unemployed. A fair question to ask of the Illinois experiment is how noisy? Just how weak was the signal-to-noise ratio, assuming that one thinks the measure is captured by the calculations of sampling error? The answer underscores the arbitrariness of Fisher’s 5 percent ideology—the Type I error was about 12 percent (p ⱕ .12). That is to say, the 4.29 benefit-cost ratio was in the pilot study statistically significant at about the .12 level. In other words, the estimate was not all that noisy. A pretty strong signal for a very strong employment program. It was ignored. By contrast, Joshua D. Angrist (three scores of Good in the 1990s) does well, in his “The Economic Returns to Schooling in the West Bank and Gaza Strip” (1995, 1065–1087), asking a question of oomph right from the outset. “Until 1972,” Angrist writes, “there were no institutions What the Sizeless Stare Costs ⱐ 99 of higher education in these territories. . . . By 1986, there were 20 institutions granting post-high school degrees in the territories. As a consequence , in the...

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