Tag Archive | "Numbers"

Is Market’s Plunge Reason to Buy or Bail? (By the Numbers)


Hough: As investors fret, market fundamentals remain unchanged.


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Do Partisans Get Facts Wrong on Purpose? (By the Numbers)


Hough: A new study looks at how party loyalty relates to ill-informed debate.


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Do Political Partisans Get Facts Wrong on Purpose? (By the Numbers)


Hough: A new study looks at how party loyalty relates to ill-informed debate.

“Facts are stubborn things,” said John Adams in defense of British soldiers at the Boston Massacre trials, “and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.” Hear, hear. Sadly, American politics has grown so mindlessly combative of late that in surveys, party loyalists now routinely disagree even on hard facts.
The good news is that, although past studies suggested Republicans and Democrats know the truth but say instead whatever makes their party look good, fresh evidence indicates they’re genuinely misinformed (but still say whatever makes their party look good).

Governance is faith sprinkled with science. That’s why politics gives rise to party beliefs and physics does not. Newton’s laws of motion have agreed-upon consequences. Not so for the president’s new health-care law. To the free-market Republican, too much government interference in commercial medicine causes resources to be wasted and makes consumers worse off. To the social-safety-net Democrat, health isn’t an ordinary economic good because demand for it is rightly unlimited, so what is needed is the guidance of a visible hand.

Now, as the debate turns to financial reform, expect vigorous agreement that some change is needed — not even a banker’s mother would find today’s rules adequate — but bickering over the best way to achieve it.

Some things are knowable, though. For example, America’s unemployment rate has climbed sharply since 2007, no matter which survey we cite, or which politicians we like. The nation’s debt has swelled over the past year. The broadest measures of consumer prices show little change of late. Not even the feistiest rant of the most convincing commentator should change our minds on these things. However, it seems party affiliation can.

For example, the most closely watched unemployment rate in the U.S. declined during Ronald Reagan’s presidency, from 7.1% in 1980 to 5.5% in 1988. However, in a 1988 survey that asked if the rate had gotten better, stayed the same or gotten worse, only 30% of strong Democrats answered correctly, versus 80% of strong Republicans (and 70% of weak Republicans). Democrats also did poorly in answering whether the inflation rate increased. (It plunged.) Asked years later to recount improvements during Bill Clinton’s tenure, Democrats did much better. Republicans suddenly misstated the facts.

A 2007 Princeton study sought to shed light on this mystery using cash bribes. Participants were asked several questions with polarizing cues, like how the national debt changed during the presidency of George W. Bush. All groups knew it increased, but underestimated the amount. Republicans guessed lower than Democrats. However, Republicans who were offered a smidgen of pay for accurate answers, guessed closer to the truth than those who weren’t. This pay effect didn’t show up in all questions, and it was much smaller than the party bias effect, but it raises a fascinating question. Are we all just pretending not to know things to better support our arguments?

Maybe not. In a new paper presented at this year’s meeting of the Western Political Science Association, a trio of Yale professors describe the results of a broader study in which one group was offered pay for correct answers, another group was told its questionnaires would be scored and returned, and others were given neither or both of these conditions. The party bias was as strong as ever, but bribed and scored respondents did no better or worse than others.

Thank goodness we’re merely ignorant. I was beginning to worry we’re liars.

Jack Hough is an associate editor at SmartMoney.com and author of “Your Next Great Stock.

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Selling a House? Try to Avoid Zeros (By the Numbers)


Hough: Numbers psychology can help lure buyers, a study suggests.


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Emerging-Market ETF Numbers Spike


Emerging-market exchange-traded funds multiplied at an unprecedented pace over the past two quarters after a record-breaking rise in emerging market stocks in 2009. As the industry matures, investors can increasingly buy country or sector-specific ETFs to gain the exact exposure they want.


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cXVpY2tpbnZlc3QubmV0L3dwL3dwLWNvbnRlbnQvd29vX3VwbG9hZHMvNC1xLmpwZyI7aTozO3M6NjE6Imh0dHA6Ly9xdWlja2ludmVzdC5uZXQvd3Avd3AtY29udGVudC93b29fdXBsb2Fkcy8zLXFpbG9nby5qcGciO308L2xpPjxsaT48c3Ryb25nPndvb192aWRlb19jYXRlZ29yeTwvc3Ryb25nPiAtIFNlbGVjdCBhIGNhdGVnb3J5OjwvbGk+PC91bD4=