Grad school, illustrated

Tongue-in-cheek first lesson in econometrics (plus addendum):

http://www.uibk.ac.at/econometrics/lit/siegfried_jpe_70.pdf
http://www.latrobe.edu.au/__data/assets/pdf_file/0004/251869/2013.02.pdf

Variance, illustrated

Source: "There has been an increase in the mean body-mass index since the 19th century but even more strikingly there has been an increase in the variance, what we might call an increase in weight inequality."

Negative externalities, illustrated

Earth orbit debris: an economic model

Space debris, an externality generated by expended launch vehicles and damaged satellites, reduces the expected value of space activities by increasing the probability of damaging existing satellites or other space vehicles. Unlike terrestrial pollution, debris created in the production process interacts with firms' final products, and is, moreover, self-propagating. Collisions between debris or extant satellites creates additional debris. We construct an economic model to explore private incentives to launch satellites and to mitigate space debris. The model predicts that, relative to the social optimum, firms launch too many satellites and under-invest in debris mitigation technologies. We discuss remediation strategies and policies, and calculate a socially optimal Pigovian tax.

Globalization, illustrated

Source:

Confidence intervals, illustrated

If you resample very many times, and compute confidence intervals for each sample, then a 95% CI means that 95% of those intervals will capture the true pop. value of the random variable.

Also, the larger your sample, the lower your margin of error:

Algorithms, illustrated

Really just some illustrated math, but then again...

Agglomeration economies, illustrated

Demographic winter, illustrated

Source here.

Trade and commerce, illustrated

Spurious regression, illustrated

Source:

There is a quadratic relationship between the percentage of males in a country who smoke and per capita health care spending. The relationship is statistically significant, as is shown in the table on the right.

The moral of the story? Don't conclude anything from regressions on country-level data.

The problem with analyses like this one is shown in the picture below. There is a very strong positive relationship between a country's income and the amount of money that is spent on health care: as income increases, health care spending increases. There is also a relationship - though a more complex one - between income and smoking. The poorest of the poor cannot afford cigarettes. As income increases, smoking rates increase. But in the most affluent countries, rates of smoking are lower again.