Eliminate Ballyhoo‏, by Jeff Watson

October 25, 2011 |

In the quest for the truth and the elimination of ballyhoo, one must get through all the BS to find the kernel of truth. Here is a very important glossary of mathematical mistakes that are commonly seen in the popular culture and often repeated as the absolute truth.

http://members.cox.net/mathmistakes/glossary1.htm

It would be an interesting exercise to see what we can add to the list, either in the popular culture arena, or market lore.

Ralph Vince comments:

How about (cultural ballyhoo) "After all, we're a very litigious society!" (this is usually accompanied by the reminder of some anonymous woman scalded by coffee at McDonalds being awarded an amount so ghastly that poor McDonalds will have to make up that amount against the rest of us somehow!)

I would posit we are not litigious enough. One need only sit in any municipal court or state appellate court for a couple of hours and see the litany of individuals being hauled before the altars of justice by the financial institutions or the paint manufacturers whose lead was ubiquitous, or any other host of entity vs the individual going on. Truly, I almost NEVER see an individual as plaintiff in one of these unless they are going after another individual. The vast majority of what goes on in the courts WE PAY FOR are actions brought by those who do not pay for these courts, against our neighbors.

Yet, our class action rights are eroded under our noses repeatedly and recently. The only ones in favor of so-called "Tort Reform," are the insurance companies. The medical professionals who think they will financially benefit by this are delusional. The delusion is further propagated to the hoi polloi under the even falser notion that the medical community will share these newfon legislated riches amongst us.

Rocky Humbert writes:

After reading this, it's unclear to me whether Ralph is in favor of, or opposed to, tort reform.And, arguably, he's guilty of a bit of cultural ballyhoo here. He writes, "The only ones in favor of so-called "Tort Reform," are the insurance companies."At a macro level, it's not obvious why insurance companies should necessarily support tort reform (or even care about it.) Insurance companies raise premiums to offset the costs of litigation. Their profits (the combined ratio) are the "spread" between premiums earned and the settlements paid.

If the costs of litigation decline, so will premiums — and if there were serious tort reform, it might actually damage insurance companies, since their products would no longer be required!!If there were no tort litigation, insurance companies might go out of business en masse!!! The visible and direct costs of litigation (to which Ralph alludes) are minuscule compared to the invisible costs. The invisible costs include the innovation and investment which are forgone because of the FEAR of litigation; the incalculable dead weight loss; the practice of defensive medicine which wastes resources (and which applies to other industries as well).

"Loser pays litigation costs" combined with allowing third parties to finance and benefit from winning litigation — would be a fine first step towards balancing the scales between plaintiffs and defendants. But to suggest that insurance companies actually want tort reform ignores their raisson d'etre.

Stefan Jovanovich comments:

Ralph omits the largest part of the litigiousness of our society, which I pray will be largely eliminated some day - the criminal justice system. Since misdemeanors rarely go to trial, they will be absent from the municipal court dockets; and state appellate courts are usually not the best venue for criminal appeals (the Feds are usually better) so Ralph may not have had a chance to see how much of the "justice" system is about law and order.

A visit to any Superior Court or Federal District Court would probably change his view; at present, the largest single obstacle to an individual seeking civil damages is that their right to a speedy trial is non-existent.As one defendant put it, "The United States of America versus Alphonse Capone! What kind of odds are those?"

Ralph Vince responds:

Rocky,

I'm not an attorney — and I AM a little over-impassioned about the subject, so don't be surprised by my phreneticism here on this subject, ok? I am utterly opposed to this (altogether speciously misnomered) "Tort Reform," idea!

Where you say ". If the costs of litigation decline, so will premiums," I could NOT disagree more. When the Bankruptcy Act of 2005 was passed (presumably, among other things, so that the costs financial institutions were having to suffer as a consequence of personal bankruptcies not be passed along to the rest of the peons like me) did we see credit card interest rates reduce as as result? Did we see banking fees come down? No, the margin gained by such legislation accrued to the banks.

Profits ONLY flow upwards. Those paying down here do not participate in profits. If we did, those $150 running shoes made in Jingalia would only cost us about ten bucks.

The notion of a frivolous lawsuit is something cast in sand, and something the courts can deal with already via sanctions, etc. Just try to get an attorney to take a patently frivolous lawsuit to court — or see what happens if a non-attorney attempts one pro-se. They will be clobbered by the courts.

In fact, I say to the average Joe F. Blow out there, just try to take his NON-frivolous lawsuit to court. Go see how easy that is. Go see what the typical attorney will require of you up front. He is already, effectively blocked from the system, Bleak-Housed out from the very courts his tax dollars pay for. And again, if you take from people their venue for settling disputes in a civil manner, they are then likely to settle them in an uncivil manner. What is wrong with allowing people the venue of settling their disputes?

Our courts are NOT clogged incidentally. These are not a natural resource of finite size. If we need more courts — set em up. More insane judges. No problem. Homer Simpson is a little sick of sitting at that control panel at the nuclear facility, he can sit on on the bench for us.

Finally, when I speak of profits only flowing upwards, I don't mean it with respect to tort reform alone. The notion is integral to the specious arguments we are subject to every day to try to stifle our abilities of thinking critically for ourselves (I am not referring to you personally here, you seem to do so quite well except when it comes to your interactions with women). We hear repeatedly how free trade brings the cost of goods down (taking away US jobs) or how if we don;t have illegals picking our produce that tomato will cost 5 bucks.

Nonsense. Perhaps there is a scenario, but I cannot think of one wherein Joe F. Blow benefits because the cost to producers is reduced legislatively. To do so but taking Joe's right to settle his disputes — against individuals AND entities — away from him, is the real crime.

Stefan Jovanovich responds:

Neither Ralph nor I is an attorney, but I am guilty of having been one in California for nearly 4 decades. I stopped being one when the State Bar of California decided that it has absolute jurisdiction over any commercial transaction of my companies simply because I was an officer of the court. What that meant in practical terms was that any business partner or even customer could claim I owed them a fiduciary duty as a lawyer even if our dealings were purely commercial. As W.S. Gilbert put it, "here's a pretty mess". Eddy's Mom and I decided that resignation was the better form of valor. It took us nearly 2 years from the Supreme Court's clerks to decide we really meant it; the last letter we have from them is one suggesting that we might want to reconsider because we would be losing all the member benefits - i.e. access to State Bar of California credit cards and life insurance.

The greatest obstacle to "the average Joe F. Blow" is the current system of pleading; it is archaic to a degree that would astonish Lincoln or any other railroad lawyer of the 19th century. David Dudley Field would not be amused, especially since his reforms were adopted in Britain with much greater success than they have been in the United States.

http://en.wikipedia.org/wiki/David_Dudley_Field_II

http://en.wikisource.org/wiki/The_Mikado/Here 's_a_how-de-do

Ralph Vince writes:

Stefan, we evidently live in different universes. I routinely get called to jury duty in Cuyahoga County, Ohio, losing a week every two years. This is a court for monkeys.I have been through that system on the wrong side. Ex-parte rulings, convicted judges, FBI swarming, lower court transcripts LOST going to the appellate courts, corrupt clerk of courts, corrupt sherrif's dept., (all have plead guilty), routine over-charging of defendatns hoping for the routine, gullible jury, etc.

I will tell you what I tell the prosecutor in voie dire. "There's no way in hell you will get me to convict my fellow man of anything. Bring in the DNA evidence, the video, of this child-molesting cop killer. I wont convict anyone here in monkey court."Then….the resultant litany of threats levied upon me. I do my week and I go home. At least where I am here, in this universe, there is NOTHING WHATSOEVER about "Justice."

Comments

1 Comment so far

Don Chu on October 27, 2011 12:01 pm
Having good math skills can be important in life; perhaps even important enough to make a difference in income levels.

Here is an article uniting the topics of economic production, mathematical ability/education, tax codes and regression fallacies, discussed previously around here I think.

From yet another Bloomberg article and analysis. Fallacy or not, the attached graph (showing the correlation between the logarithm per-capita income levels in 2010 and math PISA test scores in 2009) is worth if not a thousand, at least quite a fair amount of words:

Education, Not Tax Cuts for Economic Growth: Fallacious?

…

I’m all for sensible tax reform, but prosperity depends far more on our skill base than on cutting tax rates that are already low by international standards. If the Republicans want to battle for a more prosperous, and stronger, country, they must start spending a lot more time fighting the failures of American education.

The attached figure shows the correlation between the logarithm per-capita income levels in 2010 and math PISA test scores in 2009. The Organization for Economic Cooperation and Development’s Program for International Student Assessment, known as PISA, tests 15-year-olds in a range of generally prosperous countries, and takes on values from 200 to 800 (similar to the math SAT). Tests are also given for reading and science — the scores are quite closely correlated across subject area — but the math results are the best predictor of incomes across countries.

…

The graph illustrates that a 46-point test score increase, which is about 10 percent of the average score across countries, is associated with an increase of more than 90 percent in country level incomes. The test score variable can explain, in a statistical sense, the lion’s share of income differences across these countries.

Empirical Evidence

Although it’s sensible to be a bit skeptical about figures like this, there is a long and distinguished literature linking education with economic outcomes at the individual, country and metropolitan area level. Economists have found that earnings rise with education even among identical twins and that randomly getting a better kindergarten teacher produces higher adult earnings.

…

All in all, the link between education and prosperity is about as solid as anything in the social sciences.

By contrast, the statistical link between tax rates and prosperity is far weaker.

…

But empirical studies, compromised by a host of tricky statistical issues, have typically found a murky relationship between government size and economic growth. U.S. tax cuts also typically appear to have modest impacts on economic activity.

…

Skill Deficit

I support smart reform in all these areas, but if we fail to address the primary issue — our skill deficit — we’re fiddling while the country declines. Indeed, the figure shows that U.S. wages are already high relative to our skill levels. The big challenge is to ensure that Americans have the tools to thrive in an information age.

Our current PISA math scores put us in the middle of the pack. We’re on a par with Portugal, ahead of Italy and Azerbaijan, and behind Hungary and Slovenia. We’re far behind countries such as South Korea and Singapore.

Why should we expect an American with limited skills to earn dramatically more than an equally skilled counterpart in China or India? An American consultant doesn’t expect to earn a wage premium for advising an Indian company just because she’s from the U.S.

…

Americans will earn what our talents produce. Any Republican or Democrat who wants to repower our economy must recognize that the nation’s future depends on its human capital, far more than infrastructure or energy or finagling with the tax code.

–Edward Glaeser

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