Tuesday, March 07, 2006

Extraordinary Claims Vs. Evidence

by Tom Bozzo

If you want to establish the proposition that the housing boom has been a relative bust for the real estate selling trade (summarized here at the Freakonomics site), you might just want to characterize:
What's arguably a more interesting implication of the real estate sales employment boom, given how we've lately been regaled with tales of the deleterious effects of professional licensing requirements — which, often, I see as a "stationary bandit" function of government — is that the combination of state licensing requirements and a trade association in antitrust trouble hasn't done more to restrict entry. This is actually a puzzle noted in this research (props to Levitt and Dubner for providing a public link to the background research). It seems fairly obvious, though, that the association-level (and arguably real estate firm-level) drive would be to preserve the size of the pot of commissions by defending the traditional commission rates.
If you told me that (1) there was a sudden influx of salesmen and (2) there was an increase in turnover that was less than the influx of salesmen, I would not be inclined to claim that a decline in median income reflected a decline in income.

Many of us made less money, especially inflation-adjusted from 2001 to 2004; that the median went up doesn't mean we all benefitted.

An economist who uses the median as his benchmark when the underlying dataset has shifted significantly is not one to be trusted.
Levitt and Dubner were annoyingly imprecise as to whether they were uniformly reporting medians versus a mix of medians and means; the paper that was in part their source (which I'm still wading my way through) is also less than crystalline.

As to your final comment, amen. That the dataset has not only shifted significantly but is also almost surely multimodal makes comparisons based on central tendency measures even less meaningful.
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