A correspondent asks me if it isn't time to surf on over again to Donald Luskin's "Poor and Stupid" website, find some egregious offense against intelligent thought, and lay down another marker saying that Luskin is indeed the Stupidest Man AliveTM, just in case there's somebody out on the internet searching for information on Luskin who doesn't already know.
Sigh. OK. It's painful, though... Here's the very first item
Ah. Donald Luskin has taken down the post I was pointing to to show that he is indeed the stupidest man in the world. Well, here's another example. Here Luskin is outraged that http://Sportsbook.com/ is unwilling to lose lots of money by taking the sucker side of bets:
The Conspiracy to Keep You Poor and Stupid: GREED? MARKET EFFICIENCY? SAME THING! Betting in futures contracts on an online "prediction market" has been shut down, apparently because insiders who know the outcomes are heavily trading the contracts. Isn't this the whole point of prediction markets? To make predictions? Based on what knowledgeable people know?
Sadly, Donald, no. The point of running a gambling website is to entertain and so make money--not to lose money by taking the sucker side of bets against the better informed.
And here's what Paul Kedrosky has to say on the subject:
Paul Kedrosky's Infectious Greed: Online Betting is Too Accurate : Sportsbook.com shut off betting Friday on both Sports Illustrated's Sportsperson of the Year, and Time Magazine's Person of the Year. Why? Because it looked like the betting was tilting rapidly toward two candidates, quarterback Tom Brady and Mother Nature, respectively. So what, right? If the betting market is working, it is only to be expected it would tilt toward a smart choice. Maybe, but in this case some of the biggest action Friday was coming from folks who had email addresses at Time-Warner's (the owner of both magazines) PR agency. I have only one question: What insider could conceivably be so dumb as to make a heavy bet on such a prominent topic, and do it using their work email address? Truly amazing.
And here's the original item that he deleted:
The Conspiracy to Keep You Poor and Stupid : HMMM... Our friend John Grauel says:
You consider that there have been an average of 160,000 troops in the Iraq theater of operations during the last 22 months, and a total of 2112 deaths, that gives a firearm death rate of 60 per 100,000.
The rate in Washington D.C. is 80.6 per 100,000(1). That means that you are about 25% more likely to be shot and killed in our Nation's Capitol, which has some of the strictest gun control laws in the nation, than you are in Iraq.
Conclusion: We should immediately pull out of Washington D.C.
If Donald Luskin were not the Stupidest Man AliveTM, he would know that the DC figure of 80.6 is an annual figure, while the 60 figure is a monthly figure. 2112 deaths divided by 160,000 soldiers divided by 22/12 years gives an annual death rate of not 60 per 100,000 but 720 per 100,000.
But what is a factor of twelve to the Stupidest Man AliveTM?
(1) Note: This "80.6" itself appears to be about twice as large as the real number. But why am I not surprised?
But what I really want to do is to pull an item out of my archives--an item in which Luskin's stupidity provides us with an opportunity to teach some really important things:
I continue to shake my head in amazement as I consider the most bats--- ignorant thing I read all last summer: Donald Luskin's claim in National Review that in order to get a picture of income distribution and mobility in America:
Intellectual Garbage Pickup: you'd have to track hundreds of millions of individuals.... [N]one of this is reliable... the Panel Study of Income Dynamics... tracks only 8,000 families out of a U.S. population of 295 million individuals...
The whole purpose of the science of statistics is to tell us that this is simply not true. As long as you can take a random sample of your population, you can find out an enormous amount about the population from a relatively small number of observations. You can find out what proportion of rich people had poor paretns, or what proportion of twenty year olds think they will graduate from college, or pretty much any other average proportion that you want.
Now the "random sample" part of this is very important. But if your sample is random--if the fact that the yes-no pattern of observations so far makes it no more (or less) likely that you next observation will be a "yes"--then the law of large numbers tells us that the sample average you compute will converge to the true population average at a frighteningly rapid speed.
The standard demonstration of this is to repeatedly flip a coin and count the excess proportion of heads over tails. We know that--with a coin flipped and caught in the air by a human being at least--the population average taking all coins that have ever been flipped of the excess proportion of heads is zero. How many observations do we have to take--how many coin flips--before the sample average converges to this population average of 0% excess heads?
Let's see. Here's one run of 1,000 "flips" from Excel's internal random number generator:
Here are ten more:
Try some yourself.
You could have a population of 295 million flipped coins. Yet you don't need to look at "hundreds of millions" of them to determine what is going on. Looking at 1,000 will do.
This is the principal insight of the science of statistics. it is an important insight. It is a powerful insight. It is also not an obvious insight--that's what makes it powerful and important.