Every once and a while, a few individuals come out with a study that gives econometrics a bad name (debate is found here and here). The UPI reports:
A recent study found that people who go out drinking with coworkers tend to be more successful, the Los Angeles Times reported.
The research, done by two economists, concluded that social drinkers can earn up to 14 percent more than those who abstain or drink alone.
[...]
“It’s true you get to know people on a more personal level during happy hours and other social events, and you may learn where opportunities for advancement lie,” said Jennifer Sullivan, a spokeswoman for CareerBuilder.com, an online job search company partly owned by Tribune Co., the parent company of the Times.
This is a prime example of correlation versus causation. The study claims that social drinking leads to better social networking and thus better opportunities and higher incomes. However, as this slippery slope suggests, there is something else at work.
Alcohol is a normal good. This means that as income increases consumption of alcohol increases and vice versa. An article in the International Journal of Epidemiology demonstrated this roughly nine years ago when it found that the impact of unemployment was not statistically significant with respect to alcohol consumption. In other words, individuals do not drink more when they are unemployed (i.e. have lower levels of income).
The impact of drinking on income is merely as a result of correlation. Those with more disposable income are likely to spend more money on alcohol. It is not the consumption of alcohol that leads to higher levels of income. In fact, it is just the opposite.
This is just one more example of the manipulation of the wage equation. Unfortunately, it is studies like these that lead intelligent individuals such as Don Luskin to condemn econometrics as a “pseudo-science”.
But we that freely go forth and give them all that they ever wanted and they that will go from their rags to their riches all by themselve say yes to importing more while exporting nothing. It will be all more prosperous but deficit spending by any other name is still a chapter 11 by any other name and spreading more of the wealth around where there is none to be found is doing more than going out of business. You are out of business.
I was about to call the first comment a string of non sequiturs, but that couldn’t begin to approach describing that uncohesive string of English words.
Presumably he’s talking about the trade deficit, when in fact advanced countries experience trade deficit growth during economic expansion, and trade deficit shrinkage during economic contractions. As Daniel Griswold of Cato and others point out, the United States’ trade deficit is a symptom of its economic strength.