Down With Crap Research

Here is a post on demographics. CalculatedRisk sums it up well:

This is probably another reason many boomers will never retire

I agree with the general sentiment here, but will quibble nonetheless.

The study correlates one-year trailing P/E to the ratio of Middle-Aged over Old People (sounds a bit juvenile putting it that way). They calibrate this relationship and project the P/E ratio over the next few years. I have a few comments

1. I generally dislike statistical models. They are prone to many biases.
2. I dislike statistical models that adopt point estimates for variables even more. In this case, I have little doubt the modelers have non-stationary data. That means that these folks aren’t accounting for changes in variable relationships.
3. Then there’s this graph:

Ok, now I’m pissed off. What on earth are they doing taking the log of the age ratio? What is non-linear about an age ratio? Oh, wait, let me just flick down to the footnotes to find the explanation for this unexpected and important assumption.

[crickets]

What does taking the ln of the age ratio do? Well, luckily they offer up their data and I compared the log data and the ‘raw’ data. Logarithms matter, folks:

Back to #1 above for a sec. Russ Roberts has this fantastic idea that every scientific study should be published with a little appendix showing all of the dead ends and false leads the researchers spun their wheels on.

I wonder how many different ways these researchers crunched this (these!) data before they found a proposition that fit their conclusion. Did they write up the report before they even conducted the analysis?

Anyway, even garbage research can tickle my bias and make me think for a sec. In this case CalculatedRisk has the right tack, which has been expanded upon by WCI. Boomers aren’t retiring.

Great, but yawn. Heard that before.

I’m drawn back to one of the irritating things about that previous analysis. If the boomer retirement party is postponed, what was the reverse effect back in the 90s when they were peaking in productivity?

Back to WCI, for a Canadian take:

Declining employment levels of their elders is the answer. Early retirement. Poor boomers won’t have it as good as those they displaced.

The thing with Tsunamis is that, just before they strike, they suck all of the water off the beach. Then, as we all know about big waves the water pulls back from the force of the retreating water. Boomers can’t help but push their adjacent demographic groups out of the workforce.