Saturday, October 22, 2011

Selection problem in reasoning

Employees who have chosen to join a labour union seem to make less money than their coworkers who have abstained from union membership. So why would anyone join a labour union to begin with?

J.J. Heckman
The above example illustrates sample selection bias, a typical fault in scientific reasoning that was first explicated in detail by D.B. Rubin (I am not 100% sure) and later addressed by J.J. Heckman (worthy of Nobel prize in 2000). The above reasoning is faulty because people who are likely to benefit from union membership join a union, while those unlikely to benefit decide not to join. It happens to be that in general those who earn more are less likely to benefit from the union membership.

Selection bias in academic research
The selection bias (a specific case of the broader problem of 'endogeneity') is discussed in detail in every good PhD program. Much of the advanced statistics (stuff covered after basic and time-series regression models) relates to the problem of endogeneity. Yet, selection bias remains an endemic weakness in strategic management, and probably plenty of social sciences studies.Some academics have joked that if the reviewer does not like an article and would like it to be rejected, (s)he can always complain about selection bias and endogeneity.

I recently read an article in Academy of Management Journal that I really liked, finding in effect that the actively involvement of managers and their tendency to draw in external stakeholders to discuss problems increased both the quality of resulting agreements and the resulting actions.It is a strong and enticing article. Yet, the author neglects to discuss the possibility that managers are unlikely to engage with problems or call in external stakeholders when they are thorny: managers select which problems to attend to based on their likely ability to resolve the issues. Thus, the seemingly self-evident prescription that the more managers and stakeholders engage with issues the better may be false. Indeed, it is easy to see that when problems cannot ultimately be solved, managerial engagement and the involvement of stakeholders can have high cost for the managers themselves - if not the organization.

Why are academics unable to reason correctly and to attend to the selection bias? I think there are three issues. First, it is very difficult to robustly correct for selection bias. We would have far less research done and published if we insisted on controlling for all potential selection problems. Second, the PhD education, while attending to selection problems, also creates a lot of trust into basic methodologies, both quatitative and qualitative. Researchers will always be overjoyed with any novel findings they make, It is not very enticing for us to go and try to decimate our results. Management being such a shitty practically oriented discipline that it is nearly impossible to publish studies that identify relationships and then prove them to be spurious. Finally, researchers often have a good qualitative understanding of their research subjects. When you know the managers and know how they think, you immediately know that the selection bias is not an issue. If you know it is not an issue, you may not think it is worth doing a lot of extra work to prove it conclusively.

Selection bias of managers?
To my best knowledge (not saying much), nobody has really examined selection bias in managerial reasoning. The phenomenon lies under a broader umbrella of 'superficial learning', the idea that managers learn wrong lessons from their experiences. In reality, we do not know the extent to which managers assume causality from mere correlation.The bias would seem likely: managers supposedly imitate the behaviors of their successful competitors, even though the only reason why less successful companies do not behave in the same way lies in the inability of less competitive companies to benefit from the practices.

The question is pretty significant for two reasons. First, selection bias leads to false causal attributions and thereby wrong decsisions. Second, problems resulting from selection bias can be influenced. By drawing attention to problematic causal attributions, managers can either correct their mistakes or at least approach their causal attributions and knowledge with the required scepticism.

How to study the selection bias in real life? I suppose we would require very intelligently deviced large-scale surveys. The next step would be to design laboratory experiments to investigate potential ways to mitigate biases. While neither form of research really appeals to me, I hope someone would investigate this.  

Selection bias and network centrality
When doing my PhD I had some data from a big telecoms firm to examine interpersonal networks within a big R&D unit. I found, along with the prior research, that engineers who had worked with other central engineers created inventions with greater impact within the firm. However, once I looked at the technological domains these people worked with, there was no longer any causal relationship: engineers were well connected if they worked on technologies that were crucial to the firm and the inventions of these engineers had big impact only because of the technological area they operated in. It turned out that the social ties were selected based on the work task, which also explained the apparent 'productivity'.

The data was not rich enough to "disprove" the importance of centrality in explaining 'innovative productivity', and I lost my interest in the whole domain area over time. Yet, my own observations provide a nagging feeling that many effects reported in research are significantly weaker than expected, but our social sciences are terrible in self-correcting themselves.


  1. The principal examination you have to do on the advances is the financing costs. Abstain from going for the principal bargain offered and all the more thus, on the off chance that you have great credit, as this will make you qualified for various advance sorts. cash advance

  2. A title auto credit is not something that numerous individuals may have known about, yet it is something that could advantage you on the off chance that you need a trade advance out a rush. These credits permit you to get to money rapidly and effortlessly by getting against the estimation of your auto. In any case, these credits are not accessible to everybody and, while they do have their advantages, there are a few disadvantages connected with this sort of account. Consequently it is critical that you pick up a decent comprehension of these credits and how they can influence you before you consider this alternative.

  3. Hello everyone, I would just like to share some information . Shop the Latest Formal Dresses Online at Free Shipping and Free Returns on eligible items. Free Shipping, Every Day, Every Order. Shop for the latest Designer Women's Apparel, Men's Apparel, Shoes, Handbags, Beauty and More

  4. This can prompt cash reserve funds on gas and perhaps even charges. With the cash your auto devours, you can pay off your Mastercard obligation, in the event that you have any. Another incredible cash administration guidance is eating at home. check cashing

  5. Two projects are in charge of governmentally subsidized advances. One is the Federal Family Education Loan Program in which the moneylender can be your school or bank. The other system is the William D. Passage Federal Direct Loan Program where the bank is the U.S. Branch of Education. car title loans chicago

  6. Graduate understudies have higher chances of benefitting from understudy credits without co-guarantor and are exceptionally asked to ensure that they apply for them as requirements be. check cashing lemon-grove

  7. Advance absolution projects and utilizing the best understudy advance solidification projects are two of the most ideal approaches to reimburse your understudy credit today. Through this, you will have the capacity to reimburse most and some of the time the greater part of your advances in short request while in the meantime, still acquire enough cash so you can have an average way of life after you graduate. check cashing oceanside

  8. At long last, it is an awful thought to succeed at one of those terrible credit understudy advances, just to flee them by moving to remote places, for example, another state or nation. All that really matters is, don't pay back a signal of goodwill with a movement to cheat. payday loans san-diego

  9. The last indicate is help yourself to remember your commitments when you graduate. Take out all your understudy advance archives and read through your commitments. Additionally, bring out the arrangement with you have drafted out together with your folks. Land a position and be prepared to reimburse your understudy credit and be a dependable borrower. Cash Advance Lemon-Grove

  10. Renegotiating an understudy advance will make it simpler for you to reimburse the majority of the credits you've amassed amid school. Along these lines, on the off chance that you are wanting to head off to college, you ought to truly consider understudy advance projects and renegotiating them when it's the ideal opportunity for you to reimburse your different credits. Payday Loans

  11. On the off chance that you are considering setting off to a tech or exchanges school, you could meet all requirements for the Career Training Loan that is accessible from Sallie Mae. Cash Advance Lemon-Grove

  12. A large number of them require reimbursement when you escape school with next to zero effortlessness period. Some require that you pay them back while you are still in school. Check Cashing