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August 08 2013

Podcast: ratings, rankings, and the advantage of being born lucky

Outcomes following random exogenous upvotes and downvotes on message board posts. Image via Sean Taylor.Outcomes following random exogenous upvotes and downvotes on message board posts. Image via Sean Taylor.

Researchers randomly upvoted some posts and downvoted others on a popular message board. The upvoted posts became substantially more popular over the long run. Image via Sean Taylor.

Is popularity just a matter of simple luck–of some early advantage compounded by human preference for things that are already popular? A paper published today in Science offers some insight into the way that popularity emerges in online ratings. Lev Muchnik, Sinan Aral, and Sean Taylor were able to set up a randomized experiment on a popular Reddit-like message board in which they gave some posts a one-point upvote on publication and others a one-point downvote. Posts that were “born lucky” ended up with 25% higher scores on average than those without modification.

In our latest podcast, Renee DiResta and I are joined by Sean Taylor, Hilary Mason and John Myles White to talk about Sean’s findings and about ratings, rankings and reviews in general. Bits and pieces that come up in the podcast:


Subscribe to the O’Reilly Radar Podcast through iTunesSoundCloud, or directly through our podcast’s RSS feed.

August 06 2011

Why S&P Has No Business Downgrading the U.S. | robertreich.org 2011-08-05

Standard & Poor’s downgrade of America’s debt couldn’t come at a worse time. The result is likely to be higher borrowing costs for the government at all levels, and higher interest on your variable-rate mortgage, your auto loan, your credit card loans, and every other penny you borrow. 

Why did S&P do it?

Not because America failed to pay its creditors on time. As you may have noticed, we avoided a default.

And not because we might fail to pay our bills at the end of 2012 if tea-party Republicans again hold the nation hostage when their votes will next be needed to raise the debt ceiling. This is a legitimate worry and might have been grounds for a downgrade, but it’s not S&P’s rationale. 

S&P has downgraded the U.S. because it doesn’t think we’re on track to reduce the nation’s debt enough to satisfy S&P — and we’re not doing it in a way S&P prefers.

Here’s what S&P said: “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.” S&P also blames what it considers to be weakened “effectiveness, stability, and predictability” of U.S. policy making and political institutions.

Pardon me for asking, but who gave Standard & Poor’s the authority to tell America how much debt it has to shed, and how?

If we pay our bills, we’re a good credit risk. If we don’t, or aren’t likely to, we’re a bad credit risk. When, how, and by how much we bring down the long term debt — or, more accurately, the ratio of debt to GDP — is none of S&P’s business. 

S&P’s intrusion into American politics is also ironic because, as I pointed out recently, much of our current debt is directly or indirectly due to S&P’s failures (along with the failures of the two other major credit-rating agencies — Fitch and Moody’s) to do their jobs before the financial meltdown. Until the eve of the collapse S&P gave triple-A ratings to some of the Street’s riskiest packages of mortgage-backed securities and collateralized debt obligations.

Had S&P done its job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn’t have become so large – and their bursts wouldn’t have brought down much of the economy. You and I and other taxpayers wouldn’t have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn’t have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now.

In other words, had Standard & Poor’s done its job over the last decade, today’s budget deficit would be far smaller and the nation’s future debt wouldn’t look so menacing. 

We’d all be better off had S&P done the job it was supposed to do, then. We’ve paid a hefty price for its nonfeasance.

A pity S&P is not even doing its job now. We’ll be paying another hefty price for its malfeasance today. 

Reposted from02myEcon-01 02myEcon-01
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