Which of these two relationships is “tighter?”. The relationship on the left appears “tighter” for three reasons:. Cognition bias . Simple linear relationships are easier to “eyeball” than complex relationships. Information bias . Rounding masks information. - PowerPoint PPT Presentation
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CorollaryAn anecdote is both meaningless and dangerous.
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Left half of room: Don’t look.Right half of room: Write what you read.
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The average person in Benin earns an annual income of $750 (in U.S. dollars).
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Right half of room: Don’t look.Left half of room: Write what you read.
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The average person in Andorra earns an annual income of $40,000 (in U.S. dollars).
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The average person on planet Earth earns what annual income (in U.S. dollars)?
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AnchoringWhen we see a piece of information, we evaluate subsequent information in light of the first piece of information.
InformationNews interview of a single mother working three jobs to support her family.
Policy QuestionDo we need welfare reform?
ProblemHow common is this example?
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Left half of room: Don’t look.Right half of room: Read and answer.
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Should we require school districts to pay to install seat belts on school buses?
1 2 3 4 5Definitely not! Absolutely!
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Right half of room: Don’t look.Left half of room: Read and answer.
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Every year in the U.S., 17,000 children are treated for injuries sustained in school buses accidents.Most of these injuries could have been avoided had the children been wearing seat belts.Should we require school districts to pay to install seat belts on school buses?
1 2 3 4 5Definitely not! Absolutely!
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AvailabilityIt’s easier to see what’s in front of us that it is to see what isn’t.
InformationNews report showing the benefit of school bus seat belts.
Policy QuestionShould we require seat belts in school buses?
ProblemWhat is the expected benefit and what are the tradeoffs?
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Lesson #1Never trust your eyes.
Lesson #2Always employ sanity checks.
Lesson #3An observation is meaningless.
CorollaryAn anecdote is both meaningless and dangerous.
Lesson #4Not everything that appears random is.
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RegressionWhy do we do this?
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A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.
Approach #1: Calculate Average Time per Mile
Trucks in the data set required a total of 87 hours to travel a total of 4,000 miles. Dividing hours by miles, we find an average of 0.02 hours per mile journeyed.
A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.
Approach #2: Calculate Average Time per Delivery
Trucks in the data set required a total of 87 hours to make 29 deliveries. Dividing hours by deliveries, we find an average of 3 hours per delivery.
A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.
Approach #3: Combine Average Time per Mile and Average Time per Delivery
Trucks in the data set required 0.02 hours per mile journeyed and 3 hours per delivery.
(0.02 hours per mile) (200 miles) + (3 hours per delivery) (3 deliveries) = 13 hours
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A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.
Problems
1. Combining average time per delivery and average time per mile will double-count time if delivery and miles are correlated.
2. We have ignored a possible fixed effect – an amount of “overhead” time that is required regardless of the number of miles and deliveries.
A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.Miles Traveled Deliveries Travel Time (hours)
A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.Miles Traveled Deliveries Travel Time (hours)
A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.Miles Traveled Deliveries Travel Time (hours)
1.13 hours + (0.01 hours per mile) (200 miles) + (0.92 hours per delivery) (3 deliveries)= 5.89 hours
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A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.Miles Traveled Deliveries Travel Time (hours)
(0.01 hours per mile) (200 miles) + (1.07 hours per delivery) (3 deliveries)= 5.21 hours
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A trucking company wants to be able to predict the round-trip travel time of its trucks. Use the data below to predict the round-trip travel time for a truck that will be travelling 200 miles and making 3 deliveries.
Hours per Mile Hours per Delivery Fixed Hours Estimated Hours0.02 4.00