Explicit vs. Implicit Comparisons
July 22, 2010
I’ve had a post idea on the tips of my fingers, so to speak, for a few weeks now but I can’t ever seem to find just the right words or examples to get started. It follows on the theme of David’s excellent post on top ten lists, as well as the general line of discussion on this and other blogs of rankings, ratings, and metrics. One trend we seem to be identifying is the movement from implicit comparisons to explicit ones. Surely, there was a status hierarchy among elite universities before the US News and World Report rankings – but now there is a metric and a published list. There are definitely corporations with better and worse reputations, but after David and Daniel construct their “Top Ten Demonized Companies in the Gulf”, there will be an explicit reference guide. My question is – what can we generalize about the difference between explicit and implicit comparisons? Do explicit comparisons always win out? What role do methodology, transparency and authority play in all this? And why do we sometimes feel, well, icky when we see an explicit comparison trying to assert itself where previously the tradeoffs involved were much more implicit?
Let me give you an example that’s been on the back of my mind for a few months. Way back in February, the excellent economics blog Baseline Scenario posted a critique of a regulatory framework for cost-benefit analysis that was keyed to the “discount rate” used to commensurate present and future damage. That post discusses another, which mentions that the Office of Information and Regulatory Affairs “instructed agencies to discount the value of future lives in constructing cost-benefit analyses by 7 percent a year, so that 100 lives in 50 years would only be worth 3.39 current lives.” The post takes issue with this discount rate, and argues instead (based on productivity growth, population growth, risk-aversion, and so on) for a discount rate of more like 1% – “And instead of 3.39 lives today, you get 60.80 lives today. That’s a big difference.”
There’s something fascinating and yet profane about this sort of calculation. Certainly, any policy that involves sacrificing current well-being or wealth in exchange for future benefits can be framed as this kind of trade-off (with lots of caveats) – but usually we don’t make so explicit the comparison. Under what conditions does making this comparison explicit lead to better decisions? Does our intuitive sense of the “ickyness” of such grim calculations provide any useful indication that this particular attempt to make something explicit is a bad path? Is there a way to fight an explicit comparison without trying to produce a better one (as Kwak is doing)?