Monday, January 31, 2011

Blog-snark as a high art

As only a Brit can do it.

Raising tuition

I have quite a bit to say about this post from Richard Posner but no time to say it at the moment. I'll try to get back to this but in the meantime feel free to start without me.
In any event, there is no case at all from an overall social standpoint for subsidizing students who would pay full college tuition, without the inducement of a subsidy; the subsidy does not induce students to obtain a college education who otherwise would not because they could not afford to; it is a windfall to their families. Private colleges recognize this. They charge very high tuition (though not high enough to cover all their costs—but they have other sources of funds, such as alumni donations), but grant scholarships or loans to students whose families can’t afford the tuition. Charging low tuition to everyone, as public colleges do for residents of the state in which the college or university is located), does not make economic sense; it merely as I said provides windfalls to families willing and able to pay the full tuition. As Becker points out, this results in regressive redistribution of income, because families that can pay full tuition are wealthier than the average taxpayer, who pays for the costs of public colleges that tuition doesn’t cover.

Brad DeLong needs to watch more TCM

If he did, the next time he saw a story about Microsoft's online losses he would realize they were simply following this time-honored business model (relevant quote at the end of the clip, but watch the whole thing).

Paul Krugman has no shame

No honorable man would use this title, even if the topic is core inflation. Even Shakespeare would have said this one goes too far.

Student Loans

I came across this article by following one of the commentators in the discussion section on Andrew Gelman's blog (it was the same discussion that Mark was recommending). Protoscholar is discussing financing graduate school and makes a very good point:

The last option, to be avoided if at all possible, is student loans. The U.S. government makes it incredibly easy to take out student loans to pay for school, but these things will haunt you for decades to come. Remember that they are not GIVING you money, they are LOANING it to you. You have to pay it back someday. If a starting assistant professor makes $50,000, it isn’t worthwhile to get the degree and graduate with twice that in loans.

Remember; loans cannot be gotten rid of with bankruptcy and have the potential to ruin your credit, your chance of buying a home, your ability to rent a place and a lot more. Figure out the cost/benefit of taking out loans. What is your starting salary likely to be? Are you stuck working for a university or can you go into private industry for a few years and make a pile of money that can be used to pay the loans off? Is your field notoriously underpaid? Think about these things before accepting the loans or plan on slaving to pay them off for a long, long time to come.

I wish more students would think about issues like this. Even with assistantships and so forth, it is difficult to complete graduate school without acquiring some debt (as life can bring up all sorts of surprises that cost money). Plus, it can be hard to live like a hermit for many years, especially if the school you are going to is in a large city (with the consequent expenses).

But I see a lot of graduate students finish with a surprising amount of debt; even if the degree is very marketable this can be a dangerous way to start life off.

The curious case of Dr. Glaeser

Edward L. Glaeser is smart guy. Despite being in his mid-forties, Glaeser has already made a number of important contributions to economics. He has been a fixture in the Boston Globe and has recently joined the lie-up of the New York Times' Economix blog (slogan: "explaining the science of everyday life."). All of which makes this recent column on population shifts all the more inexplicable.

The article is classic "ice cream causes murder" analysis. In order to get the desired conclusion, you have to ignore numerous confounding factors and discard a number of alternative hypotheses that better explain the data and even then you have to be selective with your metrics and graphs (or at least the labeling) to maintain even the appearance of credibility.

Joseph has already discussed this at some length but just to review, percent change can be tricky to work with, particularly when dealing with state populations which can vary by well over an order of magnitude. Add to this the matter of population density -- certainly a concern when talking about home prices but notably absent from Prof. Glaeser's post.

Let's take Glaeser's comparison of California and Texas. If we look at percent population change as he does, Texas does much better but Texas has more land and fewer people. If we look at absolute change, the results are much closer and if we take density into account with something like change by area, California may actually come out ahead. (Glaeser's use of California is also interesting in other unintended ways, but more on that later.)

If you look at this table from Wikipedia, the role of population density becomes harder to ignore and Glaeser's case becomes harder to buy. Consider these two paragraphs:

"More generally, population isn’t moving to high-income areas. The four fastest-growth states were Nevada, Arizona, Utah and Idaho (in order of growth), all of which have earnings below the national average.

"Our richest states, Connecticut, New Jersey and Massachusetts, grew by 4.9, 4.5 and 3.1 percent, respectively, far below the national average. People are not following the money."

Could available land be playing a role here? Probably. Nevada, Utah and Idaho are among the ten least densely populated states in the union. Arizona is is in the next ten. By comparison, Connecticut, New Jersey and Massachusetts make up three of four most densely populated.

Glaeser's response to this point (in a related post) doesn't really help his case:

"Why is housing supply so generous in Georgia and Texas? It isn’t land. Harris County, Tex., which surrounds Houston, has a higher population density than Westchester County, N.Y."

To people with even a passing familiarity with these two areas, the fact that Harris County is more dense than Westchester County is hardly surprising. What is surprising is that someone would say that Harris 'surrounds Houston.' For most purposes, Harris IS Greater Houston. The city does include two other counties but Harris contains all but a fraction of the metropolitan area's population.

In other words, the county that includes Houston is more dense than a suburb of New York.

But perhaps the most damning rebuttal comes from Glaeser's prime example:

"My interpretation of Red State growth is that Republican states have grown more quickly because building is easier in those states, primarily because of housing regulations. Republican states are less prone to restrict construction than places like California and Massachusetts, and as a result, high-quality housing is much cheaper.

"There is a strange irony in this: more conservative places do a much better job in providing affordable housing for ordinary Americans than progressive states that are believed to care about affordable housing.

"Progressive states, of course, have other objectives beyond affordable housing, and some involve blocking building. California environmentalists have been fighting construction for more than 40 years, and regulations in Massachusetts are barely less intrusive."

According to Glaeser's hypothesis, California should be scraping the bottom, particularly given that, as mentioned before, the metric being used tends to understate the growth of highly populous states. And keep in mind that he previously used Oklahoma as one of his examples of Red State growth. Oklahoma's growth rate was 8.7%. California's was 10%. That puts California slightly above the national average. (You'll notice that, unlike the other states discussed, California's actual growth rate does not appear in the article, nor is it labeled in any of the graphs.) California also beat a number of McCain states in the region of Oklahoma and, being a good ol' Arkansas boy myself, I can tell you that if a lack of building codes and environmental regulations were driving immigration, the whole area would be packed.

[To get a good picture of what's going on here, take a few minutes to look at this helpful interactive map. Pay close attention to the red states in the center of the country like Missouri.]

Population density alone does a good job explaining population shift patterns (considerably better than Glaeser's hypothesis). Add in the growth of the Hispanic population (something any competent demographic analysis should include) and it does an excellent job. And when you lay on top of that the expected impact of Katrina (how much of Texas' growth was diverted from the anemic Louisiana?) and the Nevada real estate bubble, the map we see looks almost exactly like the map we would expect.

If you don't want to use population density and the growth of the Hispanic population, how about the graying of America? Traditional retirement migration patterns look a lot like what we're seeing here and I'll bet we can come up with a few more explanations that outperform Glaeser's hypothesis.

George Polya once observed* that, when given a theory, scientists and mathematicians tended to look for cases that contradicted the theory while almost everyone else looked for cases that confirmed it (others had made similar points before he did, but I'm a Polya fan). Glaeser's approach here falls into the 'everybody else' category. He went looking for confirmation and he found it, but his theory maintains the appearance of validity only as long no one looks for contradictory evidence.

Perhaps Economix needs a new slogan.

*Quoting from memory so I may have to revise this later.

When bad things happen to good technologies

Roger Ebert has a follow-up to the letter he published from Walter Murch on the various reasons why 3D remains a bad idea (previously discussed here). This time the subject is Maxivision48, a technology that, according to Ebert, "produced a picture four times as good as conventional film."

It's an interesting counterpoint, an innovation that has been getting great reviews from independent experts for a dozen years but can't seem to get any attention from the industry despite what seems to be a sound business case.

Sunday, January 30, 2011

Better late than never...

Via Andrew Gelman, here's an excellent post that made many of the same points that we've been making about lottery-based analyses here at OE (and beat us to the punch by several months).

Mini-colloquium: Homework

One of the cool things about about Andrew Gelman's blog is the quality of discussions you'll see in his comment section. The observations are almost always well-informed and the tone strikes a nice balance between spirited and civil.

Prof. Gelman's recent post on homework (which responded to this post we did earlier on OE) prompted one of these excellent discussions. Joseph has already built a post around one particularly interesting comment, but all of them are worth reading.

Hotel pricing enigma

(that may not be that enigmatic)

Has anyone else noticed that the higher the price of the hotel, the more likely it is to charge for internet access? I do quite a bit of travelling on my own decidedly thin dime so I usually stay in one of the bargain chains but occasionally I find myself in a nice, corporate-booked hotel. Free internet is almost universal in the cheap places but it's likely to run you $10 a night in a place with valet parking and a fitness center.

I assume this is another case of prices being driven by expense accounts, but does anyone else have an alternative explanation?

Saturday, January 29, 2011

Educational Lotteries

Hoisted from the comments on Andrew Gelman's web site, Steve Sailor claims:

In my one experience with a charter school lottery, the charter school made it quite difficult to enter the lottery; and to find out if your kid was selected, you had to go there and ask them. And, it appeared, it wasn't a random lottery at all. My son was known to the founders of the school as a star student, so when I showed up and nervously asked if his name had been picked, I was told, Don't worry about it, of course he's in.

This is a very good point. There have been some very good comments on the use of charter school lotteries as a gold standard. I think there are persuasive reasons to be concerned, even if the lotteries are fair. However, it would be in the self interest of charter schools to accept a few "star students" outright rather than lave their selection to chance. Insofar as this happens at all, we would no longer have randomization (and thus would be unable to use these lotteries to estimate causal effects, even if the other concerns were not present).

So it seems increasingly hard to treatment there lotteries as a valid instrumental variable.

Weekend Gaming -- The Blue and the Gray

[If you missed it, check out last week's game as well.]

The famous game designer,* Sid Sackson, had over eighteen thousand games in his personal collection so making his short list was quite an accomplishment, particularly for a game that almost nobody has ever heard of.

On this alone, the Blue and the Gray would be worth a look, but the game also has a number of other points to recommend it: it only takes about three minutes to learn (you can find a complete set of rules here); it is, as far as I know, unique; it raises a number of interesting and unusual strategic questions; and for the educators out there, its Turn-of-the-Century** origins provide some opportunities for teaching across the curriculum. My only major complaint is that it requires a dedicated board, but making your own shouldn't take more than a few minutes.

The object of the game is to be the first to get your general to the center by moving along the designated path while using your soldiers to block your opponent's progress. Since soldiers can capture each other, the game has two offensive options (capturing and advancing) compared to one defensive option (blocking). (Something I learned from developing my own game was the more the designer can shift the focus to offense, the better and faster the game will play.)

I don't know of any attempt to do a serious analysis of the Blue and the Gray. Might be fun to look into. If someone out there finds anything interesting, make sure to let us know.

* Yes, I did just use the phrase, 'famous game designer.'

** I'm going off memory here about the age of the game. You should probably double check before building a lesson plan around this. (see update)


Via the good people at the University of Maryland, here's the original patent from 1903.

Thursday, January 27, 2011

A new post by James Kwak, an old rant by me

James Kwak has an excellent post on rational maximizing, but while the whole thing is worth reading, this passage jumped out at me:
I say this is interesting because, on the one hand, I accept the random walk studies (and I personally believe I have no ability to predict where any security price is going tomorrow), but on the other hand I think that any idea that markets have fundamental levels is flawed. For example, housing prices are still falling. Some people try to predict how far they will fall by looking at the Case-Shiller Index and figuring out where the long-term trend line will be. But how do you look at a chart and figure out what the right value is? What if there has been something different about the market over the last one hundred years from the market today? It’s really a fool’s errand.
Kwak's objection reminded me of a similar problem I had with the book, "Lifecyle Investing," by Ian Ayres and Barry Nalebuff, one that finally made my head explode:
No one can possibly know what's going on here! We can get some smart people making good guesses about long term stock performance, but these guesses are based on data from a century's worth of secular upheavals. A list that includes the Great Depression, two world wars, a post-war reconstruction, the cold war, China becoming a major player, boomers entering the market, boomers leaving the market and huge changes in regulation, technology and business practices.

What's happening now never happened before. What happened before never happened before. What happened before what happened before never happened before. We have no precedents. People are recommending forty-year investment strategies using models based on data from markets that haven't gone twenty years without a major secular change.
I have great respect for economists, but, more so than any other field I can think of, they are shooting at moving targets and sometimes I get a bit nervous about their aim.

One more exchange on Mankiw's assumptions

More from the ongoing debate.

Here's David (pulled from a longer comment):
I think where we disagree (assuming that we do disagree) is on where the burden of proof should lie. As an economist, and based on my reading of the theoretical and empirical literatures, the burden is on the individual who claims there are important plateaus and such. This requires showing empirically that they exist, and not in a general sense, but on the relevant margin of choice for those individuals. My general sense is that most economists would agree with this placing of the burden of proof, and your suggestion of the consensus of various economists is consistent with my impression as well. In other words, to assume that there are important plateaus on the margin requires empirical justification, and substantial justification because its very difficult to understand labor markets if we deviate generally even moderately from this productivity/wages relationship. So while you agree that “…if pundits' arguments are sufficiently robust or their assumptions are obviously true, they can do what Mankiw does.” I’d say that the consensus to me amongst economists supports the arguments and broader type of assumptions that I discussed previously. I suppose that’s an empirical question, for which I have not yet looked for data.


It's easy to get lost in the weeds here, so I'll try to get a few specific points out of the way then address the bigger issue of of the way we treat assumptions in the economic debate.

First, when it comes to robustness, it is sufficient to show that deviating from an assumption would cause the model to fail. There is no need to show that a particular deviation (such as the possible plateaus I suggested) occurs, only that if it occurs problems will follow. The world is full of perfectly good models that are not robust. As long as the real world lines up closely enough with the model's assumptions, the lack of robustness is not an issue.

Robustness is, however, an issue when we go out of the range of data, and, given these unique times, every policy proposal goes outside our range of data. At this point the burden falls on the proposer to be explicit with assumptions and make some kind of case that they are being met.

We also need to be carefully to distinguish between individual and aggregate relationships. We know that raises and promotions occur at discrete points and bonuses are frequently capped. That means, for many workers, the relationship between wages and productivity can't be linear. It is, however, possible that when aggregated that relationship is linear (or at least close enough for our purposes). The problem here is that proposals that assume individual level linearity can sound a lot like proposal that assumes aggregate linearity. Once again, we need more caution and clarity than we've been seeing.

All of which lead to the main point: much of the economic debate (particularly Greg Mankiw's corner of it) has been based on arguments that aren't all that robust and assumptions that aren't immediately self-evident. Many of these arguments reach conclusions that are difficult to reconcile with the historical record (such as Mankiw's prediction that a return to Clinton era taxes would have dire effects on the nation). Under these circumstances, assumptions should not be left implicit and they certainly should not be depicted as broad and obvious when they are highly specialized and non-intuitive (Freakonomics being the best known example with Levitt's go-to "people respond to incentives." formulation).

In other words, in this situation, I'd probably argue that the burden of proof is on Mankiw; I'd certainly insist the burden of clarity is.

Wednesday, January 26, 2011

Evaluating the evaluations

Busy morning so I don't have time to do more than provide some links and the abstract for this paper on the effectiveness of college teachers.
In primary and secondary education, measures of teacher quality are often based on contemporaneous student performance on standard-ized achievement tests. In the postsecondary environment, scores on student evaluations of professors are typically used to measure teaching quality. We possess unique data that allow us to measure relative student performance in mandatory follow-on classes. We compare metrics that capture these three different notions of instructional quality and present evidence that professors who excel at promoting contemporaneous student achievement teach in ways that improve their student evaluations but harm the follow-on achievement of their students in more advanced classes.
Here's the ungated version via Tyler Cowen. May not be quite the same as the published one.

Here's Andrew Gelman's reaction.

Repost -- Fitness Landscapes, Ozark Style

[I'm working on a long post that uses fitness landscapes, so I thought I'd rerun some previous posts to get the conversation going.]

I grew up with a mountain in my backyard... literally. It wasn't that big (here in California we'd call it a hill) but back in the Ozarks it was a legitimate mountain and we owned about ten acres of it. Not the most usable of land but a lovely sight.

That Ozark terrain is also a great example of a fitness landscape because, depending on which side you look at, it illustrates the two serious challenges for optimization algorithms. Think about a mountainous area at least partially carved out by streams and rivers. Now remove all of the rocks, water and vegetation drop a blindfolded man somewhere in the middle, lost but equipped with a walking stick and a cell phone that can get a signal if he can get to a point with a clear line of sight to a cell tower.

With the use of his walking stick, the man has a reach of about six feet so he feels around in a circle, finds the highest point, takes two paces that direction then repeats the process (in other words, performs a gradient search). He quickly reaches a high point. That's the good news; the bad news is that he hasn't reached one of the five or six peaks that rise above the terrain. Instead, he has found the top of one of the countless hills and small mountains in the area.

Realizing the futility of repeating this process, the man remembers that an engineer friend (who was more accustomed to thinking in terms of landscape minima) suggested that if they became separated he should go to the lowest point in the area so the friend would know where to look for him. The man follows his friend's advice only to run into the opposite problem. This time his process is likely to lead to his desired destination (if he crosses the bed of a stream or a creek he's pretty much set) but it's going to be a long trip (waterways have a tendency to meander).

And there you have the two great curses of the gradient searcher, numerous small local optima and long, circuitous paths. This particular combination -- multiple maxima and a single minimum associated with indirect search paths -- is typical of fluvial geomorphology and isn't something you'd generally expect to see in other areas, but the general problems of local optima and slow convergence show up all the time.

There are, fortunately, a few things we can do that might make the situation better (not what you'd call realistic things but we aren't exactly going for verisimilitude here). We could tilt the landscape a little or slightly bend or stretch or twist it, maybe add some ridges to some patches to give it that stylish corduroy look. (in other words, we could perturb the landscape.)

Hopefully, these changes shouldn't have much effect on the size and position of the of the major optima,* but they could have a big effect on the search behavior, changing the likelihood of ending up on a particular optima and the average time to optimize. That's the reason we perturb landscapes; we're hoping for something that will give us a better optima in a reasonable time. Of course, we have no way of knowing if our bending and twisting will make things better (it could just as easily make them worse), but if we do get good results from our search of the new landscape, we should get similar results from the corresponding point on the old landscape.

In the next post in the series, I'll try to make the jump from mountain climbing to planning randomized trials.

* I showed this post to an engineer who strongly suggested I add two caveats here. First, we are working under the assumption that the major optima are large relative to the changes produced by the perturbation. Second our interest in each optima is based on its size, not whether it is global. Going back to our original example, let's say that the largest peak on our original landscape was 1,005 feet tall and the second largest was 1,000 feet even but after perturbation their heights were reversed. If we were interested in finding the global max, this would be be a big deal, but to us the difference between the two landscapes is trivial.

These assumptions will be easier to justify when start applying these concepts in the next post in the series. For now, though, just be warned that these are big assumptions that can't be made that often.

Tuesday, January 25, 2011

They may be anecdotal...

...but as recent events drive the mental health debate, cases like this take on an added significance.

"Why 3D doesn't work and never will. Case closed."

According to Roger Ebert (who should know), Walter Murch is "the most respected film editor and sound designer in the modern cinema" and, according to Murch, 3-D movies are still a bad technology.

Here's his main objection (from an open letter to Ebert):

The biggest problem with 3D, though, is the "convergence/focus" issue. A couple of the other issues -- darkness and "smallness" -- are at least theoretically solvable. But the deeper problem is that the audience must focus their eyes at the plane of the screen -- say it is 80 feet away. This is constant no matter what.

But their eyes must converge at perhaps 10 feet away, then 60 feet, then 120 feet, and so on, depending on what the illusion is. So 3D films require us to focus at one distance and converge at another. And 600 million years of evolution* has never presented this problem before. All living things with eyes have always focused and converged at the same point.

If we look at the salt shaker on the table, close to us, we focus at six feet and our eyeballs converge (tilt in) at six feet. Imagine the base of a triangle between your eyes and the apex of the triangle resting on the thing you are looking at. But then look out the window and you focus at sixty feet and converge also at sixty feet. That imaginary triangle has now "opened up" so that your lines of sight are almost -- almost -- parallel to each other.

We can do this. 3D films would not work if we couldn't. But it is like tapping your head and rubbing your stomach at the same time, difficult. So the "CPU" of our perceptual brain has to work extra hard, which is why after 20 minutes or so many people get headaches. They are doing something that 600 million years of evolution never prepared them for. This is a deep problem, which no amount of technical tweaking can fix. Nothing will fix it short of producing true "holographic" images.

Murch also makes important points about the editing and aesthetics of 3-D cinema, none of which are likely to make you rush out and invest your money in the technology, but that's just what the film industry has been doing.

As far as I can tell, it's been over seventy years since a customer-facing innovation (Technicolor) has revolutionized the cinema industry (distinguished here from home entertainment where the story has been entirely different). There have been customer-facing innovations but they've failed to catch on (Cinerama, color-based 3-D, Sensurround -- Imax has managed to stick around, but with less than 500 theaters after about four decades, it hasn't really been a game changer).

The innovations that actually had a major impact on the industry have been primarily focused on making films faster and quicker to make and easier to market (multiplexes, 'opening big,' digital production, post-production and projection, even CGI).

And yet studio executives continue to dream of the next Vitaphone.

*I'm not sure about the 600 million years -- how far back does stereoscopic vision go?

Monday, January 24, 2011

What's French for spam?

A few days ago, Seyward Darby posted a good piece of analysis on publishing teacher scores. Having been critical of Darby's previous writing on the subject, I entitled my response "Credit where credit is due." This morning I found the following comment complete with hyperlink:
Creadit - Vous cherchez crédit, credit d'impot, banque et bancaire [redacted] est une entreprise de courtage offrant les meilleures solutions pour pret relais et Credit en ligne au meilleur prix.
Or (according to Google Translate):
Cread - Looking for credit, tax credit, bank and banking [redacted] is a brokerage firm offering the best solutions for bridging loan and Credit online at the best price.
This should have been an easy catch for the spam filter. Was this just a random slip-up or does language make a difference?

I could not agree more

From Matt Yglesias:

Opioid addiction is bad, and it’s perfectly reasonable for policymakers to try to minimize its incidence. But short of dying, experiencing chronic pain is one of the worst things that can happen to someone. The correct ordering of priorities is to try to make sure that nobody suffering from treatable chronic pain goes untreated, and then try to minimize addiction risks within that framework. The view that people suffering pain should get relief subject to the binding constraint that we need to fight addiction has a nice Puritan logic to it, but it doesn’t make any real sense.

I have been enjoying Matt's comments on pain medication. The ability to relieve pain is one of the miracles of modern medicine and one that should not be squandered. There are always going to be limitations to any system but it is odd that we don't focus on those in need of pain relief first and abuse second.

After all, we don't ban driving just because some driver's are reckless or irresponsible.

Sunday, January 23, 2011

Health care and economies of scale

As mentioned before, I always like to be cautious when drawing conclusions from different countries, cultures and hemispheres. With that caveat out of the way, this Marketplace story about an Indian health insurance program is definitely interesting and possibly important as well.
Shetty and his team of 40 cardiac surgeons at Narayana Hrudayalaya Hospital are used to conversations like this one. They perform many more operations each year than comparable U.S. hospitals.

Shetty: This is a thousand-bed heart hospital. We do about 33 to 35 heart surgeries a day.

About a third of all of the patients at Shetty's hospital are farmers from rural villages. They're here because they have something called Yeshaswini insurance. It doesn't cover routine doctors visits for, say, a cough or a cold, but the insurance does cover all surgical procedures. The farmer pays approximately three cents a month; the government puts in one and a half cents and farmers cooperatives operate the program. Shetty believes there's strength in numbers.

For another story of medical developments coming from unlikely places, check out this story on battlefield medicine (this time from NPR).

Brewsterian astrophysics and Frazzian mathematics

Hey, it's a Sunday.

Saturday, January 22, 2011

Damned, pinko entrepreneurs

Whether in business, education, or any other field, what works there might not work here. With that caveat in mind, take a look at "In Norway, Start-ups Say Ja to Socialism" by Max Chafkin in Inc. magazine (or, if you're in a hurry, you can go to Felix Salmon's pithy analysis of the article and get much of the meat without the local color).

Here's the keystone of the piece:
Norway is also full of entrepreneurs like Wiggo Dalmo. Rates of start-up creation here are among the highest in the developed world, and Norway has more entrepreneurs per capita than the United States, according to the latest report by the Global Entrepreneurship Monitor, a Boston-based research consortium. A 2010 study released by the U.S. Small Business Administration reported a similar result: Although America remains near the top of the world in terms of entrepreneurial aspirations -- that is, the percentage of people who want to start new things—in terms of actual start-up activity, our country has fallen behind not just Norway but also Canada, Denmark, and Switzerland.
I tend to be distrustful of international comparisons, but, as I've mentioned before, if you're going to do it, Canada is probably where to start. "Demographically, economically, culturally and historically, Canada would seem to be the obvious country to look to when trying to determine the effectiveness of potential U.S. policies..." Having our northern neighbor on the list makes me more inclined to give its obvious implications some weight and those implications conflict with a lot of what we've been told about business-friendly policies.

According to much of the conventional economic wisdom, we should be leaving all of these countries behind in terms of entrepreneurs and new businesses. Their progressive taxes and extensive social safety nets should leave people with little incentive to work hard while their restrictive regulations (in Norway "firing an employee for cause typically takes months, and employers generally end up paying at least three months’ severance.") should make running a nimble and efficient business virtually impossible, but what should happen clearly isn't.

It would be interesting to see Greg Mankiw's explanation for this.

Kind and literate OE readers

Can someone out there help me find the name of a story. It's from the late Nineteenth or early Twentieth Century. In it a banker tells of a colleague who was ruined because he became obsessed with chess. I won't spoil the payoff but it's very funny and incredibly timely.

Thanks in advance,

Note to Gelman -- first fill its mouth with salt, then light candles, then decapitate

Andrew Gelman is once again going after the voting-is-irrational zombie (disinterred this time by the Freakonomics team). Gelman shows, using estimates that if anything err on the conservative side, that the possibility of influencing an election, though small, can still easily be associated with a reasonable expected value.

This particular zombie has been shambling through the dark corridors of pop econ books and columns for years now (Gelman himself has been monster hunting since at least 2005), but every time the creature seems truly dead and buried, along comes someone like Landsburg or Levitt, someone who's smart enough and mathematically literate enough to know better, but who just can't resist digging up the grave.

Friday, January 21, 2011

Weekend Gaming -- Agon

I don't know exactly what happened to Agon, but I'm pretty sure those damned orthogonalists had something to do with it. The game was all the rage in Victorian England where it was appreciated for its simple rules but surprisingly complex strategies. (the Victorians were also big fans of Lewis Carroll's Doublets, thus showing remarkably good taste in diversions.) The game was and is remarkably challenging and enjoyable but early in the Twentieth Century it faded away, perhaps due to the hegemony of orthogonal game boards.

You can find a complete set of rules on my game site. You can also buy boards there but obviously waiting for delivery would undercut the whole 'here's a game for this weekend' concept so I've included two JPEGs that you can print off if you can't find a suitable substitute (lots of games use a 6x6x6 hexboard so locating one shouldn't be that difficult).

The game is extraordinarily easy to learn. Each player starts out with six pawns and a queen spread out around the edge out the board.

A piece can either move around a concentric hexagon or go toward the center. The object is to get your pieces arranged like this (black wins):

'Capturing' is done in the style of many older games by placing two of your pieces on either side of the opponent's piece. I put the word in quotes because a captured piece is not removed from the board. Instead, it is moved back to the outer ring. Agon is therefore entirely a game of position. Novice chess players have a tendency to play for points and measure how well they're doing by how many of their opponent's pieces are lined up by the side of the board. Learning Agon can help break them of some bad habits.

I first came across Agon in David Parlett's Oxford History of Board Games -- an excellent resource if you're thinking about teaching a math class and not a bad read if you just enjoy games. Parlett is also a game designer of some note so he brings a lot of insight to the discussion.

Credit where credit is due

Seyward Darby has a thoughtful and balanced piece on education in today's New Republic. Here's the conclusion:
But, even when better evaluation methods exist, is it really a good idea to publish, en masse, the ratings of every public school teacher? I’m not convinced. Yes, the information should be available to those in the public who want it—namely parents. But schools or school districts, not newspapers, should share it with parents in a constructive manner, so that they are able to ask questions and understand fully what the information means. Teachers’ unions and districts should also use it to remove underperforming instructors from their jobs, and to ensure that no school has a high concentration of ineffective teachers, such that its student are getting the short end of the stick. And teachers should use it either to ask for additional training resources—or to gain recognition of the good, hard work that they’ve done.

I’m all for transparency. But a wide-open view of incomplete information isn’t what we need to improve education. What’s more, broadly publicizing even the most thorough of information isn’t always productive; complexities and nuances are often best conveyed in smaller settings, with the stakeholders who matter most.

The media shouldn’t focus on shaming individual teachers, because there are bigger fish to fry. Indeed, across the country, they should focus on shaming the entrenched bodies, structures, and policies that allow poor teaching to continue unchecked, fail to reward good teaching, and don’t provide enough support for teachers who want to improve their skills.
I don't agree with everything Darby says here and there are omissions that bother me (relying on . On the whole, though, this is an entirely reasonable piece of analysis. I complained earlier that there wasn't really an education debate in this country. Perhaps we're about to start one.

Alignment of Incentives

Professor in Training has a post on selfishness in Academia:

I’m at the point where I’m jumping up and down in frustration because I can’t get what I want when I want it (which is always yesterday or last week or last year). My resources are limited and dwindling at an alarming rate. My students are swamped with classes and assistantship responsibilities. And yet I’m expected to push out papers. I’m expecting them to push out the papers. And data. Let’s not forget the new data.

I think that the incentives are more aligned here than it appears on first glance. Students will benefit from having a successful professor as a mentor. They benefit from being involved in a lot of successful research projects.

What I suspect the core problem is that academia is set up to make a lot of things urgent (the class you need to teach today, the faculty meeting, the memo you need to write) but they are not especially important. In the long run, success in a biomedical tenure track role requires research output. Other things matter, but this one is key. Students are just as susceptible as professors to getting caught up in things that do have the potential to consume all of ones time. Participating in student goverence, for example, rarely is worth the time that is removes from the student. As a result, everybody feels overwhlemed and tempers fray.

I think the secret here is to realize what are the things that will matter in the long run and what needs to be done adequetely but is not worth a lot of time.

Hoisted from comments -- still more on Mankiw's assumptions

Following this and this, here's the latest in my ongoing debate with David over Mankiw's use of assumptions.

Drawn from a longer comment, here's David:
Assumptions may be very sensitive in a model such that if they deviate even slightly, then the results change substantially. And, of course, some assumptions are robust to substantial changes. It would seem that this is the language that Mankiw is speaking in, according to the few short quotes in the past post.

This seems to me to be a different question when evaluating the policy conclusion. For example, I don't believe that all workers earn their Marginal Product (and in some sense there's no way that we could ever tell). In this sense, Mankiw is mostly likely wrong. However, I do strongly believe that there is an important relationship between productivity and wages. The more productive a worker is, the more he or she will likely be paid. This latter formation is much less precise than the former, but I would submit that they carry very similar policy conclusions. Importantly, the assumptions necessary to make the latter statement are much more robust than the former.

Here's my reply (adapted from a previous comment):


Everything you've said is correct but here's the problem: at the level of generality you're talking about, everyone from Mankiw to Paul Krugman to Dan Ariely is in agreement, but many of Mankiw's arguments seem to require much more specific definitions. Rather than being robust, they are so sensitive that making small, common-sense changes can do great damage.

Keep in mind I'm a statistician, not an economist, so I may be getting some of this wrong but let's assume (except for workers on commission -- I'll grant you linearity for that one) the relationship between a worker's productivity and wages is generally monotonic but with plateaus and possibly even the occasional local optimum. I'm not saying this is the case but I suspect it's a pretty good description of what's going on. More importantly, I wouldn't be comfortable assuming this isn't the case.

I'm pretty sure some of Mankiw's arguments break down if you make this assumption. There's a luck factor now as to whether a change in productivity will result in an increase in wages. You also have an asymmetry problem -- the employer has a better idea where the plateaus are.

Or look at his statements about the inheritance tax. He assumes that one component of money's value to a worker is the pleasure of leaving money to an heir (so far, so good) and that the value of that component holds its value even as the inheritance gets well into the millions. If parents start to worry progressively less about each dollar after, say, the first million then the other value components (such as spending, bragging, charitable giving) will swamp the inheritance component long before the inheritance taxes kick in. If this is true, Mankiw's policy arguments simply collapse.

In other words, if pundits' arguments are sufficiently robust or their assumptions are obviously true, they can do what Mankiw does. Unfortunately, neither case applies here.

Thursday, January 20, 2011

Contractually obligated to mention Canada again

I'm as tired of it as you are, but as long reform movement advocates* keep bringing up Singapore, I feel someone has to point out that Canada is neck-and-neck with countries like Singapore (except in post-secondary education where it pretty much blows them away) and that Canada, which is a far better match for the U.S. culturally, historically and demographically, has achieved this by taking most of the steps the movement suggests and doing the exact opposite.

If we had a properly functioning debate on education reform in this country, movement advocates would expect to be presented with counter-arguments; they would even anticipate them. New examples would be sought out, positions would be refined and the intellectual framework of the reform movement would be stronger for it.

But we don't have a properly functioning debate. Hell, we don't really have a debate at all. Instead, we have a situation where advocates can talk about Singapore without anyone bringing up Canada, or about PISA without anyone bringing up TIMSS, or about lottery-based analyses without anyone bringing up peer effects (or placebo effects or volunteer effects or treatment/selection interaction or...). Instead of being challenged and having to prove themselves, these claims go directly into the conventional wisdom pile where they are accepted by smart, otherwise well-informed people like Seyward Darby, Ray Fisman and Jonathan Chait.

This is not likely to end well.

* For the distinction between advocating for reform and advocating for the reform movement, see here.

In good company


Have you ever been called 'fascinating' before? It sort of turns a fellow's head.


p.s. This would still be a cool list even if we weren't on it.

Achilles and the Tortoise, the CBO and the GOP

Perhaps it's just the lateness of the hour but this post by Brad DeLong on the Republicans' refusal to accept CBO numbers reminded me just a bit of the Tortoise's refusal to accept a simple argument in Lewis Carroll's follow-up to Zeno's best-known paradox.

I really need to get to bed.

Wednesday, January 19, 2011

The Self-esteem gap

Michelle Rhee was on Marketplace yesterday. She's worried about all the coddling and empty praise we've been heaping on our children.
We've lost our competitive spirit. We've become so obsessed with making kids feel good about themselves that we've lost sight of building the skills they need to actually be good at things.

I can see it in my own household. I have two girls, 8 and 12, and they play soccer. And I can tell you that they suck at soccer! They take after their mother in athletic ability. But if you were to see their rooms, they're adorned with ribbons, medals and trophies. You'd think I was raising the next Mia Hamm.

I routinely try to tell my kids that their soccer skills are lacking and that if they want to be better, they have to practice hard. I also communicate to them that all the practice in the world won't guarantee that they'll ever be great at soccer. It's tough to square this though, with the trophies. And that's part of the issue. We've managed to build a sense of complacency with our children.

Take as a counterpoint South Korea, where my family is originally from. In Korea, they have this culture that focuses on always becoming better. Students are ranked one through 40 in their class and everyone knows where they stand. The adults are honest with kids about what they're not good at and how far they have to go until they are number one. Can you imagine if we suggested anything close to that here? There would be anarchy.
This is an old and much loved refrain in the reform movement, but when you look closely and take the time to disaggregate the data the argument completely collapses. The problem is that the culture of esteem-building Rhee describes is essentially a suburban phenomena. In poor neighborhoods, the situation is exactly the opposite:
Hart and Risley also found that, in the first four years after birth, the average child from a professional family receives 560,000 more instances of encouraging feedback than discouraging feedback; a working- class child receives merely 100,000 more encouragements than discouragements; a welfare child receives 125,000 more discouragements than encouragements.
Other words, our best performing schools are filled with kids who, according to Rhee, should be complacent and lacking competitive spirit while most of the kids in our worst performing schools have received little of the empty praise that so concerns her.

Perhaps we should worry less about the exaggerated self opinions of students and more about that of our pundits and commentators.

Department of better late than never

I just came across this excellent piece on President Obama's education speech at It is essential reading for anyone who wants to keep up with the education debate, but if you just want the punchline, here it is:

Most of the major claims in the president's speech were either based on highly selective reading of the data or were simply wrong.

This brings us to one of the strangest aspects of the education debate: the way it makes smart, conscientious people act grossly out of character. Consider this representative example from FactCheck:

But the claim that "our high school dropout rate has tripled in the past thirty years"? That’s not even in the ballpark. According to the Department of Education’s National Center for Education Statistics, the "status dropout rate" – defined as the percentage of people between ages 16 and 24 who are not in school and do not have high school diplomas or GEDs – was 9.3 percent in 2006. In 1976, 30 years before that, it was 14.1. That’s actually a 34 percent decrease in the high school dropout rate.

Of course, dropout rates are notoriously hard to measure and compare. For instance, while NCES shows a status dropout rate of 9.3 in 2006, the high school completion rate for that year was only 74.8 percent. Why the discrepancy? Instead of counting people of a certain age with a diploma or equivalency certificate, this figure compares the number of high school freshman in a certain year to the number receiving a high school diploma four years later. Those who take more than four years to finish aren’t counted, nor are students who get GEDs instead of diplomas. But using this calculation still doesn’t back up Obama’s claim. The dropout rate – that is, the discrepancy between incoming freshmen and graduates – would have been 25.2 percent in the 2006-2007 school year. The rate in 1976-1977 was 25.6 percent.

Even pessimistic accounts don’t show a tripled dropout rate. According to a report by the Educational Testing Service, titled "One Third of a Nation" after the number of students they say are high school dropouts, high school completion rates peaked at 77.1 percent in 1969 and dropped to 69.9 percent in 2000. (NCES shows higher numbers in both years.);That would put dropout rates at 22.9 and 30.1 percent respectively – a 30 percent increase over 31 years. As many sixth-graders could tell you, tripling would mean a 200 percent increase.

So where did Obama’s figure come from? A White House spokesman pointed us to a report by the College Board, which said: "The rate at which American students disappear from school between grades nine and 12 has tripled in the last 30 years." But the College Board’s report included a mistake, which it later corrected: The rate really refers to what happened between grades nine and 10. More important, however, it is not really a "dropout rate." The College Board report in turn cites a 2004 study by the National Board on Educational Testing and Public Policy, which actually shows a tripling of the attrition rate between grades nine and 10, not the dropout rate. In other words, the difference between the number of students enrolled in grade nine in one year and the number enrolled in grade 10 the next year has increased threefold. At the same time, there has been a corresponding threefold increase in grade nine enrollments relative to grade eight. The report shows more ninth-graders failing that grade, not dropping out.

Given that the reform movement has been railing against social promotion for years, it's hard to argue that an increase in students held back is a cause for alarm.

The spam filter on Blogger... what's the word?...

Oh, I remember, sucks.

It seems to have a problem with long comments so if you write a comment and it doesn't appear, please follow up with a short note and Joseph or I will check the filter.

Sorry for the inconvenience.

Tuesday, January 18, 2011

Jonathan Chait disapproves of a liberal journalist's flip-flop on unions

In today's TNR:
New York has a mordantly funny piece about the effort by staffers at Harper's to unionize. The saga begins with gross mismanagement by owner Rick MacArthur, spurring the staff to organize. Then the left-wing MacArthur started to act a lot like a union-crushing boss.
I have a bit more sympathy for MacArthur. He's in a difficult situation trying to save a tremendously worthwhile institution. I tend to be very union-friendly but the situation can get murky when the business in question really is struggling to survive, not just making a play for sympathy. Given that my only source of information is the gossipy and badly written New York piece, it's difficult to assign much blame.

Besides, it's not like he attacked a fundamental role of unions like the right to protect their employees from unfair termination.

Mortgage Questions

This post had a very perceptive take on a question from Megan McArdle:

McArdle: “Let’s turn it around,” I asked. “What if the bank decided that it wanted to exercise the same sort of option?…What if the bank foreclosed on your house, even though you made the payments, because it figured it could make more money taking the house and selling it?” (Not a likely scenario, I know, but a useful thought experiment.).

Banks exercise the same sort of option all the time when they resell mortgages (and hopefully notes!) from one entity to another entity. That’s the problem we have right now, that this reselling option banks use was so sloppy it’s tearing up the economy.

This is why if you are the type of person who thinks markets self-regulate through consumer demand and reputation there’s a major problem, as consumers have no choice over their mortgage servicer. If you don’t like your servicer, and refinance your mortgage with another bank, that bank can still sell off your mortgage and you can still end up serviced by the same institution.

I never quite thought of the decision to resell mortgages in this light, but this is a remarkably good point. It's not quite the same scenario as "seize the house" (which I think was the actual tactic that McArdle had in mind) but it certainly does put the decision to resell mortgages in perspective.

In a more pragmatic light, the decision to try and do regulation by reputation (long a bad idea) has even less relevance in the modern world. First of all, job tenures at banks may be quite short so the people making decisions that undermine a firms reputation may be elsewhere at the end of this period. Second, firms themselves often vanish or are absorbed by other firms (consider Washington Mutual as an example). These features of the modern corporate environment make it difficult to use a reputation based system as the primary check on the system.

This is not to say that homeowners who are in default should be given free houses (I'd think that was obviously an incorrect conclusion) but rather that we should give the regulatory structure of banks some serious thought.

Monday, January 17, 2011

The Golden Globes as a collective action problem

Even by the standards of Hollywood awards, the Golden Globes was a largely pointless exercise, selected by small and lightly credentialed group of no particular standing. For awhile, it represented a small net positive for the industry -- it did generate publicity and the large number of categories meant that a lot of shows could add "winner of..." to their promotional material -- but eventually the meaninglessness, the poor choices and the suspicion that nominations were made based on who might attend the ceremony all pushed the Golden Globes into the liability category. This came to a head this year with multiple nominations for the Tourist, one of the worst-reviewed pictures of the season, and with a payola scandal.

I suspect that most of the industry would like to see the Golden Globes go away but here's where the collective action problem comes in. If everyone who disapproved would stop covering or attending the event, they could probably kill it in a year or two (I'm counting being bumped to E! as virtual death), but even the Globes' harshest critics haven't been able to go cold turkey. As long as the show is there, all the incentives on the individual level are lined up to keep the show going. The journalist who refuses to write about the nominations or the ceremony loses ground to competitors. The nominated star who boycotts the awards passes up publicity and may be seen as difficult to work with (a label that can devastate an actor's career).

There's something refreshingly trivial about Hollywood versus the Golden Globes, but it does raise an interesting point: just how embarrassing does a situation have to be for an industry to find a solution to a collective action problem? Apparently it need to be worse than having the host of a prime-time network awards show opening with jokes about the fact that the nominations are fixed.

School segregation

From Dana Goldstein:

American schools are more segregated by race and class today than they were on the day Martin Luther King, Jr. was killed, 43 years ago. The average white child in America attends a school that is 77 percent white, and where just 32 percent of the student body lives in poverty. The average black child attends a school that is 59 percent poor but only 29 percent white. The typical Latino kid is similarly segregated; his school is 57 percent poor and 27 percent white.

There are clearly some places that our current educational system could stand to be reformed. I would rather focus on issues like segregation and access rather than whether removing tenure would be a panacea.

h/t Tyler Cowen of Marginal Revolution

What can I say, I'm a sucker for a good Procrustes joke

Click for the full strip.

Sunday, January 16, 2011


Female Science Professor has an absolutely delightful take down of a Andrew Hacker and his book:

My vote for the strangest part of the book is the paragraph in which the authors describe a "workingman" who "jumped on a subway track to rescue a child who tripped and fell." The workingman didn't think; he just did it. The authors posit that professors on that same platform would not have jumped on the track to save the child:

"We wonder if, had some professors been on the platform, would they have paused to ponder how John Stuart Mill might have parsed the choices?"

I wonder if that is a sane thing to wonder. Of course the professors would save the child. What better way to combine broader impacts, a synergistic activity, and outreach?


Similarly, what is your evidence for your contention that professors don't work as much as they say they do? This seems to be it: "A story is told of a classroom where all the students were busy scribbling as the professor droned on. All, that is, but one, a young woman in the back row, who wrote down nary a word. How so? She had with her the notes that her mother had taken for that class during her own student days." That's the evidence? A possibly apocryphal story?


For example, your book starts with the story of a candidate who, in his interview for a faculty position, makes it clear that he is not interested in teaching and is only interested in research. The fact that he was not hired indicates to me that the system worked well, yet you used this anecdote to illustrate your hypothesis that professors don't care about teaching and try to do as little of it as possible.

There are a lot more really good examples in this text, these were just my favorites. It is definitely worth an afternoon read.

Saturday, January 15, 2011

Joe Gores wrote the best chimpanzee sex scene you'll ever read

That sounds like a joke (and a rather tasteless one given that Gores died this week). It's not. The scene occurs in the book Menaced Assassin and in the most unlikely of settings it goes from wrenching despair to a moment of extraordinary sympathy. It was, like much of Gores' writing sentimental, but it was always honest and hard-earned sentiment.

And damn, the man could write.

Continued (battery issues)

My first exposure to Gores was the short story "The Second Coming" about two hipsters who volunteer as witnesses to an execution, just for kicks. It was published in 1966 in a now forgotten men's magazine and was, in its way, as unlikely as that chapter in Menaced Assassin. There was no mystery -- the accused was guilty -- and no violence except for that mandated by the state, but like the chapter in Menaced Assassin, it will stay with you.

Friday, January 14, 2011

When relative rates are misleading

Mark points me to this article.

To me these effects are hard to interpret in terms of relative growth rates given that rich areas of the country remained richer (on average) than the poor areas of the country. Let us consider a thought experiment to see what I mean by the problem of relative rates.

One region, call it sunbelt, has income of $1,000 per capita and this income increases by $20 (2% growth per year).

Another region, call it rustbelt, has an income of $500 per capita which increases by $15 (3% growth per year).

Clearly the rustbelt region has better growth (in % terms) but has a lower growth in absolute wealth. Now let us presume that the absolute growth rates remained constant over a decade.

At the end, despite always having lower growth, sunbelt has $1,200 in income while rustbelt has $650 per capita. The relative difference is smaller (as 650 > 50% of 1200) but, in absolute terms, the people in sunbelt now make $550 per year more than the people in the rustbelt.

Are we sure that % growth rates are always the best metric of economic progress?

Thursday, January 13, 2011

Quality journalism -- only available for a limited time

Mainly limited by the fact that it took me four days to get around to posting this:

"The Invention of Money" from This American Life

More thoughts on fluoride and lithium

Yesterday, Joseph posted his reaction to the possibility (discussed by Mike Moffatt at Worthwhile Canadian Initiative) of adding lithium to the municipal water supply of cities with low naturally occurring lithium levels. Joseph made some good points but I'd like to go a bit further, starting with the way the original question was stated:

How Much Would You Be Willing to Pay to Reduce Murders by 30%?

I don't have a problem with assigning a dollar value to a life when discussing policy (there's generally no alternative), but I think this is the wrong way of framing the problem for a number of reasons. We are talking about getting a drug to the relatively small portion of the population that needs it by giving it to everybody. There are other options for getting lithium to the people who need it. The water supply approach has the advantage of missing fewer people though not all (I suspect this will make some people, particularly the paranoid, switch to bottled water), but it comes with other concerns.

The obvious comparison here is with fluoride, a comparison that Moffatt himself makes here:
Will it work? I don't know. It seems like it would be worthy a pilot study or two. Although those levels of elemental lithium are believed to be safe, there may be side-effects we are not considering. There are ethical considerations as well, but it is hard to make a case that adding fluoride to the water supply is ethical but lithium is not - and we've been adding fluoride to drinking water for over half a century.
But there are at least two important differences between lithium and fluoride, and both differences have practical and ethical considerations.

First, tooth decay affects most people and virtually all children (whose health society has a responsibility to protect). There was no other practical way to get this treatment to everyone who needed it. Relatively few people need lithium treatment. As mentioned before, there may be other options for getting treatment to those people.

From an ethical standpoint, we are talking about exposing the majority of the population to a heightened level of a chemical that treats a condition that they don't have. This doesn't mean that adding lithium is a bad idea, but it is certainly possible to make an ethical case for fluoride that doesn't hold for lithium.

Add to that the concerns, noted by Joseph, over adding a mind-altering substance to a city's water supply. On the practical side, there have to be unexpected consequences (even with fluoride, there were enough minor side effects to reduce the level used). On the ethical side, you're adding a mind-altering substance to a city's water supply.

I don't know whether we should consider manipulating lithium levels, but I'm pretty sure we should start by acknowledging the complexity of the problem and taking a good look at the alternatives. Though much beloved by economists, this is one situation where "how much would you pay to..." is not going to cut it.

The middle of January and already in reruns -- Alice in Lawyerland

This post from Matt Yglesias on intellectual property (with additional comments by Joseph here), got me thinking about this post from a few months ago. I apologize for repeating myself, but this is one of my favorite examples of copyright hypocrisy:

Alice in Lawyerland: would the laws Disney lobbied for have prevented Disney from existing in the first place?

(disclaimer: I have cashed a number of royalties checks over the years so the following is obviously not an attack on the concept of intellectual property. I like royalty checks. I'm just worried about the consequences of taking these things to an extreme.)

In 1998, the Walt Disney company had a problem: their company mascot was turning 70. Mickey Mouse had debuted in 1928's "Mickey Mouse In Plane Crazy" which meant that unless something was done, Mickey would enter the public domain within a decade. This was a job for lobbyists, lots of lobbyists.

From Wikipedia:

The Copyright Term Extension Act (CTEA) of 1998 extended copyright terms in the United States by 20 years. Since the Copyright Act of 1976, copyright would last for the life of the author plus 50 years, or 75 years for a work of corporate authorship. The Act extended these terms to life of the author plus 70 years and for works of corporate authorship to 120 years after creation or 95 years after publication, whichever endpoint is earlier. Copyright protection for works published prior to January 1, 1978, was increased by 20 years to a total of 95 years from their publication date.

This law, also known as the Sonny Bono Copyright Term Extension Act, Sonny Bono Act, or pejoratively as the Mickey Mouse Protection Act,[2] effectively "froze" the advancement date of the public domain in the United States for works covered by the older fixed term copyright rules. Under this Act, additional works made in 1923 or afterwards that were still copyrighted in 1998 will not enter the public domain until 2019 or afterward (depending on the date of the product) unless the owner of the copyright releases them into the public domain prior to that or if the copyright gets extended again. Unlike copyright extension legislation in the European Union, the Sonny Bono Act did not revive copyrights that had already expired. The Act did extend the terms of protection set for works that were already copyrighted, and is retroactive in that sense.

Mickey had been Disney's biggest hit but he wasn't their first. The studio had established itself with a series of comedies in the early Twenties about a live-action little girl named Alice who found herself in an animated wonderland. In case anyone missed the connection, the debut was actually called "Alice's Wonderland." The Alice Comedies were the series that allowed Disney to leave Kansas and set up his Hollywood studio.

For context, Lewis Carroll published the Alice books, Wonderland and Through the Looking Glass, in 1865 and 1871 and died in 1898. Even under the law that preceded the Mouse Protection Act, Alice would have been the property of Carroll's estate and "Alice's Wonderland" was a far more clear-cut example of infringement than were many of the cases Disney has pursued over the years.

In other words, if present laws and attitudes about intellectual property had been around in the Twenties, the company that lobbied hardest for them might never have existed.

There's nothing unusual about a small company or start-up exploiting lapsed or unenforced copyrights to get a foothold. The public domain has long been fertile ground for stage companies, record companies, publishers, and producers of movies or radio and television; it's just been getting a lot less fertile lately.

Wednesday, January 12, 2011

More on Just Desserts

Matt Yglesias has a very good point:

And this is for good reason. It’s pretty clear if you read the paper that Mankiw doesn’t intend to be arguing for any really radical changes in the structure of American society. He wants to defend modern industrial capitalism, while bolstering the case for lower taxation of the rich and less generous spending on the non-rich. But think about his examples here. How is it that you can get rich writing books, making movies, designing MP3 players, or making TV shows? Well it’s thanks to statutory definitions of intellectual property. If the copyright on a book only lasted two years, JK Rowling wouldn’t be nearly as rich. If the inventor of the Xerox Alto owned some kind of perpetual right to the concept of a graphical user interface, Steve Jobs’ whole career would be unimaginable. And the firms involved in these industries are constantly “manipulating the system” of intellectual property to try to maximize their own advantage.

I think that this is a very astute point; the structure of modern intellectual property laws have made the creation of these goods very lucrative. But linking success to morality is a very tough proposition because most people who are very successful are going to benefit from favorable regulation (because in places where regulation is unfavorable, it ia harder to be a success).

Consider this small businessman in California (who has discovered that there is a tax for have retail hand scanners):

Then yesterday the bill arrived. Sure enough, the people of California had enacted a new tax on small business. $205 in my case, including $100 for existing and $105 for having a POS system with one barcode scanner. It's like a tax on progress, only applicable to forward thinking businesses that have migrated away from the inefficiency of the cash register. Want to raise state revenue? Require retail businesses to have a point-of-sale machine or pay a $205/year fine. At least then you'll have capital investments in equipment and services that lead to jobs and more tax revenue.

The bottom line is that politics in this state preclude tax increases and our state is tens of billions of dollars over budget. Conservatives decry tax increases while liberals won't budge on public services. This naturally results in the nickel and diming of small businesses. We don't have a union or trade group to defend us, so watch as our business fees silently rise 20%.

The merits of one specific tax may or may not be justified. But people can work hard at a socially productive activity and still end up with a marginal income due to the choices we make on how to tax and regulate business activity. We may have chosen the optimal levels of these things (anything is possible) but ascribing moral superiority to classes of people who manage to obtain favorable regulatory treatment does not appear to be ideal.

Hoisted from comments -- more on Mankiw's assumptions

David had this to say about my post critiquing the way Greg Mankiw and many other economist who defend the magic of the market don't spell out the highly restrictive assumptions they use in their arguments:
An often neglected aspect of these standard assumptions is that they are *sufficient* not necessary conditions. Perfect information, for example, might not exist, but that doesn't mean there won't be an equilibrium capturing all the potential gains from exchange.

These statements may well form a set of conditions that are sufficient but for the most part not necessary to support Mankiw's conclusions. You could say the much same foe some list of statements in most intellectually mature movements. With Mankiw, I'd go even further and say that if these statements don't have to be true; they just have to approximate reality to a sufficient degree in order to make his case.

But we're talking about something slightly but significantly different. In this context, these assumptions are part of the arguments that Mankiw is making. It is, of course, possible for invalid argumnts to lead to correct conclusions and you can have a trivially valid argument that starts with a false premise, but (putting aside those old logic lessons about the implications of the existence of unicorns) you can't have a valid and meaningful argument based on false assumptions.

It's important to put this in context. Mankiw is arguing that, in addition to being immoral, a return to Clinton era tax rates would cause a sharp drop in productivity and economic growth. It is possible that he's right, but there is considerable historical evidence and any number of counterarguments (many by Nobel Prize winners) that contradict his conclusions. Under those circumstances, I think the burden of proof should rest with the guy who's saying this time it will be different.

"The generosity collapse"

Frances Woolley has an interesting post on the nonlinear relationship between demand and charitable giving:

People give when they're asked.

Jim Andreoni and Justin Rao have proved it. They ran the following experiment: one person, the allocator, was given 100 'money units', worth $10 in real money. She was free to choose how much to keep for herself and how much to give to another person, the recipient. The recipient, however, had an opportunity to ask for a particular division of money - 50/50, say, or 30/70 or 60/40.

It turns out that people who ask for more get more - up to a point. When the recipient asks for, say, 70 percent of the money in the envelope, the allocator is quite likely to say "sorry" and give nothing. But a recipient who asks for a 50/50 split on average receives more than the recipient who asks for nothing.

I'm not entirely comfortable with the way Woolley generalizes these results (I suspect her conclusions are correct; it just feels like a bit of a jump getting there), but it's a thought-provoking piece with important implications.

And the fishing analogy is pretty cool.

Tuesday, January 11, 2011

If a PhD isn't worth it, you can always get a law degree

Fresh on the heels of this, Felix Salmon continues to be the world's most depressing guidance counsellor:

David Segal is the best writer on the NYT’s business desk, so it’s a good thing that he was chosen to pen today’s 5,000-word disquisition on the economics of law degrees. He’s taken a particularly dry subject and turned it into a compelling and accessible read; that’s no mean feat.

At the heart of the article is law schools’ bait-and-switch operation: universities rake in millions of dollars in tuition fees from students who are given to understand that a well-paid job lies waiting for them upon graduation. But such jobs are hard to find and precious few law graduates will ever waltz straight into a $160,000-a-year Biglaw job, especially if they graduate from a non-top-tier school.

Yes, they really are looking at you

This is why it's creepy to serve the whole fish.

Thanks to Andrew Gelman for this cautionary tail.

Andrew Gelman on the methodological attribution problem

Andrew Gelman has a post in which he brings up the following insight:

This sort of thing comes up a lot, and in my recent discussion of Efron's article, I list it as my second meta-principle of statistics, the "methodological attribution problem," which is that people think that methods that work in one sort of problem will work in others.

I think that this concern is especially key for scientists who are moving between fields. The ideas and techniques in my field have been honed to a fine edge dealing the types of biases and design issues that often occur in our problems. I focus a lot on issues like "confounding by indication" and a lot less on other issues that can be very important in other fields. If I moved to another field, say economics, I might easily focus too much on small points (that really are not an issue in economics research) and yet miss the major points in the field. This type of translation issue is not inevitable but it is worth keeping in mind.

Lithium in the water supply

There is an interesting post over at Worthwhile Canadian Initiative on whether to add Lithium to the water supply:

A city with no-to-little elemental lithium would need to add 70 micrograms/L of elemental lithium to the water supply. Since we're adding lithium carbonate (not pure lithium), we would need roughly 200 micrograms/L. (For reference, there are a million micrograms in a gram).

The average Canadian domestic user uses just over 100,000 L of water a year (Source). At 200 micrograms/L, we would need to add roughly 20 grams per person of lithium carbonate for a total cost of $1.53 per person, or $153,000 per 100,000 people.

The city of Toronto has 3.3 murders/100,000 people (Source). A 30% reduction in this rate would lower it by 1 murder per year per 100,000 people. If our rough back-of-the-envelope calculations are correct and the lithium carbonate method works like the Texas study suggests, $153,000 buys us one less murder. That does not take into account the reductions in rapes, suicides, drug use or thefts.

Will it work? I don't know. It seems like it would be worthy a pilot study or two. Although those levels of elemental lithium are believed to be safe, there may be side-effects we are not considering. There are ethical considerations as well, but it is hard to make a case that adding fluoride to the water supply is ethical but lithium is not - and we've been adding fluoride to drinking water for over half a century.

My first reaction is to note that Lithium is clearly a mind-altering drug and there does seem to be a basic principle that adding mind altering drugs to the water supply is a generally bad idea. Heck, the theme of the Firefly movies (Serenity) was all about a plan like this going very, very wrong. Or, more realistically, one could easily imagine the addition of sedatives to the water as being a response to political unrest (and this would also reduce the murder rate).

Furthermore, the original (ecological) study in Texas was based on naturally occurring Lithium in the water. This brings up two questions to me:

1) Is the distribution of Lithium independent of the characteristics of the inhabitants? This is necessary to make sure that this is not a confounding effect, of some kind (another way to say the same thing is whether water supply is a valid instrument for an instrumental variables analysis).

2) Is the causal agent lithium, or is it another substance that is associated with Lithium?

It is a complex question but it is very effective at making us evaluate our intuitions on public health intervention. Go read . . .