Tuesday, May 31, 2011

A couple of interesting stories on the business of gambling

American Public Media's Marketplace has a report on one of those you've-got-to-be-kidding business models. Not sleazy (the people behind it actually go out of their way not to take advantage of customers who might develop a serious problem), but this online casino is another example of people willingly paying money for something they can get for free.

By comparison, the AP has this account of a casino model that players have remarkably little interest in. Given the emergence of casinos in nearby states and the stagnant economy, the decline in Atlantic City isn't exactly unexpected, but this piece is still worth checking out and the title "Monopoly lost: Atlantic City's rise and fall" is definitely good for some bonus points.

A "how to lie with statistics" instant classic from the Wall Street Journal op-ed page

CJR's Ryan Chittum catches Stephen Moore doing his damnedest to mislead:

The question-as-headline is your second red flag that this just might be a deeply disingenuous op-ed (the first is that it’s on The Wall Street Journal op-ed page):

A 62% Top Tax Rate?

The top marginal tax rate is just 35 percent now, of course. So how does Moore come up with the idea that Obama and the Democrats are pitching a 62 percent tax rate for the rich? Disingenuously.

First, here’s a classic example of misleading readers with an apples and oranges comparison:

If the Democrats’ millionaire surtax were to happen—and were added to other tax increases already enacted last year and other leading tax hike ideas on the table this year—this could leave the U.S. with a combined federal and state top tax rate on earnings of 62%. That’s more than double the highest federal marginal rate of 28% when President Reagan left office in 1989. Welcome back to the 1970s.

For Moore’s headline purposes he includes state taxes to get to 62 percent, but when he compare it to rates under Reagan, he doesn’t include state taxes.

The comparison is much more misleading than that, really. Moore is also including things like payroll taxes to come up with his fake 62 percent number, while not including them in that 28 percent Reagan figure. You can’t do that, boss.

Moreover, to come up with that doozy of a number, Moore is adding in not only state and payroll taxes, but just about every possible tax hike being bandied about by Democrats. But Moore knows full well that even if they wanted to, which they don’t, the Dems wouldn’t be able to enact every one of these. But he acts like they’re all coming.

Those theoretical and far-from-likely tax hikes include a 3 percent surtax on incomes over a million bucks; Obama’s proposal to end the Bush tax cuts for the rich in 2013, which would return marginal rates to 39.5 percent at the top; 3.4 percent Medicare taxes (Moore includes the employer’s contribution here); and 10.1 percent in additional payroll taxes because “Several weeks ago, Mr. Obama raised the possibility of eliminating the income ceiling on the Social Security tax” (that includes the employers’ share, too, though Moore doesn’t say that).

There’s also this:

Today’s top federal income tax rate is 35%. Almost all Democrats in Washington want to repeal the Bush tax cuts on those who make more than $250,000 and phase out certain deductions, so the effective income tax rate would rise to about 41.5%.

It’s unclear how Moore gets to 41.5 percent here. Repealing the Bush tax cuts would return the top marginal rate to 39.5 percent. Deductions affect effective tax rates, which are far lower than marginal rates. Since he doesn’t explain it, and since the backdrop is the rest of this misleading piece, I’m going to assume that this 41.5 percent number is false (I believe Moore is talking about the PEP and Pease taxes, but those don’t apply to people making more than $525,000, so they can’t be included in a total tax rate that includes a millionaire’s surtax.)

To get to 62 percent, Moore also includes 4 percentage points for state taxes. It’s unclear why he didn’t include local taxes while he was at it. That would have got him another full point (it’s always worth noting that state and local taxes are extremely regressive, taking 11 percent of the income of the lowest quintile of earners, which is more than twice what the top 1 percent pays.)

All this allows Moore to plant the zombie lie that Democrats are “proposing rates like those under President Carter.” Even with all his hocus-pocus, that’s not true, either. The top marginal federal income tax rate under Carter was 70 percent, a full eight percentage points higher than Moore’s fake number. If you include all the state and payroll taxes he uses to get to Obama’s “62 percent” figure, which you have to to make the comparison, that Carter number would be closer to 80 percent.

And, as Andrew Sprung points out, that's still lower than the rate under Ike. It would be interesting to see how Moore reconciled the high taxes of the Postwar Era with its phenomenal growth.

Probably not informative, but interesting.

Metaphor of the day

From Merlin Mann via John D. Cook:

If a project doesn’t have an owner, it’s like a chainsaw on a rope swing. Why would anyone even go near that?

[Technically a simile, but do you really want to get technical here?]

More nails in the church door -- the case for the counter-reformation keeps getting stronger

The education reform movement is a strange beast. Its support is extensive and extraordinarily broad-based, bringing together players as diverse as Roger Ebert, the New Republic and Rick Scott (not that TNR is exactly proud of the commonalities -- check out how Kevin Carey manages to avoid Scott when discussing Republicans' reform positions, despite the Florida being the epicenter of the GOP's reform agenda).

Yet, despite this overwhelming consensus, it is a movement almost completely unsupported by solid, non-anecdotal evidence. I summarized some, but by no means all, of the cases where the data seemed to be running against the tenets of the movement in a post entitled: "Perhaps this is the time for a counter-reformation."

The following report (described here by the indispensable Dana Goldstein) undercuts the intellectual framework of the movement even further (though I would have liked to hear more about Canada which seems to be the more relevant example).
But what if the United States is doing teacher reform all wrong?

That’s the suggestion of a new report from the National Center on Education and the Economy, a think tank funded mostly by large corporations and their affiliated foundations. The report takes a close look at how the countries that are kicking our academic butts—Finland, China, and Canada—recruit, prepare, and evaluate teachers. What it finds are policy agendas vastly different from our own, in which prospective educators are expected to spend a long time preparing for the classroom and are then given significant autonomy in how to teach, with many fewer incentives and punishments tied to standardized tests.

Finland, for example, requires all teachers to hold a master’s degree in education and at least an undergraduate major in a subject such as math, science, or literature. Finnish teacher-education programs also include significant course work in pedagogy—exactly the sort of instruction former New York City schools chancellor Joel Klein recently called useless. All teacher candidates must write a research-based master’s dissertation on an issue in education policy or teaching practice, and will then spend a full-year as a student teacher reporting to an experienced mentor.

Shanghai takes a somewhat different approach; its teacher candidates take 90 percent of their college courses in the subject they will teach, and are expected to complete the same undergraduate programs as students who will go on to receive Ph.Ds in math or the sciences. As in Finland, however, a new teacher in Shanghai will spend the first year of his employment under the supervision of a mentor teacher, who is relieved of some of her own classroom duties in order to spend more time training the newbie.

You can see how these international examples cut against the grain of American education reform. Our approach has largely borrowed the Teach for America model. First, we attempt to bring more elite college graduates into the teaching profession by decreasing the credentialing necessary to become a teacher: no student-teaching year or education degree required, just a few weeks of summertime training are supposed to suffice. Then we expect teachers to spend much of their time preparing children for standardized tests, whose results, in turn, will be used to judge teachers’ competency.

The NCEE report makes a persuasive case that the Obama administration and its allies in the standards-and-accountability school reform movement have teaching policy exactly backward. The way to increase the prestige of the teaching profession is not to make it easier for elite people to do the job for a few years and then burn out, but to make it more challenging to earn a teaching credential, so that smart young people are attracted to the rigor of education programs. Within such a system, alternative credentialing programs for career changers could still play an important role. But alternative pathways will never have the capacity to provide the entire teacher corps.

Following this approach, Finland has been able to abolish test-score based accountability, finding that the folks who come through their challenging teacher professional development pipeline are well prepared to create their own curriculums and assessments. “It is essential for high-performing countries to trust its teachers, but it had better have teachers it can trust,” writes Marc Tucker, author of the NCEE report.

For the record, I don't believe in slavishly following international examples (even when they support my position), but when movement advocates like Klein and Rhee use these countries to bolster their arguments, they need to explain why we should pursue the opposite of these countries' policies.

Thought of the day

I was reading this statement (via a link from Felix Salmon):

Emergers also have a better chance of being part of the coveted 1% who control 40% of wealth in America someday.

It got me thinking again about precisely why we have low marginal tax rates on those who make above (for example) 500 thousand per year. Now, by low I mean low in comparison with other rates in the post-WWII era.

There seem to be two explanations: 1) competition for key talent and 2) incentive for performance.

The first seems unlikely. All US executives pay taxes in the same country so it just resets the baseline. Americans seem to be the best compensated class of business executives and stock traders so international competition can only matter so much.

The second is much clearer if we (following Linda McQuaig and Neil Brooks) look at sports stars. Did Babe Ruth or Lou Gehrig under-perform relative to Micheal Jordan due to low compensation? Do we really think that the overall quality of play would decline in some massive sense?

Now we might get fewer people wasting their lives trying to become a sports superstar if they paid more in marginal taxes, but is that really a shame?

Meanwhile, infrastructure, education and the rule of law all make economic activity possible. Is it not possible that these areas are under-invested in and could use some transfer of cash?

I do not know for sure, but it is worth thinking about.

Monday, May 30, 2011

3-day Weekend Blogging -- Junk Food edition

We've been robbed!

L.A. is unquestionably one of the world's great burger towns (and I have the only Pulitzer Prize winning food critic to back me up on this), so it's bad enough when Travel and Leisure omits us from its top ten list, but this is just adding insult to injury:
No. 2 Salt Lake City

Locals have lined up in droves ever since the streamlined burgers of In-N-Out have come to town, but otherwise the area's burger personality is quite a bit more decadent—as in, pastrami burgers. To try a quarter-pound patty piled high with more beef, check out Crown Burger, where they also add Thousand Island dressing, lettuce, onions, and cheese.

In-N-Out? Really?

Sunday, May 29, 2011

Correlation is not causation . . .

. . . but this association is both alarming and worth a lot more study;

Plus, overall, people with long commutes are fatter, and national increases in commuting time are posited as one contributor to the obesity epidemic. Researchers at the University of California–Los Angeles, and Cal State–Long Beach, for instance, looked at the relationship between obesity and a number of lifestyle factors, such as physical activity. Vehicle-miles traveled had a stronger correlation with obesity than any other factor.

Unlike things like genetic factors (which tend to be reasonably stable within decades at the population level), the shift towards longer commutes has moved in parallel with increases in obesity. If the association persists at the individual level then it is a possible candidate for obesity prevention.

The problem, of course, is we continue to build low density, car centered cities which do not improve matters. It makes it hard to change average commutes on any sort of easy time scale. But a discovery that this association was causal would suggest all sorts of public health interventions.

Perhaps we were a bit too quick to dismiss the Jupiter effect

Saturday, May 28, 2011


I was looking at Andrew Gelman's blog and saw his discussion of Ray Fisman's piece on compensation. I was especially struck by this statement:

Yet this aversion to pay cuts isn't good for workers or the American economy more broadly. More people end up losing their jobs than if wages were more flexible, and there are serious long-term consequences for the workers who lose their monthly paychecks. The negative impact on a worker's earnings, health, and even the earning prospects of his children lasts decades beyond the pink slip's arrival. Creative solutions—like the furloughs that cut government salaries in California and elsewhere—might help to make lower pay more palatable, by presenting the cut as a temporary measure and by creating at least the illusion of a lower workload. If we can find other ways of overcoming the simmering resentment that naturally accompanies wage cuts, workers themselves will be better for it in the long run.

I wonder how this links with tax increases. Greg Mankiw seemed to be quite displeased by the prospect of tax increases (which are a form of reducing compensation).

If this relation works the same way, then there are two implications:

1) Tax cuts are a terrible idea as a way of providing economic stimulus as they will do little to increase output (3 hours according to Fisman's experiment) but will be greatly resented if they are rescinded

2) High taxes (like low pay) seems to have little effect on income so if you rise taxes then you should raise them by a lot so you only feel the pain of resentment once.

I am not sure that this position is correct, but it sure is thought provoking.

Thursday, May 26, 2011

And NPR is probably the best of the bunch

Between poll numbers, town hall meetings and the special election in New York, the Ryan budget is starting to look like a tremendous political misstep for the GOP. To make matters worse, the pundits (who have gushed praise for Ryan in the past) seem to be increasingly open to Paul Krugman's take on the plan:
Anyway, the underlying premise behind statements like that is the assumption that the Ryan plan represents a serious effort to come to grip with America’s long-run fiscal problems. But what became clear soon after that plan was unveiled was that it was no such thing. In fact, it wasn’t really a deficit-reduction plan. Once you remove the absurd assumptions — discretionary spending, including defense, falling to Calvin Coolidge levels, and huge tax cuts for corporations and the rich, with no loss in revenue? — it’s highly questionable whether it would reduce the deficit at all.
Given all this and the fact that seniors are the Republicans' most important demographic, what were John Boehner and the rest of the house leadership thinking when they publicly came out for privatizing Medicare? Not being privy to their private conversations, we can only speculate, but I suspect that, in addition to fear of primary challenges, part of their rationale was the assumption that the Washington press corps would spin the story in a way that would minimize the damage.

To see how they might have made that assumption, check out this exchange between Neal Conan and NPR political editor, Ken Rudin:

CONAN: Another candidate who's been on the hustings in Iowa is Newt Gingrich, who's been saying, well, I'm the man that Washington has learned to hate.

Mr. NEWT GINGRICH (Republican Presidential Candidate): It is impossible to have watched television for the last week and not get the conclusion I am definitely not the candidate of the Washington insiders.

Everywhere I go across Iowa, or everywhere I see people randomly, they have figured out I'm the guy who wants to change Washington and they can tell it because the people they see on TV from Washington aren't happy with me.

CONAN: Well, not happy with him because, well, any variety of reasons.

RUDIN: Well, yes, and you know something, even - even when he said the thing about Paul Ryan, that it was a radical, it was social engineering...

CONAN: He now he says he would have voted for it.

RUDIN: Yes, but you know, when he said it at the time, of course everybody jumped on him, saying how dare you say that. But everybody said, well, that may be true. And we saw New York 26, and we'll talk about that later. That could very well have been the message that came out of it. So even when he says things that may very well be true, you know, we jump on him for saying that. And of course he went back on that word.

What amazes me about Rudin's comment is how, in less that two weeks, a senior political reporter can so completely revise his memories of an event. It's true that by now everybody has jumped on Gingrich at some point but the people who jumped when he criticized the Ryan plan were completely distinct from the people who jumped on him when he tried to walk it back. The story here isn't difficult to follow: Gingrich (probably assuming his conservative credentials were solid enough) tried to distance himself from Ryan's increasingly unpopular budget proposal; Conservatives were outraged and demanded a retraction; Gingrich clumsily backtracked, apologizing to Ryan and trying to suggest that he had misspoke partly because he wasn't expecting Meet the Press' 'gotcha' questions (despite having been on the show over thirty times).

Rudin has completely internalized the values of the Washington press corps, particularly "tell both sides of every issue" (even when there's only one side). He takes an account of a dislikeable politician's disastrous launch of a trial balloon and makes it into the story of a prophet without honor in D.C., not because he supports Gingrich (I very much doubt he does) but because he's more comfortable with the revised version.

When Paul Ryan and the Republicans put forward a plan to privatize Medicare immediately after a nominally pro-Medicare campaign, they were counting on reporters like Rudin to spin it as a serious response to a dire problem. Nor did Rdin disappoint, calling the plan "perhaps politically courageous, but maybe suicidal as well."

It's worth taking a minute to recall how common this initial response was. For at least a couple of days it looked like the press, which was deeply invested in the Ryan-as-fiscal-conscience meme, was going to converge on the interpretation that the Ryan budget, though certain not to become law, was an honest attempt to start the conversation by facing up to some hard truths (you could even find some Democrats falling in line). If this interpretation had held, the story would have probably dropped off the radar fairly quickly and the political landscape would look radically different now (insert "Sound of Thunder" reference here).

There's only one thing more annoying than the kind of post Mike Konczal just put up

You know know, the "What does [recent popular culture phenomena] tell us about [______ theory or principle]?" post. Whether it's an embarrassing reality show or a celebrity's public meltdown, someone on the internet will a pretentious excuse to talk about it.

But what's even more annoying is when someone like Mike Konczal not only writes one of these ("What can the movie Bridesmaids tell us about the Recession and Keynesian Economics?"), but actually makes it good enough that I feel compelled to quote it at length.

This is the one year forward survival rate for businesses that have launched in the previous year. So a business that launched between March 2008 and March 2009 has only a 76.3% chance of being around in March 2010. As you can see, it’s actually lower than that. It’s really hard to open a business in a recession.

This is an important point that goes against the “creative destruction” view of recessions. Those who believe that kind of classical theory think that the “work” of a recession is to let the economy recalculate what goods and services are needed going forward, while also letting the virtuous and hard working purge the incompetent and the lazy out of the system. But recessions are terrible for new entrants! Good ideas or bad ideas, who wants to launch a business in a climate with 10% unemployment? Even if you are the best manager, even if your idea is killer, if all your customers can barely pay their own bills it is unlikely that your work will pay off. The realization that this depressed state could perpetuate itself was an important breakthrough for macroeconomics. The government needs to step in to jump start the economy so that the normal trucking and bartering and allocation of a market economy can function.

If you’ve been paying attention to the headlines, you’ll note that the political economy is all wrong about what needs to be done to fix this. Most of the major discussions have been about how to make the established business community feel more encouraged. From writing regulatory rules to slashing the social safety net to extending high-end tax cuts, our hopes seem entirely to rest on whether or not we can get millionaires to work an additional 10 minutes and feel properly appreciated rather than having customers with money in their pockets available for new businesses.

The Polish economist Michal Kalecki wrote an excellent 1943 essay called Political Aspects of Full Employment that warned us about this problem. If during a recession and a weak economy the government doesn’t step up to ensure full employment, then suddenly the business community has powerful indirect control over the economy. Governments give credits and rebates for established companies to expand, businesses spend the money on M&A and consolidation and, most importantly, incumbents expand and entrench their powers. This kind of confidence building isn’t going to help a small bakery that’s trying to open.

More intellectual property silliness

From TPM:

The New York Stock Exchange now claims that you have to get their permission (express or implicit) before you use images connected to the New York Stock Exchange. So if you find a wire photo of the trading floor and use it to illustrate a story on Wall Street, you're violating the NYSE's trademark because they've trademarked the trading floor itself.

We found this out yesterday when we got a cease and desist letter from the NYSE based on an article published at TPM back in November. You can see the letter here.

TPM is represented on Media and IP matters by extremely capable specialist outside counsel. And we've been advised that the NYSE's claims are baseless and ridiculous on their face. But this is yet another example of how many large corporations have given way to IP-mania, trying to bully smaller companies into submission with inane and legally specious claims of intellectual property rights.

Well, TPM's small but we have big teeth. And we don't like being pushed around. So we're again posting the same picture as an illustration for this post. But really, what's next? Mayor Bloomberg trademarks his face and the city newspapers have to get his permission to publish photos of him so not to infringe the Bloomberg face trademark? Or more likely, the Empire State building trademark's the image of the Empire State building and demands a fee or bars photographs of the New York skyline.


So in the spirit of the moment I propose a contest. We know that NYSE now says you need their permission to show photographs of the Exchange in the context of news coverage. And if I understand their logic you'd actually need their permission to show a sketch you drew of the Exchange floor.

So here's the contest, what do you think NYSE's next preposterous claim of intellectual property rights will be? Can you say the words 'New York Stock Exchange' without their permission? Can you do a line drawing of the facade of the exchange without running it by the NYSE's lawyers?

As many have observed (including Thomas Jefferson who refused to patent any of his inventions), intellectual property laws are a necessary evil. They restrict the creation of new work in often onerous ways but they provide an increased incentive to create work that qualifies for protection. Even more importantly, they encourage dissemination of that work.

Over the past few decades, however, we've seen less interest in the necessity and more emphasis on the evil. The result is unfair, economically suboptimal, and undeniably silly.

[We've been down this rabbit before as you can see here.]

Wednesday, May 25, 2011

"Top Colleges, Largely for the Elite" -- no, really?

This David Leonhardt story has been getting a lot of attention, which is all for the good. It doesn't go very deep into the issue, but it unearths some revealing facts and makes some important points that are often left out of the discussion:
The truth is that many of the most capable low- and middle-income students attend community colleges or less selective four-year colleges close to their home. Doing so makes them less likely to graduate from college at all, research has shown. Incredibly, only 44 percent of low-income high school seniors with high standardized test scores enroll in a four-year college, according to a Century Foundation report

— compared with about 50 percent of high-income seniors who have average test scores.

“The extent of wasted human capital,” wrote the report’s authors, Anthony P. Carnevale and Jeff Strohl, “is phenomenal.”

This comparison understates the problem, too, because SAT scores are hardly a pure measure of merit. Well-off students often receive SAT coaching and take the test more than once, Mr. Marx notes, and top colleges reward them for doing both. Colleges also reward students for overseas travel and elaborate community service projects. “Colleges don’t recognize, in the same way, if you work at the neighborhood 7-Eleven to support your family,” he adds.

Several years ago, William Bowen, a former president of Princeton, and two other researchers found that top colleges gave no admissions advantage to low-income students, despite claims to the contrary. Children of alumni received an advantage. Minorities (except Asians) and athletes received an even bigger advantage. But all else equal, a low-income applicant was no more likely to get in than a high-income applicant with the same SAT score. It’s pretty hard to call that meritocracy.

Tuesday, May 24, 2011

Another data dump

So many links, so little time.

From Felix Salmon:
That's the kind of performance Bill Ackman can only dream of. In 2007 he raised $2 billion for a hedge fund, Pershing Square IV, dedicated to going long Target; today, in the wake of a 40% plunge in January, that fund has dwindled to just $210 million.

From Huffington Post:
"Hear yourself, ma'am. Hear yourself," Woodall told the woman. "You want the government to take care of you, because your employer decided not to take care of you. My question is, 'When do I decide I'm going to take care of me?'"

Large portions of the crowd responded enthusiastically to the congressman's barb, with some giving him a standing ovation, underscoring the fierce divisions within the electorate.

William Robert Woodall III, who goes by "Rob," doesn't appear to have been referring literally to himself, but rather speaking figuratively. It's a good thing, because financial records show the 41-year-old congressman has done very little to take care of himself in his retirement. Woodall's 2009 financial disclosure forms, filed with the House of Representatives, show that his two largest IRAs have between $15,000 and $50,000 worth of assets, hardly the type of nest egg that would be able to cover the health care costs associated with aging absent government health care.

Woodall was chief of staff to former Rep. John Linder (R-Ga.), a job taxpayers shelled out more than $100,000 a year for in 2002, rising to more than $150,000 in 2009, plus gold-plated health and retirement benefits. Woodall, who has taken his former boss's seat, now makes $174,000 a year with generous benefits.

From Yahoo:
While some NFL players are spending the enforced offseason in workouts with their teammates and others (like Minnesota's Ray Edwards(notes) and Baltimore's Tom Zbikowski(notes)) are spending it in the boxing ring, third-year safety David Bruton(notes) of the Denver Broncos has set himself on a different path — he's spending the lockout as a substitute teacher at his old high school in Ohio, teaching social studies and credit recovery (yes, they have those classes for teenagers now) for the not-so princely sum of $90 per day.

From WSJ:

Could someone please explain to business writers that hearing about a ten percent jump in ingredients doesn't mean anything to us unless you tell us how much of the retail price goes for ingredients (from Businessweek):
Surging ingredient costs are putting restaurant margins under increasing pressure. World food prices rose to almost a record in April as grain costs advanced, leading to price hikes for basics like eggs, meat and sugar. Dairy Queen, which also debuted a smaller milkshake this month, expects its ice cream costs to jump more than 10 percent this year.

Nathan Myhrvold: Egotistical patent troll, or the lowest form of life on Earth?

I am surprised Mark did not post this

But one of the blogs on our blogroll has a fun probability problem. It's fun to head on over and work it out!

Use it up, wear it out, make it do or do without

My parents used to recite that rhyme when describing their parents' and grand-parents' generations (making me think that the saying preceded the ad campaign that produced the magazine copy below). It always struck me as a dramatic example of how American values have changed.

Now Tim Duy has a great post up on this ad campaign comparing the economic contexts of two very different wars on inflation.

I can't cut-and-paste this New Yorker article, which is perhaps just as well

Nicholas Lemann's examination of the entry level culture at McKinsey (reached through a link from Felix Salmon) is one of those pieces that needs to be read in full if you want to understand the state of American business. The New Yorker apparently unlocked the story because McKinsey has been in the news lately, but I think the real importance here goes well beyond the scandals.

Monday, May 23, 2011

Would you rather have Jon Stewart or Felix Salmon gunning for you?

Either way it would certainly suck to have both on your case.

And while on the subject of Salmon, check out this fascinating piece on the attributes in online reviews that bring in customers (they aren't what you'd expect).

Dean Dad makes an essential point about the higher education debate

From Confessions of a Community College Dean:
My sense, very much like Tim Burke’s, is that a category like “higher education” obscures as much as it clarifies. Harvard, the University of Minnesota, the University of Phoenix, Philadelphia Bible College, and Bronx Community College all fall under the category of “higher education,” as different as they are. Popular discussions of, say, climbing walls as drivers of tuition increases are utterly irrelevant in most of the for-profit and community college worlds. Complaints about state budget cuts have a great deal of validity for state and community colleges, but are largely irrelevant to most of the private colleges. Sports may be a religion at Texas Tech; not so much at Cal Tech. (At Proprietary U, every year represented another undefeated season.) College may be a four-year party at some second-tier residential colleges; it absolutely is not at colleges with large numbers of adult students with jobs and kids. Even complaints about “administrative bloat” seem to have validity in much of the four-year sector, but are mostly misplaced in the community college world.

With that much variety, it’s entirely possible that someone who attends, say, a huge state university with a high-profile sports program chose it for precisely that reason. That person may resent invisible professors -- or may not care -- and not mind at all the four-year party. A working Mom who chooses a community college night program might find the entire discussion of the four-year party utterly alien.

With such disparities hidden under a single category, too literal a reading of poll results could lead to destructive conclusions. Yes, Rich Kid Private College may have a lavish student center; does that mean we should cut funding for community colleges? Yes, some for-profits took advantage of legal loopholes to exploit financial aid; does that mean we should layer new regulations on public colleges?

My sense of it is that the sector that’s in real trouble is the expensive-but-not-selective, “nothing special” private colleges. A pricey, tuition-driven college without distinction or a clear niche represents a weak value proposition in a tough market. That’s true whether the college is for-profit or not. A clear niche could mean exclusivity, or a specific programmatic strength, or a strong religious identity. Being okay at a whole lot of things doesn’t justify thirty thousand a year, especially when public options are available for a fraction of the cost.

Why restrict the types of NSAIDs used as active comparators?

I am always surprised when people do not include negative controls when there is a very obvious candidate to be used as such. Consider this article:

Chronic analgesic use with either COT or COX-2 was associated with an increased risk of cardiovascular outcomes. These findings suggest either a selection of high-risk patients to chronic analgesic treatment, coupled with unmeasured or residual confounding, or a potential cardiovascular effect of these medications. Further research is warranted to evaluate causes for this association.

Why did the researchers not use an active comparator that is known to be null (a negative control)? After all, the participants who are tkaing pain medication may be systematically different from those who do not. It is prescription claims data so it is unclear whether or not you can adjust for these kinds of differences.

So why would you not at least look at Naproxen and Ibuprofen users?

Yes, the categories were: Opioids, Rofecoxib, Celecoxib,Valdecoxib, and General population. Covariates were:

We derived variables representing demographics, medical history of angina, coronary heart disease (CHD), congestive heart failure, arrhythmias, ischemic stroke, transient cerebral ischemia, peripheral vascular disease, diabetes, hypertension, hyperlipidemia, hypercholesterolemia, smoking, and obesity; and dispensing of nitrates, anti-platelet agents, angiotensin-converting enzyme inhibitors, angiotensin II receptor blockers, beta-blockers, calcium channel blockers, and diuretics. Baseline history of chronic diseases of the musculoskeletal system, diseases of the esophagus, hyperthyroidism, medical care required for general ill-defined symptoms and respiratory or chest symptoms, including dyspnea and upper respiratory symptoms, were also included.

Now I have done a paper on the misclassification of ibuprofen and naproxen in claims data but the issue there was sensitivity and not specificity. There is no reason that naproxen or ibuprofen could not be negative controls (or that aspirin could not be a positive control). It would certainly make the unexpected results of this analysis easier to interpret!

Weekend Blogging -- technology edition

The following appeared under a slide show of dumb inventions, but they got me thinking about how thin the line between stupid and successful can be. Glowing tires fail but spinning rims make it big. People show no interest in a tiny TV screen in '66 but get excited about watching shows on their cell phones 45 years later.

Was the technology flawed in these inventions. Was it too expensive? Or have we just gotten better at selling stuff?

Sunday, May 22, 2011

Libertarian dreams

From Jacob Weisberg:

Though I criticized Ryan for his unsupported rosy assumptions (shame on you, Heritage Foundation hacks), I reacted too quickly and didn't sort out just how laughable Ryan's long-term spending projections were. His plan projects an absurd future, according to the Congressional Budget Office, in which all discretionary spending, now around 12 percent of GDP, shrinks to 3 percent of GDP by 2050. Defense spending alone was 4.7 percent of GDP in 2009. With numbers like that, Ryan is more an anarchist-libertarian than honest conservative.

It is interesting to be reading this as I just finished the book the Moon is a Harsh Mistress by Robert Heinlein. What I found interesting about this book was the assumption that one could so easily eliminate all of the functions of government (and yet have highly patriotic individuals willing to die for this version of a state).

But what I found interesting is how these ideas of government cannot be easily reconciled with a strong military. In the novel, Heinlein has the settlers of the moon act as a voluntary militia that is able to hold off another power. But these ideas are simply incompatible with a role as a "global policeman".

So there is a tough decision to be made about the role and scope of the US government in international affairs, if we really are going to put serious libertarian ideas of the state into practice.

This is a big deal

California is considering a single payer health care system. Unlike Vermont, which is a small market, a successful single payer system in California would be strong evidence that the plan is viable in a broader US context.

In the long run, containing health care costs is a major issue. While I am sure that there are alternatives to the US and Canadian systems, it is hard to argue with the better outcomes and lower costs of a single payer system. I suspect that they are even more attractive to a state like California which has a long history of budget issues.

The end of the world as seen by Basil Wolverton

With another failed doomsday prediction in the news, I thought this might be appropriate.

To anyone over forty, Basil Wolverton was the artist behind those unforgettable comic caricatures that were featured on countless magazine covers and posters, drawn in what Wolverton himself called "spaghetti and meatballs style."

But Wolverton's favorite subjects were directly or indirectly biblical. As an elder in Herbert Armstrong's Radio Church of God, Wolverton was immersed both in scripture and in the apocalyptic conclusions Armstrong drew from it.

Wolverton produced a number of wonderful drawings based on Bible scenes. He also provided the amazing illustrations for Armstrong's pamphlet "1975 in Prophesy." Here are a couple of examples. (You can see more at Mippyville.)

p.s. Wolverton was also a huge (and acknowledged) influence on R. Crumb. This story has some particularly good examples of some similarities.

Weekend pop culture blogging -- comic strip edition

Monty by Jim Meddick.

Nice photomontage effect, by the way.

The headline alone makes it worth clicking the link

But if you have any interest in the rabbit hole of intellectual property law, you should read the post as well.

While you're there, check out this one as well.

Both from Dean Baker.

Saturday, May 21, 2011

How to lie with statistics -- the category category

It's amazing the conclusions you can manage if you get to define your own categories.

From Krugman:
So it’s good to have Mike Konczal reminding us that Pinto’s definition of “subprime-like” mortgages is just something he made up — and that it turns out that his supposed high-risk categories weren’t that risky at all, that in fact they look more like traditional conforming mortgages than like true subprime:

Dana Goldstein actually visits LA

Which is a bigger deal than you might think. LA County is a huge (over 4,000 square miles) but most visiting journalists (and more than a few who actually take up residence) see only a tiny and highly unrepresentative sliver of the area.

Goldstein has actually made it out into the town and is getting a glimpse of LA the way most Angelenos see it.

Now if she just makes it to Al and Bea's.

Preblogging energy

James Kwak has a follow-up to his previously noted biomass post. I'll be referring to both in a post I'm working on:
Wow. Power plants have only a minuscule impact on emissions? In 2005, electricity generation was responsible for 73 percent of sulfur dioxide emissions, 21 percent of nitrogen oxides emissions, and 11 percent of fine particulate matter (PM2.5) emissions. And biomass plants are less efficient, per BTU, than plants that burn coal or natural gas.
I'll also be mentioning biochar. Here's a relevant passage from Wikipedia:
Biochar may be a substance mostly suited to severely weathered and deprived soils (low pH, absent potassium, low or no humus). Clearly, there is the real potential for carbon sequestration, simply because biochar is so stable and is not accessible to normal microbial decay. Soils require active carbon to maintain micro and macro populations, not the inactive form found in biochar. Biochar can prevent the leaching of nutrients out of the soil, partly because it absorbs and immobilizes certain amounts of nutrients, however, too much immobilization can be harmful. It has been reported to increase the available nutrients for plant growth, but also depress them increase water retention, and reduce the amount of fertilizer required. Additionally, it has been shown to decrease N2O (Nitrous oxide) and CH4 (methane) emissions from soil, thus further reducing GHG emissions. Although it is far from a perfect solution in all economies, biochar can be utilized in many applications as a replacement for or co-terminous strategy with other bioenergy production strategies.
If you're curious, you might also want to check out this this NPR story and this news release from Eurekalert.

Weekend Gaming -- that other chess set is just sitting there

Back at the turn of the millennium when I was wasting away in the suburban hell of [redacted], I found myself killing a lot of time at the Borders down the street. Most days there would be a old man sitting at one of the tables with two chess sets set up up side by side with the edges of the boards touching. At the side of the table was a hand lettered sign inviting people to try the new game, superchess.

I never had the heart to tell him that the game he invented had been around for decades. That's not to say chess with twice the pieces on an 8x16 board isn't a good idea. It's a simple but elegant variation on the game and since, unlike most fairy chess, almost all of the moves and rules are unchanged, it stays remarkably true to the original game.

You move your pieces just as you normally would, only over a board that's twice as wide. You can't castle but other than that the only difference is the objective. Here you have two choices. The more common seems to be where the winner is the first to capture both opposing kings but I prefer playing for first blood (first player to capture a king wins).

You can find a more detailed discussion here or you can just grab a couple of boards and jump right in. As a chess variant, it's not as interesting as hexagonal chess but it's still definitely worth a try.

Friday, May 20, 2011

"Economists are the rapiest profession going"

Jon Stewart vs. Ben Stein.

It's like Bambi vs. Godzilla would have been been if you came into it really disliking Bambi.

Andrew Ross Sorkin is not helping

At least not with reporting like this:
Whatever the policy debates, households at President Obama’s dividing line might be wealthy, but that doesn’t mean they feel wealthy.

On a Yahoo message board, a poster named Mason, who lives in Manhattan with two young children, said his household income was $262,000. “I understand the need to raise taxes,” he wrote, “but I don’t understand why people like us are lumped in with millionaires and billionaires.”
Are we talking about taxable income here? The writing isn't very clear on this point and I couldn't get the link to work, so I would be inclined to assume that the phrase "household income" refers to the money coming into the household. If that's the case, then Obama's proposed tax increases wouldn't affect Mason at all.

But let's assume, just for the sake of argument, that we are talking about taxable income. Even if we make that assumption, the higher rate would only apply to twelve thousand dollars. Please check my math on this, but it looks like going from 33% to 39.6% would mean something around an eight hundred dollar increase.

Eight hundred dollars. Eight hundred dollars to someone who is probably bringing in close to three hundred thousand in gross income. Eight hundred dollars to someone living in a town where dinner for two at a nice restaurant can easily run you four hundred.

It's true that the writers and the editors of the NYT have always been deeply moved by the hardships of Manhattanites but even Sulzberger would draw the line at making this big of a deal over this small an amount of money. That's why Sorkin (in a story rich with specific figures) chose not to run this particular number.

Sorkin's "Rich and Sort of Rich" is standard NYT things-are-complex, both-sides-have-point, look-at-how-objective-I-am journalism, but if you actually clear away rather than add to the confusion about marginal rates and taxable income, the whole story collapses.

Sorkin is a smart and experienced financial journalist which makes this sort of shoddy reporting even less forgiveable.

[Joseph and I have been hacking away at this for a couple of days now. You can find the rest of the thread here, here and here.]

Tax Policy

Mark has been discussing the concerns about the hardship that tax increases would inflict on those with an income exceeding $250,000 per year. In part I think that this line of discussion began with Greg Mankiw trying to use himself as an example of a person who might do less labor if the marginal tax rate increased. There were a number of great points brought up as to why this example had issues: see here, here, and here.

There was a second economics professor who also made similar claims although I found them a bit harder to evaluate as the example was not as clear. This argument seemed to be more about how hard this person would find it to make cutbacks rather than a specific example of how he would become less productive.

Yesterday,Noahpinion linked to a great article by Karl Smith that went to the heart of this discussion. The argument was whether tax increases (at the sort of marginal rates we currently have) really depress productivity. Karl Smith made a number of arguments that were worth considering, including:

Third, high income people don’t seem to be working that much more than low income people despite the fact that a natural propensity towards work can make one high income.

Indeed, the data show us that low income folks used to work a little more, but now they work a little less than high income folks. Yet, if the income and substitution effects were balanced for each person we would still expect higher income people to work more.

That’s because working hard can lead to more education, more experience and more promotions. Being hard working is also associated with having a conscientious personality type which is itself more valuable.

So if someone was simply born with a stronger propensity to work, we would expect that person to earn more income per hour. Thus we when look at the data we should see that all these high income people are working lots of hours.

Yet, we actually don’t see that. We see only a mild effect and even then that effect is not robust over time. Sometimes, high income folks are working less.

But the piece is a must read in the entirety. The key argument here, though, is whether the extremely small tax increases that are under discussion (a raise in the marginal tax rate for the highest income bracket from 36% to 39.6%) is really likely to make high income Americans less productive. Because if these tax increases don't disincent work and we accept that government finances really are a mess then the tax hikes seem to be a logical way to "share the cost of these increases".

But I also think that these points don't necessarily go far enough. Are we really convinced that a small decrease in productivity among the wealthy will be that devastating? What is the source of productivity in the American economy? Is it highly paid CEOs, hedge fund managers, lawyers and medical doctors, or is it the majority of workers who drive productivity?

I think it is essential to get this correct. A top down model of an economy (where the people at the top make the key decisions and are responsible for the output) did poorly in Soviet Russia. A bottom up theory of economic gains seems to make a lot more sense and that suggests that small productivity losses among the wealthy are not a serious concern.

It is worth emphasizing that, at this time, I am aware of two proposals to increase the tax rates of the wealthy: increasing the amount of wages on which FICA can be charged and returning to Clinton-era tax rates. Neither of these increases is a vast change in the marginal tax rate of this group. Clearly there are tax increases that would cause issues, but we can handle those when they show up and not now when all of the possible rates under discussion are sane.

The last example that people tend to bring up is innovation and how important it is to reward innovators. Now, as part of a first principle I would like to point out that the innovator is not always the person who profits the most from an invention (consider Nikola Tesla). But it is also worth noting, as Mark points out, that copyright law already provides enormous rewards for intellectual property holders.

So I think we should look to balance harms. Recent events have included layoffs of government workers into a economy with an extremely high unemployment rate. Are we sure that the consequences of a large body of long term unemployed workers will be better than that of small increases in tax rates?

"This really isn't about the hunting, is it, Bob?"* -- more on just scraping by on a quarter mil

Comments to my recent post on getting by on $250,000 (which was itself basically a comment on this excellent piece by Felix Salmon) picked up on the fact that, for people making a little over 250K in taxable income, the actual increase in taxes paid under the Obama plan would be remarkably small. This raises an obvious question: why do we keep hearing about the hardship on people making less than 300K when hardly any of the increase falls on this bracket?

The answer I suspect has less to do with math and more to do with marketing.

Sympathy for financial hardship is almost always inversely related to wealth and income. It's hard to feel all that sorry for someone who makes more money than you and yet has trouble keeping the bills paid.

For most of us, a quarter million in income takes you to the far outer edge of the sympathy zone. It seems like a lot of money but you might be able to convince some people (particularly, say, well-paid Manhattanites) that it was possible for a non-extravagant family to have a combined income of 250K and still not have much of a buffer at the end of the year.

Unfortunately for people lobbying to keep the Bush tax cuts, that 250K family wouldn't actually pay any additional taxes if the cuts expired. Neither would a 260K family or a 270K family (assuming those numbers are gross). Because we're talking about taxable income and marginal rates, a family's gross would have to be closer to 400K than to 250K in order to see anything more than a trivial increase.

If you're trying to make an emotional pitch for the Bush tax cuts this creates a problem: the only people significantly affected by the increase are those well outside of the sympathy zone. You can't expand the zone (the suggestion that many families making a quarter of a million were just getting by was met with considerable derision. Upping the number by another hundred thousand is a no starter). The other option is to focus on families making between 250K and 300K while downplaying the actual magnitude of the increase on these families.

Of course, that second option does require an overly compliant press corps that will simply parrot the releases of various think tanks without attempting to correct the false impressions they give. Fortunately for the tax cut supporters, that doesn't seem to be a problem.

* punchline to an old and very dirty joke.

Thursday, May 19, 2011

What Rick Santorum had to say about fiscal responsibility in 2003

From the Hill via Krugman:
“I came to the House as a real deficit hawk, but I am no longer a deficit hawk,” said Sen. Rick Santorum (R-Pa.). “I’ll tell you why. I had to spend the surpluses. Deficits make it easier to say no.”
It's important to remember these things.

"The Problem with Biomass, Part 1"

I'll be referring to this in a future post.

From James Kwak:
Did you know that my wife is a “high-paid consultant” for the shadowy anti-biomass movement? Neither did I — and I’m the one who handles all of our finances, so I should know.

Last night she testified at a hearing held by the Springfield City Council, which is considering revoking the permit of Palmer Renewable Energy (PRE) to build a biomass plant in Springfield. PRE was granted a special zoning permit to build the plant in 2008. Since then, PRE has increased the amount of fuel it intends to burn (meaning, among other things, that more diesel trucks will have to drive in and out to deliver the material) and changed the type of fuel from construction and demolition debris to “green wood chips” (which matters because the plant was initially permitted as a recycling facility).*

My wife, a professor of environmental economics and econometrics, testified about the link between emissions (from power plants and diesel trucks) and illness, particularly asthma. At the hearing, one of PRE’s witnesses claimed not to know where my wife was “getting” the idea that air pollution can cause asthma. (In a newspaper article, PRE had this to say about asthma: “Valberg said there are many theories on the causes of asthma, and that indoor air quality in homes and schools is actually more of concern than outdoor air. For opponents to state that the project will worsen asthma rates ‘is just not scientifically accurate,’ Valberg said.”)

Well. Many, many studies have linked outdoor air pollution to asthma incidence or morbidity (Mortimer 2002, McConnell 2006, Ho 2007, Islam 2007, Loyo-Berrios 2007, Halonen 2008, O’Connor 2008 (summary here); Islam 2008 reviews studies of traffic-related asthma; Patel 2009 reviews studies of childhood asthma) and to bad cardiopulmonary health in general (Samet 2000, Pope 2002, Vedal 2003). I could come up with lots more citations, but you get the point.


Recently, the biomass developers have been arguing that they are the victims of a high-paid, high-powered, shadowy network of environmental activists. See for example this Springfield Republican article that largely repackages PRE’s talking points; its lead is “The developers of a proposed 35-megawatt wood-burning plant in East Springfield say the opposition to their project is well-organized, determined and well-funded.” (The Biomass Power Association blames a “small, vocal, extreme minority.”)

Well, I can tell you that my wife drove down to Springfield after work, spent four hours at the meeting, came home late at night, missed dinner, and didn’t get paid a cent.

* There is a legal issue about the standard necessary to justify revoking a permit that has already been granted, but that’s not relevant for this blog post.

Sympathy for the financially inept

Felix Salmon does a great job dismantling the latest wave of "how can I possibly get by on a quarter mil" stories (Jonathan Chait also has a suitably snark-filled take on the subject, though unfortunately it's behind the TNR paywall). Salmon takes apart the bad math, the poor reasoning and the general offensiveness of these articles so thoroughly that there's not much to add on the general level but I do have this one locale-specific observation.

I've lived in LA for a number of years with an income that has bounced from low (parochial school teacher) to high (corporate statistician) to really low (writer and board game designer), so I can tell you from experience that any individual who can't live well in this town on 100K is either incredibly extravagant or ridiculously bad with money. I can also say from experience that you can get by on thirty (barring the unexpected) and be quite comfortable at sixty.

If you're an Angelino and you're a individual who makes six figures or a member of a household with a combined income of over a quarter of a mil and you still find yourself in the red at the end of the year (barring special circumstance like a sudden drop in income, major illness, or the birth of a special needs child), you should admit to yourself that you have a problem and either seek financial counselling or consider finding someone to make your money decisions for you.

Wednesday, May 18, 2011

Back to the future

I don't know if this has anything to do with Blogger's recent wave of weird glitches but my post comparing satiric views of the future somehow reverted to an earlier version that omitted one of the two primary examples -- the 1967 film The President's Analyst. I've restored it so if you have any interest in the subject or if you read the screwed-up version and would like to know what I was trying to say, take a look and let me know what you think.

Alternatives to Social Security

Matthew Ygelesias tackles the difficult question of what is the alternative to a government run universal pension plan. After all, if we want to replace the current system of government run pensions then it makes sense to have an alternative.

The results are pretty dismal.

So where else does the money come from? Well:

— Defined benefit pensions.
— Labor income.
— Private savings.

These three alternatives are all deeply problematic. The problems with defined benefit pensions in the public sector (chronic underfunding, etc.) are well-known, and in the private sector those problems are even more severe. Labor income is not a realistic option for people over a certain age. And private savings are, frankly, a disaster. As a country, we’ve tried to deal with the decline of defined benefit pensions by encouraging the mass middle class to engage in private retirement savings with 401(k) plans, IRAs, etc. And it doesn’t work. On the one hand, people don’t save enough. On the second hand, the tax policy is deeply regressive. On the third hand, virtually 100 percent of the management fees extracted from customers through these vehicles are value-destroying rents. On the fourth hand, it’s extraordinarily difficult for a middle class person to properly diversify his portfolio. And on the fifth hand, widespread ownership of index funds and mutual funds undermines corporate governance.

I think the drawbacks to the first two approaches are well known. But the concerns about the government savings vehicles are very thought provoking. Instead of a single (fatal objection), like the first two options, he lists a series of smaller problems that add up to a big issue. That being said, the issue of people not saving enough is always a concern.

I'd say that there is one more issue, though, that we should consider. Older adults are more easily subject to fraud on the part of either third parties or their money managers. It's not always clear that they have strong advocates. So even if people saved enough, the third option has the sixth downside of being vulnerable to theft in a way that pensions and labor income are not.

It's too late tonight to do it justice...

But this post is another reminder why Dana Goldstein is probably the most important education blogger currently on the beat.

Tuesday, May 17, 2011

More weirdness from Blogger

A few days ago I was playing around with the idea of writing a post about the dangers of economists trying for cool, so I copied this link into a new post and saved it as a draft. I had pretty much forgotten about it until a few minutes ago when it showed up with a new time stamp claiming I had created it this afternoon.

This is starting to make me nervous. Does anyone know a good way to make a hard drive back-up of a blog?

I can think of some exceptions

But I suspect Donald Knuth was excluding books like Light in August and Huckleberry Finn when he said this.

For years I tried to make calculus interesting

And yet I never considered this (via Andrew Gelman):

Those who forget the future are doomed to repredict it

Mr. SHTEYNGART: There's no present left. This is the problem for a novelist, is the present is gone. We're all living in the future constantly. How I envy...

GROSS: What do you mean by that? I'm not sure what that means.

Mr. SHTEYNGART: Well, look, back in the day, Leo Tolstoy, what a sweetheart of accounts and [transcription error?] a writer. He wanted - in the 1860s he wanted to write about the Napoleonic campaign, about 1812. If you write about 1812, you know, in 1860, a horse is still a horse, and a carriage is still a carriage.

Obviously, there have been some technological advancements, et cetera, but you know, you don't have to worry about explaining the next killer app or the next, you know, Facebook or whatever, because right now things are happening so quickly.
Gary Shteyngart talking about his novel Super Sad True Love Story on Fresh Air.

Gary Shteyngart is a ludicrously credentialed writer, but the part of his interview that caught my attention had little to do with his fiction or his approach to writing. Instead it ... Well, maybe it would just be simpler to show you.

In 2010, here's what Mr. Shteyngart's near-future satire looked like:

A half-dozen of my fellow citizens were seated behind their chewed-up desks, mumbling lowly into their apparati. There was an earplug lying slug-dead on an empty chair and a sign reading: Insert earplug in ear. Place your apparat on desk and disable all security settings. I did as I was told.

An electronic version of John Cougar Mellencamp's "Pink Houses" - ain't that America, something to see, baby - twanged in my ear, and then a pixilated version of the plucky otter shuffled onto my apparat screen, carrying on his back the letters A-R-A, which dissolved into the shimmering legend: American Restoration Authority.

The otter stood up on his hind legs and made a show of dusting himself off. Hi there, partner, he said, his electronic voice dripping with adorably carnivalesque. My name is Jeffrey Otter(ph), and I bet we're going to be friends.

Feelings of loss and aloneness overwhelmed me. Hi, I said. Hi, Jeffrey. Hi there yourself, the otter said. Now, I'm going to ask you some friendly questions for statistical purposes only. If you don't want to answer a question, just say I don't want to answer this question. Remember, I'm here to help you.

OK, then, let's start simple. What's your name and Social Security number? I looked around. People were urgently whispering things to their otters. Leonard or Lenny Abramov, I muttered, followed by Social Security.

Hi, Leonard or Lenny Abramov, 205-32-8714. On behalf of the American Restoration Authority, I would love to welcome you back to the New United States of America. Look out, world, there's no stopping us now. A bar from the McFadden and Whitehead disco hit "Ain't No Stopping Us Now" played loudly in my ear.

And here's what near-future satire looked like almost forty-five years ago:

The inescapable communication device, the cheerful tone covering the ominous totalitarianism, the cute cartoon icon. All in a big budget movie made five years before Gary Shteyngart was born.

Go back a few more years to 1953 and you can find antecedents for Shteyngart's satiric take on corporations and consumerism in the Space Merchants * (where mergers were actually resolved through armed conflict) and in any number of books and movies since then. And as for the jokes about the decline of books and reading found in Shteyngart's story, the challenge is finding a science fiction book that doesn't have them.

None of this is meant to imply any kind of plagiarism or even to suggest the book is derivative. Shteyngart is a sharp and funny writer and though I haven't read it, there's every reason to expect Super Sad True Love Story to be a terrific book.

It is, however, a book that approaches the topic of the future in a way we've seen before and that fact leads to an interesting observation: for over half a century, people have seen themselves as being at that point in history where the world was about to undergo radical and unimaginable changes. What's more they've discussed these approaches using much the same language and often similar jokes.

I suspect that it was initially a reaction to the explosive technological and social changes from around 1875 to 1945. If one man could have witnessed the first phonograph, telephone, light bulb, airplane, radio, movie, television, and an atomic bomb (not to mention two world wars, enfranchisement of half the population and too many literary and artistic forms and schools to count), just imagine what the next few decades would hold. (It is probably not a coincidence that during this period, the time travel genre was introduced by Twain and Wells and became an established part of popular fiction.)

Once established it's easy to see why the idea of the hurtling future proved so popular. There is a natural tendency to underestimate the contemporary impact of what we think of as antiquated technology. Check out Shteyngart's quote about Tolstoy that seems to imply that the development of photography, telegraphs and locomotives changed the world less than Facebook and Angry Birds.

Besides, most people like the idea of an exciting future (particularly since so few of us alive today have actually had to live through one).

* You'll notice that some seniors have had no trouble keeping up with the future.

Monday, May 16, 2011

Sure $172,200 sounds high but you do get room and board

I wish I had time to give this the treatment it deserves:
For all the hand-wringing over the cost of a full-time MBA, it turns out that the most expensive graduate business degrees in the world are not the highly publicized two-year, full-time experiences at places like Harvard and Stanford. Instead, the bulging price tags are on elite part-time programs designed for mid-career executives.

The most costly Executive MBA in the world? It's Wharton's 24-month MBA for executives at its West Coast campus in downtown San Francisco. At a cost of $172,200, students are effectively paying nearly $250 an hour for the pleasure of sitting in a class with 50 other people. That's nearly $100 more per contact hour with faculty than the regular full-time MBAs at Wharton pay. For every one of the roughly 700 hours a Wharton professor teaches Executive MBAs, the school is collecting a tidy $12,300.

Wharton Rakes It In

The second most expensive? It's also Wharton's Executive MBA program, this time on the East Coast, where the tuition and fees now come to $162,300. Those considerable sums compare with the $108,000 in total tuition and fees forked over by the full-time students back on the main Philadelphia campus. Wharton's Executive MBA business alone now brings in more than $35 million in annual revenues, with little more than 400 total students.

Why the Difference In Cost

Why is there such a big difference in the cost of these top-ranked EMBA programs over those at other schools? "It's like anything else, whether you're talking about buying Pepsi or Sam's brand of cola," says Michael Desiderio, executive director of the Executive MBA Council, the trade group representing EMBA programs. "There is a value inherently tied to a brand."

In fact, the average cost of an EMBA program, says Desiderio, is only $65,655. "So it's a huge continuum, ranging from a low of $30,000 to a high of $170,000."

Anjani Jain, Wharton's vice dean, MBA Program for Executives, obviously thinks Wharton programs are worth the premium. "The cost of the program, when normalized with respect to the number of contact hours and the inclusion of room and board during program weekends, is actually comparable to that of peer institutions," Jain insists. "Many other EMBA programs have substantially fewer contact hours, or don't include room and board in the base tuition."

Of course, at the high end, as Jain points out, Wharton's program is a premium experience that includes meals, accommodations, and professors who are among the best business faculty in the world. In Philadelphia, execs stay on alternating Friday nights in Wharton's fairly plush executive education residence facility, while in San Francisco, they're put up in at the upscale Hotel Le Meridian in the financial district within walking distance of Wharton's West Coast campus. For another, many business schools believe there is less price sensitivity in a market catering to already successful executives in their mid-to-late 30s who don't have to quit their jobs to get the executive version of the MBA degree.

Executive MBA Programs Tend to Be Costly

No wonder there are now nearly two dozen Executive MBA programs around the world that cost six figures. Increasingly, the most expensive programs feature international excursions for which meals and accommodations are covered (though airfare is not). Duke University's Global Executive MBA program, for example, boasts five residential sessions, with 60% of the classroom time in Asia, Europe and the Middle East. It carries a $146,600 price tag that includes lodging and meals. Or there is Trium, a three-way collaborative program among New York University, the London School of Economics, and HEC Paris. That program costs $140,000.

Noah Smith leaves out an important distinction

There's a good post at Noahpinion wondering where the opposition to high-skilled immigration is coming from. I suspect Smith is too quick to dismiss the role of xenophobes who see any increase in immigration as the first step down the slippery slope toward an open border, but it was this paragraph that really bothered me.
What about high-skilled native-born Americans? Are American-born computer programmers, engineers, and entrepreneurs afraid that high-skilled immigrants will take their jobs? I guess this is conceivable. I've heard some low-level grumbling from American-born engineers about the low wages and long hours that immigrant engineers are willing to accept, but I know of nothing even slightly resembling an organized movement or lobbying effort. And my guess is that smart Americans are smart enough to know that it's a positive-sum game - that the positive impact of the businesses started by smart immigrants vastly outweighs the effects of wage competition.
I may be opening myself up to an obvious insult here but having worked as a statistician in companies that used highly skilled immigrant labor, I'm not sure that this is automatically a positive-sum game.

At least not without one important caveat.

When we talk about naturalized citizens, students and green card holders,* it really does tend to be a net gain when we bring smart, highly-educated people into this country. Putting aside students (whose contribution is a topic for a different post), the positive impact of these highly skilled immigrants is due in large part to a labor market that does a reasonably good job matching employer and employee and setting compensation levels that reflect skills and productivity.

For H-1B visas, however, the labor market is severely distorted. Though the situation seems to have improved somewhat,** employees still face significant hurdles when changing jobs and limitations on what sort of jobs they can take, a situation sharply satirized by John Oliver in the clip below.

Having said all that, there's still a strong case to be made for increasing our H-1B quotas and this country could certainly use a good, healthy debate on the subject, but the specifics make a difference. You could argue that every time we bring someone smart and creative into the U.S.A it's a win for us, but the win is bigger when that person is allowed to participate in a more efficient labor market.

* Green cards are a bit more restricted than many people realize, but probably not to the extent that it affects this conversation.

** See the American Competitiveness in the Twenty-First Century Act of 2000

Again with the comic books

And again from Mippyville.

Admittedly, it's the three cents figure in this ad from a 1950 comic book that grabs the attention of the Twenty-first Century reader, but when you actually get into the text you may be surprised at how little things have changed.

Sunday, May 15, 2011

I guess we were just collateral damage

Brad DeLong explains what really happened to Blogspot.

Taxes and Growth via Yglesias

This entire piece is worth reading. In particular:

The other mechanism that seems to be on offer is labor supply. This makes a lot of sense to me as applied to low-income people. If you work at McDonald’s or drive a taxi then you face a real choice about whether or not to increase your hours worked at the margin in exchange for more money. Driving a cab at 2AM is obviously a huge pain in the ass and not especially lucrative. To the extent that cab drivers face higher income taxes, they have even more reason not to work so late since it becomes even less lucrative. And the availability or non-availability of late night cabs has a variety of downstream impacts on bars & restaurants, drunk driving, etc.

But it’s a lot harder to see this at the high end. A very large share of high-income professionals basically have a marginal wage of $0. The CEO of WalMart can’t cut back his hours by 5 percent in exchange for a 5 percent pay cut. What’s more, a lot of high-end work is characterized by zero-sum competition. It’s plausible to imagine higher income tax rates making veteran NBA players more likely at the margin to retire rather than play one more season at the minimum. But what are the downstream economic implications of Mike Bibby retiring? There overall quantity of NBA players is fixed and there are plenty of other people willing to step up and do that job. The average quality of NBA talent might decline, but so what? The players just play against each other. And it’s not just athletes. Fancy lawyers and high-frequency traders are playing against each other. Marginal changes in average quality don’t matter. If anything, reducing the average quality of America’s lawyers and finance guys would be beneficial if it inspired more people to do something else with their time.

Last, of course, one of the main reasons for taxing the rich is precisely that the utility of a rich person’s marginal dollar is so low. Giving the dollar to someone else will increase overall well-being.

I think that this is a very strong argument and one that we really need to give more thought to. The empirical data for the effects on growth for taxing high incomes is mixed (at best) and the consequences for accelerating our current recession are non-trivial. After all, we are firing people from government jobs at the same time as there is tepid growth in private sector employment. The stated reason is to try and prevent our budget deficit from growing out of control.

However, if restoring the Clinton-era tax rates did not have a direct mechanism to retard economic growth then perhaps we could fire fewer public sector workers? That would help with the large unemployment rate that we have in the United States and the culture focus of self-worth via paid employment.

I think that the question of higher marginal tax rates on very high income earners does bear some thought.