Observational Epidemiology

California has good universities!

2012-01-29T11:08:00.001-05:00

From the Academic rankings of world universities:

1. Harvard University (private)

2. Stanford University (private)

3. Massachusetts Institute of Technology (MIT) (private)

4. University of California, Berkeley (public)

5. University of Cambridge (British)

6. California Institute of Technology (private)

7. Princeton University (private)

8. Columbia University (private)

9. University of Chicago (private)

10. University of Oxford (British)

11. Yale University (private)

12. University of California, Los Angeles (public)

13. Cornell University (private)

14. University of Pennsylvania (private)

15. University of California, San Diego (public)

16. University of Washington (public)

17. University of California, San Francisco (public)

18. The Johns Hopkins University (private)

19. University of Wisconsin - Madison (public)

20. University College London (British)

Some interesting patterns immediately jump out. Of the top 20 schools, 17 are American, which is pretty impressive given the share of the world population held by the United States. Of the 17 American schools, six of them are public (which is amazing given how many resources the private schools have). Of the public schools, 4 of them are in California.

So why are we discussing the need to privatize California higher education, which combines extremely high quality with relatively low tuition? I mean seriously, is there no other public university system in the nation that we can focus on? Or is it merely that reformers want to destroy the example of well done public education?

The whole argument strikes me as insane.

Not sure Dean Dad caught the gist

2012-01-29T01:57:00.002-05:00

Via Joseph, Dean Dad has the following reaction to recent comments by President Obama:

President Obama has put higher education “on notice” that if we keep raising tuition, we’ll get our public funding cut.

To which I say, huh?

We’ve had our public funding cut already. Since 2008, an uninterrupted series of cuts has been the direct cause of severe tuition increases for public higher ed. If you want to stop the tuition increases, the first thing to do is to require the states to restore and then maintain realistic funding levels. (When referring to a point in time, the usual term is a “maintenance of effort” requirement. Otherwise, it can be set as a “grant in aid.”) When the states have cut back, colleges have turned to the Feds through the indirect means of raising tuition, much of which is funded by Federal financial aid.

The post doesn't include a link but I assume he's referring to this (emphasis added):

Of course, it’s not enough for us to increase student aid. We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down. Recently, I spoke with a group of college presidents who’ve done just that. Some schools re-design courses to help students finish more quickly. Some use better technology. The point is, it’s possible. So let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury – it’s an economic imperative that every family in America should be able to afford.

I don't often find myself defending the President's education policies (too many movement reformers have his ear), but I think he did a good job hitting the main points here and Dean Dad could have done a better job reflecting that.

I think we need to understand college cost structures better

2012-01-28T09:24:00.001-05:00

This post (in the midst of a long, long single page blog) was very interesting:

College Costs and Quality? I rather suspect that my experience as a university professor is pretty typical, although certainly there are much more dramatic. Over the past 15 years my real (inflation adjusted - just using the CPI) salary has fallen16.5%, 831/2 cents on the dollar, not counting various costs the universities have shifted to the faculty (and not accounting for the fact, which nobody seems to when considering the situation of seniors in our society, that as one ages medical costs are an increasing proportion of expenditures, and they have been rising sharply). The "special" equipment I need is a decent laptop computer, the provision to our department members of which has enabled them to reduce secretarial support. The courses I used to teach as seminars are now in amphitheaters, and, while the substantial advances in IT (when the equipment works) have certainly improved that teaching environment, it is still most certainly not comparable to the learning in the interaction, and professor attention to individual students, of the seminar format. Moreover, tests are inadequate measures of learning, and abysmal measures of creativity, yet evaluating and commenting on papers and projects in classes of this amphitheater size is simply physically impossible, and beyond the capabilities of teaching assistants, in my field anyway. Indeed, I suspect over emphasis on exams (and standardized tests) may actually stunt creativity (assignments here for psychologists and cognitive scientists).

I think that there is a real need to understand why costs of college are escalating. It seems to be a complex problem and I have begun to suspect that simple explanations are likely to be inadequate. Some of the issues seem to be related to new services (e.g. information technology, increased reporting mandates, student services). But it is remarkable that salaries for the most expensive workers can drop at the same time as costs are rapidly rising.

Some of this is likely due to loss of state funding. But private schools have also grown more expensive with time and this cannot be solely attributed to changes in funding.

I would love to see a time series of university budgets, in real dollars, to try and understand this issue better.

I was surprised by the lack of comments on this

2012-01-27T18:43:00.000-05:00

Dean Dad:

President Obama has put higher education “on notice” that if we keep raising tuition, we’ll get our public funding cut.

To which I say, huh?

We’ve had our public funding cut already. Since 2008, an uninterrupted series of cuts has been the direct cause of severe tuition increases for public higher ed. If you want to stop the tuition increases, the first thing to do is to require the states to restore and then maintain realistic funding levels. (When referring to a point in time, the usual term is a “maintenance of effort” requirement. Otherwise, it can be set as a “grant in aid.”) When the states have cut back, colleges have turned to the Feds through the indirect means of raising tuition, much of which is funded by Federal financial aid.

I think we really need to make a distinction between public and private education here. Public schools, like in California, have had huge funding cuts that led to large percentage increases in tuition. But, in absolute terms, the increases are small compared to the amount of tuition charged at private schools (like Stanford, which is in the same state).

In public education the finding cuts are causally connected to cost increases. But I am not sure the University of California is really the problem in terms of unsustainable educational costs. True, universities are expensive and I have been amazed at the cost increases. But serious cuts in state support needs to be part of the overall picture to really understand what is going on. Education (especially affordable education) is a public good and should be treated as such.

Gaming

2012-01-27T18:32:00.001-05:00

Mark has a sideline as a professional game designer and I am an avid follower of role-playing games. So while we rarely do gaming posts, I decided to put a good RPG post collecting blog into the blogroll.

Enjoy.

I am confused about carried interest

2012-01-25T13:00:00.001-05:00

Does anybody have a good reason for the carried interest tax exemption? It seems to entirely benefit a group that already has very large incomes and doesn't really seem to be in the same class as investment capital that was risked in the marketplace. Paul Krugman notes how much benefit a retired investment adviser can reap from this exemption:

First, $13 million of the total was carried interest, which gets taxed like capital gains but is really just commissions that receive special treatment for no good reason. No profits taxes were paid on that income; right there, a minimally defensible tax code would have levied $2.6 million more in taxes on Romney.

I am completely agnostic as to the identity of the person in question -- it would be just as concerning if Barack Obama had millions in carried interest in his tax forms. The real question is how this exemption (which is commissions) can stimulate economic growth. I understand the argument for preferential treatment of capital gains. I even understand how capital gains can end up making moving between houses expensive for no really good reason. So I comprehend how this can be a matter of academic debate.

But can anyone explain why commissions should get preferential tax treatment?

Admittedly an extreme case

2012-01-23T04:04:00.003-05:00

One of my biggest objections to the wildly popular contrarian school of journalism is the way that, rather than following a line of reasoning to an unexpected conclusion, many writers obviously start out with an absurdly counter-intuitive position then try to come up with a list of reasons to justify it.

You know the sort of thing I'm talking about, stories with titles like:

Newt Gingrich's three marriages mean he might make a strong president -- really

Student Loans and Emergencies

2012-01-22T17:24:00.000-05:00

From the Incidental Economist's comment section:

As a resident manager of David’s House , a beautiful private nonprofit home away from home for families of sick children at Dartmouth Hitchcock Hospital , like a Ronald McDonald House, one of the saddest and most frustrating things I saw was student loan collectors that would not work with parents who had run out of forbearance time to reduce or temporarily waive student loan payments despite their medical emergencies. Even the federal government will operate this way when a student loan goes into collections. Will not work with the debtor at all. We had collection agencies tracking down parents at our facility because, of course, parents who were living there temporarily needed to make the phone number known instead of keeping it confidential. The student loan crisis: another problem that you economists should address.

The decision to make student loans immune to bankruptcy is going to be a problem in the long run, at least so long as the totals become so high. I meet a surprising number of students with > $100,000 in debt. It's one thing to allow large debt to occur as part of developing human capital. But the punishment meted out to people when their lives go wrong seems way disproportionate to the decision to borrow. This is even more true when you look at the employment rate among Americans without a college degree.

It makes education into a high stakes gamble (at for those who are not already wealthy) instead of a public good that we provide to improve human capital.

Tax Reform

2012-01-22T17:06:00.002-05:00

I am normally not the biggest fan of Greg Mankiw as I am concerned that his anti-tax stance reduces the focus on how we can use a strong taxation system to build a strong economy. But this post is one that I found myself agreeing with more than I disagreed with. In particular, note:

Consider the tax on gasoline. Driving your car is associated with various adverse side effects, which economists call externalities. These include traffic congestion, accidents, local pollution and global climate change. If the tax on gasoline were higher, people would alter their behavior to drive less. They would be more likely to take public transportation, use car pools or live closer to work. The incentives they face when deciding how much to drive would more closely match the true social costs and benefits.

And this:

Consider the deduction for mortgage interest . . . Subsidies to homeowners are, in effect, penalties on renters — after all, someone has to pick up the tab. But there is nothing wrong with renting. And once one acknowledges that renters are poorer, on average, than homeowners, the mortgage interest deduction becomes even harder to justify.

These are the sorts of places that tax reform might make a significant difference in building a better system. It is true that tax reform in these areas would be politically unpopular. But, in the long run, it might make for a much better and more transparent tax system.

Why I believe in safety nets

2012-01-21T23:08:00.000-05:00

Megan McArdle argues:

Who among the parents fighting so hard to get their kids into a good school is going to volunteer to have their kid give up the slot in the upper middle class? People are willing to accept a certain amount of slippage, but only as long as it comes with added job security (government) or special fulfillment (the ministry, the arts)--and even in the latter cases, Mom and Dad will often be strenuously arguing against following your calling. But how many doctors and lawyers would simply glumly accept it if you told them that sorry, junior's going to be an intermittently employed long-haul trucker, and your darling daughter is going to work the supermarket checkout, because all the more lucrative and interesting slots went to smarter and more talented people?

The lack of a safety net makes falling in social status a serious problem. When basic medical care is linked to being a productive member of the middle class, people are willing to make enormous sacrifices to protect themselves from falling in social class. If we mitigate the problems and torments of extreme poverty then maybe it won't be seen as terrible to have people shift around in social class.

Now it is true that my focus is on absolute levels of deprivation. But if the you can be poor with dignity and have basic needs met then maybe that will make us a little more willing to address inequality in general.

Copyrights and patents are intrusive government regulations

2012-01-20T00:45:00.004-05:00

They are monopolies that restrict the rights of businesses to make and sell certain products. What's more, they're built around non-rival goods with origins that are often difficult to trace (since virtually all 'creative' works are derived from other earlier ones).

This doesn't mean intellectual property laws are bad. They aren't. Society could not function well without them. What this does mean is that these laws have a cost. They distort markets, raise prices, divert resources from productive areas to legal departments and inhibit creative destruction and the founding of new businesses. We have to balance these costs against the social benefits of encouraging creation and dissemination.

Recently, though, we've lost sight of that need for balance, in no small part because those costs are born by consumers and small companies that lack the wherewithal for PR and lobbying. In the area of copyrights (patents are a subject for another day), we've allowed ludicrous extensions, let lawyers grab works from the public domain, retroactively granted copyrights to works whose creators have been dead for decades, and tried to greatly restrict the concept of fair use.

It's important to remember that the very notion of owning an idea is a useful absurdity. Ideas are intangible and indistinct with no real demarcation from other ideas. It is tremendously useful for a society to encourage creativity and give creators a protected period to disseminate their works, but if we start thinking of protecting intellectual property as an end to itself, all we have left is the absurdity.

Works moved out of the public domain?

2012-01-19T14:15:00.002-05:00

Seriously?

The Supreme Court on Wednesday upheld a federal law that restored copyright protection to works that had entered the public domain. By a 6-to-2 vote, the justices rejected arguments based on the First Amendment and the Constitution’s copyright clause, saying that the public domain was not “a category of constitutional significance” and that copyright protections might be expanded even if they did not create incentives for new works to be created. The case, Golan v. Holder, No. 10-545, considered a 1994 law enacted to carry out an international convention. The law applied mainly to works first published abroad from 1923 to 1989 that had earlier not been eligible for copyright protection under American law, including films by Alfred Hitchcock, books by C. S. Lewis and Virginia Woolf, symphonies by Prokofiev and Stravinsky and paintings by Picasso.

How exactly does this act to promote the creation of new works? Any possible incentive to the creaters is long past. Notice that this period ends in 1989 -- how many people would have created more works jsut in case they could get copyright protective in a foreign market 23 years later?

I am not against intellectual property rights (rather the converse) but I question is need for such long term protection for pieces that are decades old. At some point the public domain is the right place for these older works, as it gives them a chance to be rediscovered by people looking for inexpensive content. That is probably a better legacy for the creators than any minimal stream of royalties could be at this late date.

Another post on Unions

2012-01-19T08:58:00.000-05:00

Erik Loomis is distressed by a piece in the Atlantic asking about the plastic surgery benefit for teachers in Buffalo, New York. Erik focuses on the fact that the teachers union is willing to give up the benefit if a new contract settlement can be reached and that there are many legitimate reasons to have reconstructive surgery available (e.g. a child who had serious facial damage after a car accident).

Jordan Weissmann, the author of the Atlantic article, focuses on the salaries of the teachers (mean of $52K) and the deadlock on contract negotiations. In some ways, I think everyone is missing the big picture. Teachers are professionals who work for a contract. We do not micromanage the compensation packages of hedge fund managers, either. It is true that teachers are paid directly by the government. But the carried interest exemption (which sets tax rates at 15%) is just as much of a decision to spend money.

After all, selectively taxing one group less is the same as a subsidy.

Put this another way, we could pay teachers less if we made their salaries exempt from income tax. Now this does not mean that specific benefits can't be renegotiated. Nor do I want to deny the reality of increasing health care costs (which are a problem everywhere in the United States right now) which can make benefits that were once reasonable seem excessive. But is it really constructive to focus on whether the teacher's health care plan is correctly designed as a matter of public policy. Or should be be looking at the long term drivers of malaise in our society.

Of course, looking at the long term drivers of malaise means facing up to our low tax rates (guarenteed to be a painful discussion) and dealing with the rate of growth in medical costs.

Reading assignments

2012-01-17T01:14:00.002-05:00

Busy week but I wanted at least to throw out a few links to things I'd like to be writing about:

Felix Salmon's take on a subject is always appreciated, particularly when he's focusing on a topic we try to keep an eye on (like for-profit schools).

And staying on the education beat, Dana Goldstein collects almost two centuries worth of teacher-bashing.

The last few news cycles have brought lots of pieces about Bain. A few of them have been really interesting.

I've come across a site for the truly hardcore pop culture nerds, particularly those obsessed with stand-up comedy. There's even an intellectual property angle.

And I have got to make time for this.

Worthwhile Canadian Post

2012-01-16T22:20:00.000-05:00

Go and read. The implications for long term care in Canada and the United States is a scary prospect given the retiring baby boom and the need to find ways to care for older adults.

Frontiers in Car development

2012-01-16T22:12:00.000-05:00

Some interesting legal questions:

All told, the changes may not best the leap from horses to cars, but they are big enough to undermine many of the legal systems we rely on for things like insurance, not to mention criminal law. If a car doesn't require a driver, can a 12-year-old "drive" to his friend's house? Can a drunk person drive home from a bar? How will insurance work if people share driverless cars? Courts and legislators will be sorting those out for years to come.

Actually, I kind of like the idea of cars that can take home intoxicated people safely. Living in a community with a lot of college students, sub-urban road planning, and a lot of bars, I see a lot of accidents. I worry that some of them might have been prevented with better transportation options. Now, obviously, my preference would be improvements in public transit. But driverless cars might well be a good alternative for people who would like to go out but have limited options for coming home.

Tyler Cowen on Health Care

2012-01-16T10:53:00.000-05:00

Tyler Cowen points out a potentially serious issue with health care costs.

The U.S. median wage for 2010 was $26,363.The average health care insurance premium today is over $15,000 and by 2021 it may be headed to $32,000 or so (admittedly that estimate is based on extrapolation).Therein lies the problem

Of course, to me this number just argues for single payer health care (which can bend the curve) and innovation to try and bring cost controls to the medical profession. Now is it not contradictory to argue for both innovation and greater government control? In a sense it is, except that the market has formidable barriers to entry that cannot be easily be navigated.

So, for example, a team of nurses and a pharmacist could not form a company to treat twenty and thirty years for their minor health issues. Nor do we have a clear distinction between major medical insurance (what if I end up in the ER) versus standard health care insurance (which removes the cost from the patient and is subsidized by the government).

On the other hand, maybe I am discounting the possible benefits of the exchanges?

Health Care on Nights and Weekends

2012-01-15T20:41:00.001-05:00

Aaron Carroll has a smart point about the limitations of the current office visit model of health care. He looks at the percentage of people who have trouble getting care on nights and weekends. It seems that we don't do especially well, even on international standards:

Yeah, we beat Canada. But we lose to almost every other country. Almost two thirds of Americans have trouble getting care on nights, weekends, and holidays. You know what? A significant amount of the week is filled with nights, weekends, and holidays. Especially if you don’t want to miss work.It’s fine to believe that people should try and see the doctor in the office. But if you want that to happen, then you need the office to be available. If retail clinics do a much better job in that respect, you can’t complain when people make use of them

I think that there are two points of interest here. One, while Canada has a laudable health care system, it has flaws too and so a straight out effort to clone it might overlook opportunities to do better.

The second is that these visits don't even have to be expensive. Nurses in small retail clinics (you do not even have to have a medical doctor) could diagnose a lot of minor conditions, refer patients to emergency rooms in a crisis, and give instructions for minor care. Now consider that Pharmacies are open 24 hours in a lot of places. They have a medical professional with a doctorate behind the counter who is an expert on medications. Why could pharmacists not prescribe based on the Nurse's diagnosis. Both pharmacists and nurses are cheaper than medical doctors, used to shift work, and highly trained professionals.

Why could they not do a lot more to simultaneously reduce costs (as clinics are inexpensive, provide an alternative to hyper-expensive emergency rooms, and could get patients seen faster) and improve service (would you spend $75 to get easy treatment for an infection at 11 pm on a Saturday night?).

Why aren't me trying out these sorts of innovations?

Thinking about past and future

2012-01-14T04:52:00.002-05:00

while listening to an Austrian techno-musician do dance mixes of the great Lil Hardin Armstrong.

I thought I was done with IP stories for a while

2012-01-13T21:46:00.002-05:00

But I can't let this one pass unnoted. From Propublica (via Felix Salmon):

Right now, if you want to read the published results of the biomedical research that your own tax dollars paid for, all you have to do is visit the digital archive [1] of the National Institutes of Health. There you’ll find thousands of articles on the latest discoveries in medicine and disease, all free of charge.
A new bill in Congress wants to make you pay for that, thank you very much. The Research Works Act [2] would prohibit the NIH from requiring scientists to submit their articles to the online database. Taxpayers would have to shell out $15 to $35 [3] to get behind a publisher’s paid site to read the full research results. A Scientific American blog said it amounts to paying twice.

Things I wish I had time to write about -- the growth fetish

2012-01-13T02:35:00.002-05:00

Felix Salmon has an excellent post that uses Bain as a jumping off point to raise points like this:

Private equity is by no means unique in this respect: it happens at pretty much every public company, too. John Gapper, today, has a column about the way it destroys values at struggling technology companies:

Most public companies are run by people who hate folding ’em, and instead keep returning to the shareholders and bondholders for more chips…

Few senior executives, when debating options for a technology company in decline, admit defeat and run it modestly. Instead, they cast around for businesses to buy, or try to hurdle the chasm with what they have got. Sometimes they succeed but often they don’t, wasting a lot of money along the way.

It goes against their instincts to concede that the odds are so stacked against them that it is not worth the gamble. Mr Perez would have faced a hostile audience if he’d admitted it to the citizens of Rochester, Kodak’s company town in New York, but its investors would have benefited.

At many companies, then, both public and private, the optimal course of action is a modest one — run the business so that it makes a reasonable profit, and can continue to operate indefinitely. If you chase after growth, you often end up in bankruptcy: that’s one reason why the oldest companies in the world are all family-run. Families, unlike public companies or private-equity shops, don’t need growth: they’re more interested in looking after their business over the very, very long run.

If I had time, I'd really like to explore the connection between this and an earlier OE post on the growth fetish:

It's obvious that our economy is suffering from a lack of growth but for a while now I've come to suspect that in a more limited but still dangerous sense we also overvalue growth and that this bias has distorted the market and sometimes encouraged executives to pursue suboptimal strategies (such as Border's attempt to expand into the British market).

Think of it this way, if we ignore all those questions about stakeholders and the larger impact of a company, you can boil the value of a business down to a single scalar: just take the profits over the lifetime of a company and apply an appropriate discount function (not trivial but certainly doable). The goal of a company's management is to maximize this number and the goal of the market is to assign a price to the company that accurately reflects that number.

The first part of the hypothesis is that there are different possible growth curves associated with a business and, ignoring the unlikely possibility of a tie, there is a particular curve that optimizes profits for a particular business. In other words, some companies are better off growing rapidly; some are better off with slow or deferred growth; some are better off simply staying at the same level; and some are better off being allowed to slowly contract.

It's not difficult to come up with examples of ill-conceived expansions. Growth almost always entails numerous risks for an established company. Costs increase and generally debt does as well. Scalability is usually a concern. And perhaps most importantly, growth usually entails moving into an area where you probably don't know what the hell you're doing. I recall Peter Lynch (certainly a fan of growth stocks) warning investors to put off buying into chains until the businesses had demonstrated the ability to set up successful operations in other cities.

But the idea of getting in on a fast-growing company is still tremendously attractive, appealing enough to unduly influence people's judgement (and no, I don't see any reason to mangle a sentence just to keep an infinitive in one piece). For reasons that merit a post of their own (GE will be mentioned), that natural bias toward growth companies has metastasised into a pervasive fetish.

This bias does more than inflate the prices of certain stocks; it pressures people running companies to make all sorts of bad decisions from moving into markets where you don't belong (Borders) to pumping up market share with unprofitable customers (Groupon) to overpaying for acquisitions (too many examples to mention).

As mentioned before we need to speed up the growth of our economy, but those pro-growth policies have to start with a realistic vision of how business works and a reasonable expectation of what we can expect growth to do (not, for example, to alleviate the need for more saving and a good social safety net). Fantasies of easy and unlimited wealth are part of what got us into this mess. They certainly aren't going to help us get out of it.

Things I wish I had time to write about -- the future that was

2012-01-13T00:37:00.002-05:00

Check out this fascinating series of predictions from the Saturday Evening Post circa 1900:

Photographs will reproduce all of nature’s colors… [They will be transmitted] from any distance. If there be a battle in China a hundred years hence, snapshots of its most striking events will be published in the newspapers an hour later.

Wireless telephone and telegraph circuits will span the world. A husband in the middle of the Atlantic will be able to converse with his wife sitting in her boudoir in Chicago. We will be able to telephone to China quite as readily as we now talk from New York to Brooklyn.

Man will see around the world. Persons and things of all kinds will be brought within focus of cameras connected electrically with screens at opposite ends of circuits, thousands of miles at a span.

Rising early to build the furnace fire will be a task of the olden times. Homes will have no chimneys, because no smoke will be created within their walls.

Refrigerators will keep great quantities of food fresh for long intervals.

Fast-flying refrigerators on land and sea will bring delicious fruits from the tropics and southern temperate zone within a few days. The farmers of South America… whose seasons are directly opposite to ours, will thus supply us in winter with fresh summer foods which cannot be grown here.

Once again a knowledge of obscure pop culture saves the day

2012-01-12T23:25:00.002-05:00

Impressionist Will Jordan used to do a routine built around the idea of a threat, an actor kept under contract because of a resemblance to one of the studio's stars. The point of a threat was two-fold: to give the studios a ready replacement if a star dropped out and to let the stars know that they could be replaced.

I was reminded of threats when I came across this section of Felix Salmon's latest instalment of the adventures of Ben Stein:

But my favorite bit of the complaint is where he complains that the ad which did end up running, featuring Peter Morici, is “an explicit misappropriation of Ben Stein’s likeness and persona, which is an explicit violation of Ben Stein’s rights of privacy and of publicity, barred by California law”.

In other words, this ad, while it might look to all the world as though it features a real economist who’s much more qualified on such matters than Ben Stein, is in fact an illegal violation of Ben Stein’s privacy, which uses the likeness of Ben Stein. Maybe Stein thinks that Morici should wear a long blonde wig, or something, to make him look less Stein-esque?

According to most science fiction shows, androids of the future should have no problem with "seven minutes"

2012-01-11T23:38:00.004-05:00

Nice Observation

2012-01-11T17:20:00.001-05:00

This post was hoisted from the comments in Megan McArdle's website and it makes a point that we often forget: the eventual chance of death is 100% and the hazard of death is tightly associated with how long you have lived so far. Once you make it out of childhood, many people live their 20's and 30's free of serious health concerns. It's not atypical to find such people, at least. One the other hand, how common is it for 80 year olds to not have at least one health issue that effects either risk of death or quality of life?

With this special offer, you can watch the Super Bowl on your laptop absolutely for free!!

2012-01-10T00:07:00.004-05:00

Well, free is a small stretch. You will need an HDTV tuner stick, but those are cheap (you can probably find one for thirty and change) and most come with a small but surprisingly effective antenna. Plug it into your USB port and you're good to go.

I recently heard a technology reporter talking about how big it would be when someone finally figured out a commercially viable way for people to watch the Super Bowl on their computers. It struck me as a perfect ddulite moment, gushing over an anticipated technology while ignoring an existing one that had all the same essential features.

This tendency to prefer next year's toy to this year's tool is one of the ddulites' costliest traits because it leaves good, useful technology under-recognized and under-utilized. Waiting for the next big thing (like hydrogen fuel-cells or geo-engineering) can cause us to put off implementing existing technologies (plug-in hybrids, ground-source heating and cooling, etc.).

What I don't like about this graph

2012-01-08T04:40:00.004-05:00

Don't get me wrong. This Wikipedia graph carries a lot of information -- I use it all the time -- but there's a counter-intuitive quality about it that bothers me and I have no idea how to fix it.

The problem is that changes in the x-axis mean more or less the opposite of changes in the y-axis. Smaller intervals between new laws and larger jumps in duration both indicate increased copyright protection.

This wouldn't be a problem if we were plotting these with a line -- with lines we're used to thinking in terms of slope -- but here the natural impulse is to think in terms of area, thus making the 1976 and 1998 laws look like fairly minor changes.

One more complaint, all but one of the states had copyright laws before 1790 so the law passed that year was more of a formalization than an extension. For most of the states, there was a period of almost fifty years without a major extension. The twenty-two year interval before the 1998 act really was exceptionally short.

Intellectual property and business life-cycles

2012-01-08T04:30:00.003-05:00

A while back, we had a post arguing that long extensions for copyrights don't seem to produce increased value in properties created after the extension, but what about the costs of an extension? And who pays it?

New/small media companies tend to make extensive use of the public domain (often entailing a rather liberal reading of the 'public' part). The public domain allows a company with limited resources to quickly and cheaply come up with a marketable line of products which can sustain the company until it can generate a sufficient number of original, established properties.

Many major media companies have gotten their start mining the public domain, none more humbly than Fawcett. At its height, the company had magazines that peaked at a combined circulation of ten million a month in newsstand sales, comics that outsold Superman, and the legendary Gold Medal line of paperbacks. All of this started with a cheaply printed joke magazine called Captain Billy's Whiz Bang

Of course, Wilford Fawcett couldn't have reimbursed the unknown authors of those jokes even if he had wanted to. Disney, on the other hand, built its first success on a a title that was arguably still under copyright.

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.

Another company that went from near bankruptcy to media powerhouse was a third tier comics publisher that had finally settled on the name Marvel. The company's turnaround is the stuff of a great case study (though MBA candidates should be warned, Stan Lee's memoirs can be slightly less credible than his comics). Not surprisingly, one element of that turnaround was a loose reading of copyright laws.

Comic book writer and historian Don Markstein has some examples:

Comic book publisher Martin Goodman was no respecter of the property rights of his defunct colleagues. In 1964, he appropriated the name of a superhero published in the '40s by Lev Gleason, and brought out his own version of Daredevil. A couple of years later, he introduced an outright copy of a '50s western character published by Magazine Enterprises, Ghost Rider. It wasn't until late 1967, possibly prompted by a smaller publisher's attempt to do the same, that he finally got around to stealing the name of one of the most prominent comics heroes of all time, Captain Marvel. And this delay was odd, because the name of Goodman's company was (and remains) Marvel Comics."

(That would, by the way, be Fawcett's Captain Marvel so what goes around...)

(Fans of fantasy art should find the covers of the old Ghost Rider familiar)

This is how how media companies start. A small music label fills out a CD with a few folk songs. An independent movie company comes up with a low-budget Poe project. An unaffiliated television station runs a late night horror show with public domain films like Little Shop of Horrors and Night of the Living Dead. Then, with the payroll met and some money in the bank, these companies start getting more ambitious.

Expansion of the public domain is creative destruction at its most productive. Not only does it clear the way for new work; it actually provides the building blocks.

Behavioral Economics for Firms

2012-01-07T13:04:00.000-05:00

On Friday I read this piece by Karl Smith on Apple and this piece by Matt Yglesias on Barnes and Noble. I was struck by how both of these examples showed firms actually in the best interest of the executive (who get perks from working at the firm) and not the shareholders (who want to maximize return on investment).

I wonder if there is a limit to how well firms adhere to economic models> We already have decent evidence that people don't necessarily respond rationally (or else why would they buy Apple shares?). But the executives in the company create a principal agent problem, which may also cause issues at the level of the company itself.

This is not to knock economic models. Epidemiology has many of the same limitations and we have to rely on some pretty challenging assumptions. Rather it is to be careful, with any model, to recall the limitations and exceptions inherent in modeling a complex process.

Astronauts and aquanauts

2012-01-06T22:32:00.008-05:00

I don't want to push this analogy too far (there are important differences) , but this NPR story got me to thinking about the exploration of the oceans and the exploration of space.

To take the pictures, researchers deployed a tethered robot from their research ship. About the size of a four-wheel-drive truck, the robot was outfitted with an array of high-definition video cameras and still cameras. The researchers would watch a bank of screens of pictures that the robot beamed up from the seabed.

Fifty years ago, exploring the oceans meant sending down manned bathyspheres and bathyscaphes and establishing undersea habitats like SEALAB and Tektite. Now exploration is done pretty much entirely by tethered robots and remote-controlled submersibles. For other than military purposes, manned deep water vehicles seem to have almost disappeared. Based on a good fifteen minutes on Wikipedia, it appears that serious bathyscaphe-based research ended with the Sixties. (the record for deepest dive has stood since 1960.)

We've all gotten used to the idea of exploring the oceans through a video screen rather than a portal and it's been ages since I've heard anyone talk about colonizing the seas. The cold, hard economic fact is that in extreme environments, machines can do more, and do it more cheaply than humans. That holds for space exploration as well.

It is possible to argue for manned exploration programs but those arguments invariably have to come down to a question, not of science, but of intangibles like what we want to accomplish as a nation. I'm actually sympathetic to these arguments but they have to be made in these terms. This really is something you do not because it's easy but because it's hard.

Stock Markets and Beta

2012-01-04T20:37:00.001-05:00

Regular readers will know that I have a pet interest in personal finance. One thing that I have thought a lot about is the contrast between structured saving vehicles (like the 401(k)) and government pension plans (like the Canadian Pension Plan). One worry that I have had about government pension plans is that they seem to be under attack when times are bad (thus bearing political risk). However, the last 12 years seem to suggest that it has not been a good time to invest in the stock market:

This means that historically, the stock market more than doubles your money in real terms every 12 years, but over the last 12 years, it’s down 20%.

That is a great deal of risk to bear as an individual investor. Leaving the market in 1999 and purchasing an annuity (leaving the job market 12 years early) would produce a better retirement than saving for an additional 12 years.

Now add in the losses due to management fees and it can be a tough slog to put together a retirement account. Of course, you can't easily avoid the management fees as taxes are worse than these fees (which mostly seem to be a rather substantial subsidy to wall street). So saving in personal accounts is also hard.

That leaves two possibilities -- a entity that can smooth out risk over decades (e.g. a government) or simply making more income. Since it is not trivial to generate large pay increases, the former does seem like the only realistic way to mitigate time period risk for retirement.

Or am I missing something?

Doing something for non-traditional students

2012-01-04T01:05:00.003-05:00

A few years ago I did a stint as an instructor at a large state school (fun work, terrible pay). Most semesters I taught at least one night course which meant lots of non-traditional students. They always impressed the hell out of me. Most were working full time jobs, many had kids to take care of, but somehow they always were the ones who got all their homework in, showed up for study sessions and managed to maintain the best attitudes.

I always felt that the university was not serving these students well, that we should have been finding ways to work around their schedules to make their lives easier and the path to graduation quicker. With that in mind, I liked a lot of what I heard in this NPR report on Western Governors University, a nonprofit online school designed to help adult students finish college.

Shackleford can also keep her costs down by finishing her coursework early. The average time to get a degree at Western Governors is much shorter than at a typical school, where students have to put in a set amount of "seat time."

But the truly unusual thing about this computer-driven system is that it provides a lot of one-on-one attention. Throughout her time at Western Governors, Shackleford will have her own personal student mentor — a combination guidance counselor, career coach and best buddy.

Shackleford has never met her mentor in the flesh, even though she lives about 90 minutes away, just north of Indianapolis. Her name is Stormi Brake, and she also works out of her home office, in a house filled with kids and pets.

When I show up for a visit, Brake is wearing a headset and talking on the phone with one of her 90 students. She is organized and energetic, jumping from student to student to head off any problems. She tracks their progress on a computer dashboard the school uses. She shows me that students who are completing required tasks on schedule show up in green, while those who are behind show up in red, a sign that the mentor needs to get in touch.

Brake has a strong background in science and teaching, but her job is to make sure her students get their degree. Students with questions about course content can turn to another kind of mentor — a course mentor — who's considered an expert on the subject.

Cash for Citations

2012-01-02T19:04:00.003-05:00

Mark sent me this piece entitled Cash for Citations?. The title was a bit misleading when you click though and read the actual offer:

An astronomer at King Abdulaziz University (KAU) in Jeddah, Saudi Arabia, was offering him a contract for an adjunct professorship that would pay $72,000 a year. Kirshner, an astrophysicist at Harvard University, would be expected to supervise a research group at KAU and spend a week or two a year on KAU’s campus, but that requirement was flexible, the person making the offer wrote in the e-mail.

I am actually not sure that this rises to the level of a "scam" by modern standards. The professor would, after all, work with the students at KAU and be residential for at least part of the year. Sure, the salary is a bit high for two weeks worth of work but access to a top researcher can be worth a lot if he contributed remotely. To rise to the level of an actual scam, the flexible requirement would have to be negotiable to no duties.

Now, the concern is that the astronomer would have to list the KAU affiliation on all of their papers. On the other hand, if they are a salaried adjunct professor then that would actually be pretty normal. Several of my colleagues have positions cobbled together from multiple places and the requisite need to list multiple affiliations.

The real issue is the ability of universities to purchase reputations. It has long been true that extremely gifted and creative researchers have better employment options at least partially because of the prestige they bring to the hiring institution. In a world with flexible work locations (consider MITx), these issues are likely to become larger over time.

But the idea of "cash for citations" is really a salary for research productivity. The real question is how residential does a professor need to be to count as affiliated.

The sum of all fears = 183

2011-12-30T23:20:00.003-05:00

Seeing the world from other perspectives is a good way to start the new year. With that in mind you should pony up the dollar for a download of this episode of This American Life. All its segments were strong, but for me the most affecting was the second act. It revolves around a reading from a book by a developmentally disabled man named Michael Bernard Loggins (published with the help of a remarkable arts program called Creativity Explored).

The book consists of a list of fears, in no apparent order, ranging from the trivial (needles) to the profound (a mother dying). The fears are specific and provide distinct glimpses into Michael's life, but they're universal at the same time; though the details may be different, Michael's fears are our fears.

This really is a powerful piece of writing, beautifully presented by This American Life and actor Tom Wright. You should definitely take the time to check it out and perhaps make a small contribution to TAL or Creativity Explored.

That's also a good way to start the new year.

Yes, another talking baby video, now with informed commentary

2011-12-30T01:22:00.003-05:00

This is actually the first half of the conversation. They both come from a blog called Twin Mama Rama and they've generated quite a bit of discussion. I found these two particularly interesting:

Hope Dickinson, MS, CCC-SLP, coordinator of the Speech-Language Pathology Services at Children’s Hospital Boston at Waltham.

These two are babbling, specifically they’re demonstrating a behavior known as “reduplicated babbling,” because the sounds used are repeated, which you can hear in their use of “da-da-da.” In a more informal way, I guess I would describe it as turn-taking with babbling, or conversational babbling.

Play talk is a healthy way for kids to develop language skills

...

It really demonstrates how very young children communicate and know how a conversation works, even before they have the words to use. They will eventually begin to replace the babbling strings with words. If you listen closely, you’ll even hear a couple of words: One says “mama” when looking at the camera, and one or both say “up” more than once when picking up a foot.

One thing they are using wonderfully is turn taking, as in first one “talks” and then pauses and the other responds. They are also imitating the various intonations we use in conversation and speaking. There is fantastic rise and fall to their pitch and tones. Sentences or exclamations end loudly and emphatically, and there is also some questioning (rising) intonation. They are using gestures to supplement their talking, much like adults do. Their body distance is even very appropriate for most Americans; not too close, but not too far either.

And from the New York Times:

“Some people believe twins have the ability to generate their own detailed language, a twin language, but it doesn’t seem to be true in terms of a fully developed language system,’’ said Stephen Camarata, professor of hearing and speech sciences at Vanderbilt University School of Medicine. “They are going back and forth and enjoying each other’s company, but they aren’t saying anything specific like ‘Hey, Mom’s videotaping us. Look at her hair.’ “

...

Dr. Camarata says the video is rich with examples of how children develop language. It’s filled with canonical babbling that sounds like speech because it uses vowels, consonants and syllables to mimic words. Although most healthy babies go through the same phase of language development, most of the time the conversation is one-sided because they are interacting primarily with parents or older siblings. What’s special about the twins’ exchange, he notes, is that each baby has a peer with whom to practice language.

“The thing that is remarkable is that they both have this intonation pattern,’’ he said. “It sounds like they are speaking, making a statement, asking a question. They are using those broader markers we use in language.”

He says it’s possible that the twins are re-enacting conversations they’ve witnessed in the family kitchen.

“Children are very clever at watching and learning from adults,’’ said Dr. Camarata. “You wonder if there hasn’t been a conversation between the husband and wife or other people in the kitchen that they are mimicking. The intonation patterns were almost certainly learned from the parents.”

Dr. Camarata said he finds the video particularly delightful given that he often works with children who have delayed speech as a result of autism or another disability. He said he hopes parents who see the video will be reminded to celebrate the amazing developmental milestones of their own children.

“Here are these children interacting with each other in a very spontaneous and unguided way, and there are a lot of rich things going on that are really cool,’’ he said. “You wonder in this day and age of people programming their child’s activities if we’re losing a little bit of that. I worry that we’re not looking for and celebrating these kinds of spontaneous things that our toddlers do that are really exciting and fun.”

A quote from Coase

2011-12-29T22:29:00.001-05:00

A nice quote from Ronald Coase:

If you torture the data long enough, it will confess.

While this comment can be taken too far and exploratory data analysis is interesting, it is a good warning to medical (and other researchers) not to over-interpret data. Of course, this presumes that decisions are being driven by data and not based on expectations derived directly from a theoretical construct.

The world is a strange place and our minds seem to be pretty poor at "guessing" the correct answers.

The scandal isn't that the New York Times is one of our worst papers; the scandal is that it's one of our best papers

2011-12-29T21:59:00.003-05:00

In yesterday's NYT, Rachel Donadio had a report on Italy that included this sentence:

Germany has adamantly opposed what it sees as rewarding the bad behavior of southern rim countries like Italy, Greece, Spain and Portugal, which amassed high public debts and where tax evasion is rampant.

Except, of course, they didn't. Dean Baker (who first caught this) debunks:

Actually, of this group only Greece was consistently experiencing a rise in its debt to GDP ratio. In Portugal there was some increase in the debt to GDP ratio in the years prior to the recession, but Italy's debt to GDP ratio actually had been trending downward since 2000. Spain was running budget surpluses and had a considerably lower debt to GDP ratio than Germany.

It's not just that the NYT didn't bother to check these facts; it's that they had been debunked repeatedly in numerous places including this column printed less than a month ago in, you guessed it, the New York Times.

And Donadio is not some stringer who happened to stumble in the door. According to her NYT bio:

Rachel Donadio has been Rome Bureau Chief of The New York Times since September 2008, responsible for Italy, the Vatican and the broader southern Mediterranean.

In normal times, you would expect someone like the Rome Bureau Chief to be up on the details of what is arguably the biggest European story since the fall of the Berlin Wall. These are not, however, normal times for journalism. Standards (particularly those regarding accuracy) have fallen while journalists have (with very few exceptions) developed a disturbing herd mentality.

It's bad when journalists stop checking their own and each others' facts. It's also bad when journalists largely stop thinking independently and simply converge on a few standard narrative.

But when these two things happen together... that's catastrophic.

Adam Smith

2011-12-29T12:56:00.002-05:00

At one point I used to be a huge advocate for re-examining Adam Smith's theories in the wealth of nations. I was perplexed at how the words in the text did not seem to match the theories derived from it. In particular, it seemed that nobody paid a lot of attention to his concerns with the actions of corporations. I was reminded of this hobby of my youth will reading a comment by Dan Hirschman in Jodi Begg's blog:

Second, and more critically, be careful with Smith! Do you read historian of economic thought Gavin Kennedy’s blog, Adam Smith’s Lost Legacy? Kennedy devotes most of the blog to trying to fight the abuse of the idea that Adam Smith had some ‘theory of the invisible hand’. Kennedy has an excellent paper on the metaphor and how it became a myth (mostly blaming Samuelson’s influential textbook), Adam Smith and the Invisible Hand: From Metaphor to Myth. Long story short, that metaphor comes in the middle of the Wealth of Nations, and refers specifically to merchants who (because they are risk-averse) put their money in lower-yielding, but less risky, domestic investments and thus unintentionally stimulate local commerce. The “invisible hand” simply refers to an unintended consequence, not to some overarching thesis that self-interest leads to socially beneficial outcomes (a position held by an earlier author, Mandeville, and that Smith and his contemporaries ridiculed). For example, Smith himself lists 60 ways in which the government ought to intervene to produce better outcomes, from providing public education to regulating bank money creation. Smith also distrusted merchants, and thought they would (acting on their self-interest) readily conspire against the public (hence why he especially disliked trusts and large corporations, see Emma Rothschild’s Economic Sentiments: Adam Smith, Condorcet and the Enlightenment).

One of the interesting features of Adam Smith was how he focused on local and responsive government. In a time with a lot less mobility, it made sense to pay close attention to local politics. He had an excellent example of how lamp lighting in London was a public good, but that it would likely be done less well if it was done by a higher level of government than the city.

So I often get confused when he is cited by modern neo-conservatives. The main thrust of the book seems to suggest a decentralized mixed economy rather than a scene out of an Ayn Rand novel.

You have to wonder what they're thinking

2011-12-27T23:55:00.003-05:00

Those of you with a low tolerance for cute might want to give this one a pass, but if you've got any interest in developmental linguistics, this exchange between two seventeen-month-olds is fascinating. Check out how they've picked up all the major non-verbal aspects of conversation.

If you're following Burn Notice online

2011-12-27T23:05:00.001-05:00

Hulu slipped the last couple of episodes in under cover of darkness for unusually brief runs. You can still catch them if you hurry.

I think we also need to page Mark Palko

2011-12-27T11:52:00.001-05:00

Today's new patent is from Apple, US patent #8,082,523. It is best described as:

In other words, anything you’d recognize as a smartphone seems to be covered.

Matthew Yglesias asks the smart question:

The issue is that there's just no sound public interest case for granting monopolies over certain features to the first-to-market firms in this industry. Apple has already gained a very large competitive advantage from the fact that they were the first people to deploy a working touchscreen smartphone and even without patents clearly has a strong financial need to continue investing in improving its product lest lower-margin Android-powered phones eat away at its profits.

But the general trend seems worrisome. Not only does it vastly increase business complexity (searching the patent office for thousands of potentially applicable patents), but it stifles innovation by making new entry into the smartphone field more difficult.

Mark?

Does strong government help?

2011-12-26T23:30:00.002-05:00

The comment thread on this piece is well worth reading. In the piece, itself, Noah Smith is pointing out a possible reason for people to adhere to libertarianism -- the concern over the state protecting people from small group actions. While this is not the only issue with this creed, I do want to look at it another way.

Why did primitive cultures lose to organized cultures? It is pretty clear, for example, that the Gauls had a much less intrusive government than the Romans. They had a lot of brave fighters and a fairly free society (as ancient world societies went). While certainly a bit romanticized in literature, it is clear from reading Julius Caesar's accounts of his wars that strong central government was notably absent from the Gauls.

So why were they overrun by a high-tax society with a strong central government?

It is equally interesting to ask questions like why the residents of the American West sought statehood. After all, did they not have a much freer society outside of the United States?

Or why do people seem to suffer so badly in failed states, which also have a lack of strong central government?

I think that these practical concerns need to be addressed. A lot of what the state does is either protective (banning force and fraud) of individual citizens, a vehicle to allow disputes to be settled (the courts), acting as an insurance company for risks that are hard to use markets for, providing public goods, and mutual defense. Perhaps the goal of government should be effective government and not minimalist government.

I wonder if libertarianism thrives because most of us have not seen a failed state in the first world? People have a lot of mobility (if they are rich) and so there is less of a sense of how the government helps make a society function.

Introducing the Ddulites

2011-12-26T03:40:00.005-05:00

I've got a new coinage I'll be referring to quite a bit in some upcoming posts so I thought I'd give it a link of its own rather than bringing it out in the middle of a longer post. (since the longer the post, the greater the chance of my saying something I'd just as well forget. This way I can always link back to this nice, short, neutral post.)

Ddulite (from Luddite):

A preference for higher tech solutions even in cases where lower tech alternatives have greater and more appropriate functionality; a person of ddulite tendencies.

Though Ddulites are the opposite of Luddites with respect to attitudes toward technology, they occupy more or less the same point with respect to functionality.

Is there an economist is the house? Casey Mulligan edition

2011-12-25T22:10:00.002-05:00

After Christmas dinner, I did some web surfing and came across the following from Noah Smith:

Two posts back, I explained why the "Great Vacation" idea doesn't pass the smell test. If U.S. unemployment had been caused by a negative shock to labor supply, we should have expected to see an increase in real wages.

Casey Mulligan, one of the leading proponents of the Great Vacation story, responded on his blog:

A number of bloggers have recently discovered real wages as a labor market indicator. They are at least 3 years late to the party.

Three years ago I blogged about the effect of labor supply on real wages;

I noted how real wages had risen since 2007, and predicted that they would begin to decline in 2010.

I have continued to update this work, eg here, and here. The fact is that the real wage time series fits my recession narrative very well.*

Smith then pulls up a graph of real wages and uses it to argue that the data does not, in fact, fit Mulligan's narrative. It's definitely something you should check out, but right now there's something else I'd like you to take a look at. If you follow the link where Mulligan talks about blogging about the effect of labor supply on real wages, you get a column discussing the relationship between labor supply and productivity. This seems to be the relevant passage:

The second type of explanation is reduced labor supply.

Suppose, just for the moment, that people were less willing to work, with no change in the demand for their services. This means that employees would have to be more productive because they have to get by with fewer workers.

Of course, people have not suddenly become lazy, but the experiment gives similar results to the actual situation in which some employees face financial incentives that encourage them not to work and some employers face financial incentives not to create jobs.

Professor Douglas gave us a formula for determining how much output per work hour would increase as a result of a reduction in the aggregate supply of hours: For every percentage point that the labor supply declines, productivity would rise by 0.3 percentage points.

As mentioned earlier, in late 2008, labor hours were 4.7 percent below where trends from previous years would predict the number to be. According to Professor Douglas’s theory, this means productivity should rise 1.4 percent above its previous trend by the fourth quarter.

So let’s take a look at the numbers. Unlike in the severe recessions of the 1930s and early 1980s, productivity has been rising. Through the third quarter of 2008, productivity had risen six consecutive quarters, with an increase of 1.9 percent over the past three, or 0.7 percent above the trend for the previous 12 quarters.

Because productivity has been rising — almost as much as the Douglas formula predicts — the decreased employment is explained more by reductions in the supply of labor (the willingness of people to work) and less by the demand for labor (the number of workers that employers need to hire).

This way outside my field, so I could easily be missing the obvious here, but this post doesn't seem to support the claim that Mulligan was blogging on this question three years ago. That's not to say Mulligan's argument isn't valid or that it doesn't somehow imply his point about wages but if you're going to say "Three years ago I blogged about the effect of labor supply on real wages," you should probably mention wages in more than a passing way.

I can be sympathetic. Since I started blogging I've often recalled some prophetic observation I made in the past and started typing up a boastful post only to discover on review that I actually hadn't been that prophetic after all.

That's why I always reread old posts before I link to them; if I don't, someone else will.

* I had to remove a couple of reams of html formatting here. If I inadvertently removed something else. let me know.

Happy Holidays

2011-12-24T21:55:00.004-05:00

Layoffs

2011-12-24T15:10:00.002-05:00

Jeff Grubb has a very interesting window into how corporations act to try and create endless cycles of growth:

And part of it is that the corporation demands continued growth and profit. It can defer some of its growth for long-term development, or keep on an unsuccessful project that someone really likes, but really it boils down to guaranteed growth. And if you attain that growth, then they need to increase that rate of growth. And lord help you if you have a very good year - that very good year becomes the baseline for further calculations. In short, it is a vicious cycle.So they pass out the budgets for next year and now the departments have to plan. Yeah, some of that planning involves going back and telling the guys with the budgets that this makes no sense and sometimes that works. More often it involves figuring out what goes overboard in order to jack up profitability.Sometimes it is a new process that saves times or lowers cost of materials. Sometimes it is a new market that has been opened. Sometimes it is that "big hit" that suddenly arrives and surprises everyone (businesses actually don't like the "big hit" - it really screws up their planning. If they say you are going to lose 3 million this year and you instead MAKE 3 million, you make them look like idiots, and you will be punished accordingly).

There are two chilling comments here. One, is the idea that a good year can become the baseline for future expectations. So it makes sense to ensure that you don;t have any unexpected surprises. Two, which is the icing on the cake, is the idea that an unexpected burst of profitability will actually be punished. How this can actually be an efficient system is astonishing.

The standard explanation of "creative destruction" (badly run firms fade to be replaced with better run firms) presumes that we actually let large corporations fail. But there has been a general reluctance to do this in fields ranging from automobile manufacture to banking. Without that safety valve, this approach is going to be very dangerous to efficiency. In a later post, Jeff Grubb notes the CEO compensation for Hasbro (the subject of the first post) is pretty decent:

For those not linking, it is an announcement that the CEO of Hasbro is getting paid $23 Million this year. And yeah, it is like pouring oil on troubled water, then tossing in a match.Now, doing the digging in the article, the CEO gets a raise in salary from $1 Mill to $1.2 Mill (hardly chump change), and the rest being common stock. And to the best of my knowledge (the Internet will correct, of course), this means that it comes out of the company till - they are reassigning stock held by the company to the individual. And this assignment may have other strings attached - the stock cannot be sold except back to the company, it may only be sold at a particular price, it must be sold on leaving the company. So it is a fuzzy number, but a very large fuzzy number.The article also makes clear that this is a retention payment, negotiated last year, to keep the CEO around. It also notes that Hasbro had a weak 2010 in sales (stock prices went up, though). 2011 is nothing to write home about (stock prices have since deflated) and 2012 is not shaping up to be any better (Upcoming big movie: Battleship). So this is not about performance, but rather about stability. This is payment for showing up.

What is fascinating about part two is that this is the same company that just laid off two popular and productive long term employees in the Wizard's of the Coast division. So I googled game developer salaries and found this:

Game designers who work for a big company such as Hasbro or White Wolf Publishing can expect a more reliable salary, usually averaging between $30,000 and $50,000 per year.

Now let us presume fringe and overhead double the salary, and that both of the senior developers were at the very top of this range. The retention bonus portion of the CEO retention payment was enough to pay 400 developer-years of salary )both have fringe and overhead, it's unclear how this would work out in the details but this is a good starting estimate). Seriously, keeping the CEO around for another year was worth hundreds of experienced employees. What is ironic, is the base salary of the CEO is that of twenty senior developers (raised to that of twenty-four this year). That is actually a credible ratio of the benefit of a good CEO for a company (they have about as much influence as a couple of seasoned design teams). The additional $22 million is hard to understand. No wonder companies don't like comparisons between executive compensation and line worker compensation.

I do not really have a good idea about how to handle this issue in a more global sense, but I am deeply worried that this pattern could be playing out in corporations that we simply are unwilling to let go under.

That is a scary thought.

Do copyright extensions drive innovation? -- Hollywood blockbuster edition

2011-12-24T02:58:00.005-05:00

After all this time on patents, I thought we'd give copyrights a turn.

One of the standard arguments for stronger intellectual property laws is that they encourage innovation. Now let's think about how this is supposed to work. Stronger protection for intellectual property makes those properties more valuable. Greater value causes the market to generate more and better properties, particularly those specific properties that best capitalize on the new profit potential.

In the case of copyright protection, the properties that make the best use of these extensions are franchisable stories and characters. I'm specifically using franchise in the sense of selling the right to use a business model. Just as McDonald's can sell one person the right to run a restaurant in one neighborhood and then sell a different person the right to run one in a different neighborhood, the company that owns the rights to, say, Batman can allow one creative team to produce a series of properties based on the character, then turn around a few years later and allow another team a shot.

This interchangeability of talent is essential given the lengths of time we're talking about here. For most of the Twentieth Century, copyright protection was effectively capped at fifty-six years, but major extensions were passed in 1976 and 1998 which extended protection of corporate works up to ninety-five years and left the possibility open of essentially unlimited future extensions.

In order to reach their full potential, franchises have to repeatedly replace all of their creative personnel. Bond and Batman are arguably the good examples, both having gone through numerous incarnations with completely different creative teams, but there's an important difference in the business model. Bond was an ongoing series with considerable continuity both in front of and behind the camera; Batman pattern since the Sixties has been successful run, fallow period, relaunch with new team. The second model, with its long cycles, takes better advantage of the long copyrights.

We would expect 1976 and 1998 to produce major upticks in the creation of properties that could support Batman style franchises because at those points the profit potential of that type of property greatly increased. We would also expect newer properties generally to be less valuable than older properties both because of freshness and because of changing tastes.

That means by now if we look at films that are either part of a franchise or an attempt to launch or relaunch one, we should expect to see a very large share from the past decade (both because of the 1998 Act and because of recency) then a decent showing from the the Eighties and Nineties and little if anything from before the mid-seventies. With that in mind, let's look at the medium to large budget franchisable movies from 2011 and their creation decade:

The Adventures of Tintin -- Twenties

Alvin and the Chipmunks: Chipwrecked -- Fifties

The Twilight Saga: Breaking Dawn - Part 1 -- 00s

Captain America: The First Avenger -- Forties

Conan the Barbarian -- Thirties

Cowboys & Aliens -- 00s

Diary of a Wimpy Kid: Rodrick Rules -- 00s

The Green Hornet -- Thirties

Green Lantern -- Sixties*

Harry Potter and the Deathly Hallows: Part 2 -- Nineties

I Am Number Four -- 00s

Mission Impossible -- Sixties

The Muppets -- Fifties

Pirates of the Caribbean: On Stranger Tides -- Sixties (part of Disney's movies based on rides series)

Rise of the Planet of the Apes -- Sixties

Sherlock Holmes -- Nineteenth Century

The Smurfs -- Fifties

Spy Kids: All the Time in the World -- 00s

Thor -- Sixties

Transformers: Revenge of the Fallen -- Eighties

X-Men: First Class -- Sixties

You can quibble with some of my calls here. I quibbled with myself quite a bit, going back and forth on the Adjustment Bureau (old), Cars (new), Puss-in-boots (old) and Diary of a Wimpy Kid among others, but no matter what standards you use, it's almost impossible to see anything in the data that supports the idea that these extremely long copyrights have increased the production of highly marketable properties.

At best you could argue that the extensions might have had a positive effect but it was small enough to be swamped by other technological, economic and demographic factors. At worst, you could make the case that copyright laws were approximately optimal in the middle of the Twentieth Century and that the extensions have actually inhibited innovation.

Like patents, copyrights are necessary, but highly intrusive regulations. Taken to an extreme, they distort markets, divert resources from creators to legal departments, encourage consolidation and set up onerous barriers to entry for small companies and start-ups.

For another layer of irony here, take a look at how Disney approached intellectual property in its early days.

* Technically very late Fifties (or even Forties if you count earlier character with the same name)

Also posted at MippyvilleTV.

Two telling quotes from Bill Adair of PolitiFact

2011-12-22T23:38:00.002-05:00

Politifact has come in for a lot of criticism recently, some of it from surprising sources. Ramesh Ponnuru of the conservative National Review suggested that, rather than being the "Lie of the Year," the Democrats statements about Medicare were legitimate, while Jonathan Chait, then of the the liberal New Republic, has called the organization on unfair attacks on Republicans.

Without getting into the pros and cons of this most recent debate, I did want to share a couple of quotes from PolitiFact editor-in-chief Bill Adair:

From NPR:

"We're going to make the best calls we can in a pretty gutsy form of journalism," he says. "When we do, I think it's natural that the people on one side or other of this very partisan world we live in are going to be unhappy."

And from PolitiFact itself:

The most over-the-top response (was it tongue-in-cheek?) was a rant from Jim Newell in Gawker under the headline "Why PolitiFact is bad for you." He conveniently ignored the fact that our fact-checks are based on hours of journalistic research and portrayed them as the work of rogue bloggers with a gimmicky meter.

We've mentioned concerns about the decline of journalism and how various factors compound the problem. This is another one of those compounding factors: the strange obliviousness of many journalists. Adair, on the record, describes his own work as "gutsy." He holds up "hours of journalistic research" as an impressively high standard. He seems incapable of thinking of criticism as being based on anything but partisan bitterness. (If you think I'm cherry-picking here, follow the link above. The whole piece is like this.)

Even if you put aside the many criticisms of PolitiFact (spelled out cogently and with crushing thoroughness by Chait) and view them in the best (and I do mean best) possible light, the most you can say for the organization is that it's doing what we used to think of as standard due diligence from journalists.

Intellectual property: the story that never ends

2011-12-21T11:53:00.002-05:00

More on intellectual property rights from Matt Yglesias, who is worried about Google patenting basic features of driverless cars:

If you look at the cars we have, they're all of course different but they have a lot of really profound similarities. You almost always turn a key in the ignition. You have your gas pedal and your break, and you push them both with your right foot. You steer them with a wheel. There's a spedometer and a fuel indicator in more-or-less the same place. They use mirrors so you can see where you're going without constantly turning your head. Would it be a better world if for twenty years someone had held a patent on a Using Mirrors To Allow Drivers To See Behind Them Without Turning Their Head? I say, no. Absent the inability of new entrants into the automobile market to copy some of the basic concepts of what a usable car looks like, we would have had much less competition and much less innovation around the real cutting edge of the automobile industry.

This was not the most interesting thing that was on Moneybox today, but it fit really well into an an evolving theme that we have been seeing recently about how the patent industry is formalizing rent-seeking. This cannot be good in the long run.

Now, it is true that I think that the driverless car is an over-rated concept. Like the jetpack, it is a neat idea that has a lot of very difficult implementation issues. In the case of the driverless car, the main issues, in my opinion, are rethinking the complex web of liability we have constructed around vehicles and smoothly integrating them into mixed use roadways.

The risk of bicycle commuting has been an extremely favorable development, despite the occasional tension between cars and bikers. But I wonder if driverless cars will be able to handle treating cyclists as other vehicles or might the smaller profile of the bike make it harder for the car to account for them? The same concerns come up with pedestrians, especially in large cities.

Still more adventures in intellectual property

2011-12-21T03:06:00.002-05:00

From the LA Times (comment would be superfluous):

The patent war between Apple Inc. and smartphone rival Samsung Electronics continues to escalate, and there's only one way to describe the latest vicious salvo:
:)

That's right, it appears that Samsung has initiated a lawsuit against Apple governing the company's use of emoticons.

According to a report from patent observer Florian Mueller, who has been dependably covering the worldwide patent wrestling match between Apple and Android manufacturers, one of four new patent lawsuits filed by Samsung in German court is over, once again, yes, emoticons.

Believe it or not, Samsung does indeed own a patent on smartphone use of emoticons. It won the European rights to that "technology" in 2000, and interested readers can see the actual patent here.

A few more thoughts on journalistic conformity

2011-12-21T02:26:00.001-05:00

I complained in an earlier post that journalists have recently shown an alarming tendency to converge on a small set of standard stories when covering a major topic -- small sets that more often than not leave out things that we readers really ought to know about. Here's another example.

There are at least two potentially serious consequences to the amount of carbon we've been pumping into the atmosphere. The first is global warming. The second is the chemical and biological changes in the oceans.

Though it's difficult to compare the likely impact of phenomena this big and complex, the second problem is arguably on a level with the first, a point driven home in the LA Times' Pulitzer-winning series on the subject:

As industrial activity pumps massive amounts of carbon dioxide into the environment, more of the gas is being absorbed by the oceans. As a result, seawater is becoming more acidic, and a variety of sea creatures await the same dismal fate as Fabry's pteropods.

The greenhouse gas, best known for accumulating in the atmosphere and heating the planet, is entering the ocean at a rate of nearly 1 million tons per hour — 10 times the natural rate.

Scientists report that the seas are more acidic today than they have been in at least 650,000 years. At the current rate of increase, ocean acidity is expected, by the end of this century, to be 2 1/2 times what it was before the Industrial Revolution began 200 years ago. Such a change would devastate many species of fish and other animals that have thrived in chemically stable seawater for millions of years.

Less likely to be harmed are algae, bacteria and other primitive forms of life that are already proliferating at the expense of fish, marine mammals and corals.

In a matter of decades, the world's remaining coral reefs could be too brittle to withstand pounding waves. Shells could become too fragile to protect their occupants. By the end of the century, much of the polar ocean is expected to be as acidified as the water that did such damage to the pteropods aboard the Discoverer.

Some marine biologists predict that altered acid levels will disrupt fisheries by melting away the bottom rungs of the food chain — tiny planktonic plants and animals that provide the basic nutrition for all living things in the sea.

And we haven't even gotten to the primeval toxic slime (you really do need to read the whole series).

Given their common origin, comparable severity and potential for synergistic effects, topics like acidification should show up frequently in stories about global warming. Not all the time, but I would expect to see it in at least fifteen or twenty percent of the stories. It is simply a pairing that journalists to make on a fairly regular basis, but while a search of the last twelve months of the New York Times for "climate change" produces 10,509 hits, a search on '"climate change" acidification' over the same period produces 15.

(If we do a quick, back-of-the-envelope hypothesis test on the null that most journalists are well-informed, hard-working, independent thinkers...)

The specific tragedy here is that, for all the ink that's been spilled on the impacts of carbon emissions, all we really get in the vast majority of cases are simply the same handful of stories endlessly recycled. We read dozens of articles but since the writers have converged on a tiny number of narratives we remain ill-informed.

The general tragedy is that this is the way almost all journalism works these days. Through a lack of independent thinking (often augmented by laziness and a lack of rigor), journalists quickly settle on a small number of templates which they seldom stray from, even though these templates leave out important aspect of the larger story. Stories on the environmental impacts of carbon leave out the oceans; stories on the economics of cable don't mention broadcast television; stories about the free spending ways of countries like Greece and Spain omit the fact that Spain was running a surplus before the crisis.

It would be easy to find more examples. Finding counter-examples is the tough one.

Prediction is difficult

2011-12-20T14:16:00.001-05:00

There is a really thoughtful post in the Economist. The gist:

In a nutshell: I've become far less confident about our ability to accurately describe possible outcomes more than a decade out. Correspondingly, I've become increasingly sceptical of the value of analyses of decisions now that attempt to assess the costs and benefits of action over horizons any longer than a decade.

I think that this was a very good complement to yesterday's discussion of inference from observational medical research. Models are hard. The more complicated the model is, the more likely something is to go wrong. Future predictions suffer from these sorts of complications -- we honestly do not know what the circumstances will be like in the future or how many unlikely events will actually happen. Over the short run, predictions can bank on it being unlikely that a lot of "low event rate but high impact" events will happen. We can also neglect the slow (but incremental variables) that are currently unnoticed but which will make a huge difference in the future.

In the same sense, looking at low event rate outcomes in incomplete data (most of pharmacovigilence), leads to a lot of innate uncertainty. In both cases, I think it makes a lot of sense to be humble about what our models can tell us and to focus on policy that accepts that there is a lot of innate uncertainty in some forms of prediction.

Hat-tip: Marginal Revolutions

Can we do observational medical research?

2011-12-19T18:23:00.000-05:00

Andrew Gelman has a really nice post on observational medical research. How could I not respond?

In the post he quotes David Madigan who has a fairly strong opinion on the matter:

I’ve been involved in a large-scale drug safety signal detection project for the last two or three years (http://omop.fnih.org). We have shown empirically that for any given safety issue, by judicious choice of observational database (we looked at 10 big ones), method (we looked at about a dozen), and method setup, you can get *any* answer you want – big positive and highly significant RR or big negative and highly significant RR and everything in between. Generally I don’t think there is any way to say definitively that any one of theseanalysis is a priori obviously stupid (although “experts” will happily concoct an attack on any approach that does not produce the result they like!). The medical journals are full of conflicting analyses and I’ve come to the belief that, at least in the medical arena, the idea human experts *know* the *right* analysis for a particular estimand is false.

This seems overly harsh to me. Dr. Madigan (who I think is an amazing statistician) is working with OMAP, which I recall as being comprised of data sets of fairly low quality data (prescriptions claims for Medicare/MedicAid, GPRD and other clinical databases, and these sorts of databases). It is a necessary evil to get the power to detect rare (but serious) adverse drug outcomes. But these databases are often problematic when extended beyond extremely clear signal detection issues.

The clearest example of high quality medical data is likely to be randomized controlled double-blinded clinical trials. But there is a whole layer of data between these two extremes of data quality (prospective cohort studies, for example) that has also generated a lot of important findings in medicine.

Sure, it is true that the prospective cohort studies tend to be underpowered to detect rare adverse drug side effects (for precisely the same reason that RCTs are). But there is a lot of interesting observational medical research that does not generate conflicting results or where the experts really seem to have a good grasp on the problem. The links between serum cholesterol levels and cardiovascular events, for example, seems relatively solid and widely replicated. So do the links between smoking and lung cancer (or cardiovascular disease) in North American and European populations. There is a lot that we can learn with observational work.

So I would be careful to generalize to all of medical research.

That being said, I have a great deal of frustration with medical database research for a lot of the same reasons as David Madigan does. I think the issues with trying to do research in medical claims data would be an excellent series of posts as the topic is way too broad for a single post.

How to read Megan McArdle part 46 -- the quotes

2011-12-18T00:35:00.003-05:00

Via Joseph via Karl Smith, Megan McArdle (in a post entitled, "When it Comes to Taxes on the Poor, the Supply Siders are Right") quotes the following passage from Jeff Liebman:

"Despite the EITC and child credit, the poverty trap is still very much a reality in the U.S. A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn't make ends meet any more. I told her I didn't know what I could do for her, but agreed to meet with her. She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges. She asked me if she should go back to earning $25,000. I told her that she should first try to find a $35k job closer to home. Also, she apparently can't fully reverse her decision to take the higher paying job because she can't get the child care voucher back (the waiting list is several years long she thinks). She is really stuck. She tried taking an additional weekend job, but the combination of losing 30 percent in increased rent and paying for someone to take care of her child meant it didn't help much either.

The question is what is the policy solution here. Means-tested transfers have to be phased out at some point, so there is no easy answer.

Notice strangely brief second paragraph and the missing quotation mark at the end? Statisticians tend to be suspicious people, particularly when it comes to odd cut-offs for data ranges so I clicked through the link to the Jeff Frankels post that provided the original quote and saw a possible reason why McArdle had stopped so abruptly. Here's the very next sentence:

I think there are three things we might be able to do — all of which would, as you say, be a better use of revenue than tax cuts for the rich.

The whole paragraph is worth reading:

The question is what is the policy solution here. Means-tested transfers have to be phased out at some point, so there is no easy answer. I think there are three things we might be able to do — all of which would, as you say, be a better use of revenue than tax cuts for the rich. First, make child-related tax benefits equal for all families (now they are high at the bottom because of the EITC and high at the top because the dependent exemption is more valuable the higher the tax bracket you are in, and the dip in the middle raises marginal tax rates by 21 percent for a family with two kids — so eliminating the dip would get rid of this 21 percent portion of the effective marginal tax rate). David Ellwood and I analyze this first idea. Also Sawicky and Cherry have put forth a similar idea. Second, in designing universal health insurance, we need to be very careful not to phase out income-related premium subsidies over the same income range where all of these other benefits are being phased out. Third, implement a delay between income increases and rent increases in section 8 — allow people to save up a bit before they are hit with the rent increase (I believe I read that some states have been trying out something like this recently, but I am not up to date on these policies). There are some excellent papers that carefully model how the cumulative effects of the welfare system create a poverty trap. But I don’t think either of these papers includes all of the factors facing the woman above — so they would probably indicate that she faced a 60 percent marginal tax rate rather than the 130% (or whatever it really is) rate that she actually faces.”

I not entirely convinced that Liebman has made the case for counting personal expenses required for a new job as a tax increase, but it's a coherent and honest argument that's certainly persuasive on the reality of a poverty trap.

As for the rest of McArdle's post, after having spent a great deal of time arguing that a situation exists where supply siders predict a strong effect, her whole defense of her central thesis consists of this:

Note two things: first, that in this case, at least, the supply siders seem to be completely right. Everyone I've spoken to about the problem seems to agree that the poor respond to these high marginal tax rates by either taking lower-paying jobs than they could, or working less--not in every individual case, but in aggregate.

And second, that this is not a problem that supply siders seem to be applying much brain power or political capital to fixing.

The everyone-I've-spoken-to standard leaves something to be desired, particularly given the fact that the woman in the anecdote did the exact opposite of what supply side theory predicted; rather than "taking lower-paying jobs than [she] could, or working less," she "tried taking an additional weekend job."

(and to put way too fine a point on this, I don't see the predicted big dip for affected families in these numbers either)

On the bright side, this still isn't the worst thing to come out of the Atlantic recently.

When a model simply doesn't match reality

2011-12-17T11:14:00.002-05:00

Karl Smith relates a story from Megan McArdle:

A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn't make ends meet any more. I told her I didn't know what I could do for her, but agreed to meet with her. She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges. She asked me if she should go back to earning $25,000. I told her that she should first try to find a $35k job closer to home. Also, she apparently can't fully reverse her decision to take the higher paying job because she can't get the child care voucher back (the waiting list is several years long she thinks). She is really stuck. She tried taking an additional weekend job, but the combination of losing 30 percent in increased rent and paying for someone to take care of her child meant it didn't help much either.

Ms, McArdle tries to make a supply side argument here, where she points out that we are failing to create policies to incentive work among the poor (who can suffer a marginal tax rate of > 100% in many circumstances). It is a really interesting question why we focus on the top marginal tax rate and not the marginal tax rate for people in lower income brackets (where there is less of a competition effect). However, Karl Smith notices the really interesting behavioral issue here:

She faced a marginal tax rate in excess of 100%. This meant as her earned income went up she got poorer. What did she do? She tried to earn even more income.It was only we she failed at the attempt to make ends meet by supplying ever more labor to the free market that she try to go back to making less money.

So, not only do we have evidence from Matt Yglesias and Felix Salmon that top income earners don't necessarily even know their marginal rate, but we see low income people (facing a > 100% marginal rate of taxes) desperately trying to get more income and not less. It is not the case that the woman in this heartbreaking story decides that she would prefer to spend more time in leisure (so we can't intice her into working more). It is that working actually costs her money.

And her response is to get a second job!

Is it really too late to put supply side economics into the "special circumstances only" bin and leave it there? It may influence the odd movie producer, consultant, or freelancer (who have the ability to take on work in discrete projects and who have income sufficiency already). But this conceptual model seems to be absolutely dreadful at making predictions about how real people will act in most employment situations.

A really nice article by Andrew Gelman and Kaiser Fung

2011-12-15T10:59:00.001-05:00

Andrew Gelman and Kaiser Fung have an article on Freakonomics in American Scientist. My favorite part was the story of Emily Oster and her theory of Hepatitis B:

Monica Das Gupta is a World Bank researcher who, along with others in her field, has attributed the abnormally high ratio of boy-to-girl births in Asian countries to a preference for sons, which manifests in selective abortion and, possibly, infanticide. As a graduate student in economics, Emily Oster (now a professor at the University of Chicago) attacked this conventional wisdom. In an essay in Slate, Dubner and Levitt praised Oster and her study, which was published in the Journal of Political Economy during Levitt’s tenure as editor:
[Oster] measured the incidence of hepatitis B in the populations of China, India, Pakistan, Egypt, Bangladesh, and other countries where mothers gave birth to an unnaturally high number of boys. Sure enough, the regions with the most hepatitis B were the regions with the most “missing” women. Except the women weren’t really missing at all, for they had never been born.
Oster’s work stirred debate for a few years in the epidemiological literature, but eventually she admitted that the subject-matter experts had been right all along. One of Das Gupta’s many convincing counterpoints was a graph showing that in Taiwan, the ratio of boys to girls was near the natural rate for first and second babies (106:100) but not for third babies (112:100); this pattern held up with or without hepatitis B. In a follow-up blog post, Levitt applauded Oster for bravery in admitting her mistake, but he never credited Das Gupta for her superior work. Our point is not that Das Gupta had to be right and Oster wrong, but that Levitt and Dubner, in their celebration of economics and economists, suspended their critical thinking.

I think that this story actually has two elements. One is the dangers of a convincing explanation. There are a lot of associations that can appear and would be extremely exciting if they were true. Just consider the recent article on statins reducing mortality due to pneumonia: it is an amazing result that would be extremely exciting if it were true. I worry that these kinds of exciting results get a lot of press instead of being seen a signposts towards needing to examine the problem more carefully. After all, it was a good thing that Das Gupta had a chance to look at her data and control for an additional predictive variable. What is concerning is not raising the idea -- it is the strength of the language: "Except the women weren’t really missing at all, for they had never been born" which implied a lot more certainty than seemed warranted. But putting that point aside, the real interesting thing (to me) is considering likely effect sizes. When you look at the population level infection rates (incremental on the infection rates in countries without this gender imbalance) then you quickly conclude that the effect of infection has to be high. After all, the rate in India appears to be about 3% (versus less than 1% in the United States). At the same time, the sex ratio in India was 1.10 (these are approximate numbers).So if the natural sex ratio is 105 and India has 110 we can do a calculation. Assume that the Hep B rate among reproductive age women is triple the population average (say 9%). So 0.91 x 105 + 0.09 x [RATE] = 110. That suggests that the sex ratio among infected women is 160 (it gets a lot worse if you merely assume double). That means we could prove this hypothesis by following a very small cohort of Hep B infected pregnant women, since the effect size is so large. Now this is a simplistic way to look at the problem, and I am sure that more nuanced approaches make sense. But isn't this the sort of data you'd look for before suggesting that the experts completely missed the explanatory variable? After all, you are positing an enormous effect size for the influence of the virus on sex ratios. This would be observed in routine clinical practice.So, not to give anybody a hard time. We all have challenges in our research and it is really hard to tackle these types of problems. People should have credit for putting their necks out and proposing testable hypotheses that can enhance our understanding of the world. But I think we should rethink just how certain we are when we make these proposals. Maybe we need to learn to say "this is a possible explanation for some of the observed variation".

Remember, it no longer counts as plagiarism unless you use exactly the same words

2011-12-14T23:53:00.004-05:00

I had started out to write a post about the cable executive who described the rising cost of ESPN as a "tax on every American household," but when I went looking for source articles I noticed something strange. The Atlantic, the Wall Street Journal, and the rest all told the story in the same way, right down to the same omission of the role of over-the-air television (which is particularly relevant to a story about threats to cable's business model).

Don't worry, this is not another rabbit-ears story. What's significant here is that in a story about cable losing cost-conscious customers, none of the writers mentioned the tens of millions of people who were getting full digital television for free. Not only do journalists now tend to cover the stories from the same angles, they even omit the same important details.

This group-think is bad enough on its own, but when you combine it with an increasingly nonchalant attitude toward accuracy and fact-checking (here's one of many examples), the results can be dangerous.

Look at the debate over the Euro-crisis. Any number of virtually identical stories have appeared claiming that the crisis was started by the wild deficit spending of southern countries, implicitly or explicitly including Spain, despite the fact that Spain had been running a surplus before the crisis.

If journalists aren't bothering to think independently or check their facts when reporting on the Euro-crisis, what stories are important enough to justify their A-game?

K12

2011-12-14T07:00:00.003-05:00

This is not surprising:

Nearly 60 percent of its students are behind grade level in math. Nearly 50 percent trail in reading. A third do not graduate on time. And hundreds of children, from kindergartners to seniors, withdraw within months after they enroll.

By Wall Street standards, though, Agora is a remarkable success that has helped enrich K12 Inc., the publicly traded company that manages the school. And the entire enterprise is paid for by taxpayers.

Now, we've long been test score critics at OE. So I will accept the argument that test scores should not necessarily be the most important feature of a school. But if they are the motivation for shifting to private education then I'd at least like to see reasonable scores (after all, this is the reason for the existence of these options).

Nor is the fact that the schools are focusing on aggressive expansion reassuring:

Despite lower operating costs, the online companies collect nearly as much taxpayer money in some states as brick-and-mortar charter schools. In Pennsylvania, about 30,000 students are enrolled in online schools at an average cost of about $10,000 per student. The state auditor general, Jack Wagner, said that is double or more what it costs the companies to educate those children online.

“It’s extremely unfair for the taxpayer to be paying for additional expenses, such as advertising,” Mr. Wagner said. Much of the public money also goes toward lobbying state officials, an activity that Ronald J. Packard, chief executive of K12, has called a “core competency” of the company.

I think that it is concerning that a core competency of a large (and growing) private school is that it focuses on lobbying governments for money. If the main issue that we have with traditional public education is rent-seeking by teachers, how much worse is rent seeking by a corporation? After all, if teachers gain a small surplus per teacher that at least has a broad social impact. Clearly K12 has managed to avoid expensive teachers:

But online schools have negligible building costs and cheaper labor costs, partly because they pay teachers low wages, records and interviews show. Parents, called “learning coaches,” do much of the teaching, prompting critics to argue that states are essentially subsidizing home schooling.

At what point is the school simply letting the parent home school their children and accepting educational grant money for the purpose? This is a model that, I suspect, has a chance if and only if you have a stay at home parent that focuses on working with the child on education (or if sleep is an activity that you engage in only on weekends).

Now, I do not want to be a luddite. There may be a role for online education and this particular NY Times piece may not capture all of the nuances of K12 (the articles about traditional schools often has this issue as well). But this sort of business model has long been one of my major concerns about the push towards privatization of schools.

Smart comments from Matt Yglesias and Dana Goldstein are also worth reading.

Question about Airlines

2011-12-11T12:18:00.002-05:00

Mark Thoma tweets:

MarkThoma Mark Thoma
Just once, I'd like to be able to get on the plane at the scheduled time, and make all my connections. Once doesn't seem to much to ask. Grr

I cannot agree more. Why is it so difficult for modern airlines to provide basic services? Why is the city bus more likely to be on schedule than Delta Airlines?

This week's appalling story of intellectual property abuse

2011-12-10T03:08:00.004-05:00

Brought to us by Alex Tabarrok:

Prometheus gave man fire, thankfully he didn’t charge every time man lit a match. Prometheus Labs in contrast wants to charge patients for a rule that says when to increase or decrease a drug in response to a blood test. Quoting Tim Lee:
The patent does not cover the drug itself—that patent expired years ago—nor does it cover any specific machine or procedure for measuring the metabolite level. Rather, it covers the idea that particular levels of the chemical “indicate a need” to raise or lower the drug dosage.

Even this is not quite right for suppose a physician notes that the patient’s metabolites are within the range where a change in dosage is not necessary; although the physician takes no action she still has used the patent and thus must pay Prometheus Lab a fee or infringe.

Maybe the Republican primary is going just as we should expect

2011-12-09T01:20:00.002-05:00

I don't mean that in a snarky way. This is a completely non-snide post. I was just thinking about how even a quick little model with a few fairly intuitive assumptions can fit seemingly chaotic data surprisingly well. This probably won't look much like the models political scientists use (they have expertise and real data and reputations to protect). I'm just playing around.

But it can be a useful thought experiment, trying to explain all of the major data points with one fairly simple theory. Compare that to this bit of analysis from Amity Shlaes:

The answer is that this election cycle is different. Voters want someone for president who is ready to sit down and rewrite Social Security in January 2013. And move on to Medicare repair the next month. A policy technician already familiar with the difference between defined benefits and premium supports before he gets to Washington. What voters remember about Newt was that some of his work laid the ground for balancing the budget. He was leaving the speaker's job by the time that happened, but that experience was key.

This theory might explain Gingrich's recent rise but it does a poor job with Bachmann and Perry and an absolutely terrible job with Cain. It's an explanation that covers a fraction of the data. Unfortunately, it's no worse than much of the analysis we've been seeing from professional political reporters and commentators.

Surely we can do better than that.

Let's say that voters assign their support based on which candidate gets the highest score on a formula that looks something like this (assume each term has a coefficient and that those coefficients vary from voter to voter):

Score = Desirability + Electability(Desirability)

Where desirability is how much you would like to see that candidate as president and electability is roughly analogous to the candidate's perceived likelihood of making it through the primary and the general election.

Now let's make a few relatively defensible assumptions about electability:

electability is more or less a zero sum game;

it is also something like Keynes' beauty contest, an iterative process with everyone trying to figure out who everyone else is going to pick and throwing their support to the leading acceptable candidate;

desirability tends to be more stable than electability.

I almost added a third assumption that electability has momentum, but I think that follows from the iterative aspect.

What can we expect given these assumptions?

For starters, there are two candidates who should post very stable poll numbers though for very different reasons: Romney and Paul. Romney has consistently been seen as number one in general electability so GOP voters who find him acceptable will tend strongly to list him as their first choice even if they may not consider him the most desirable. While Romney's support comes mostly from the second term, Paul's comes almost entirely from the first. Virtually no one sees Paul as the most electable candidate in the field, but his supporters really, really like him.

It's with the rest, though, that the properties of the model start to do some interesting things. Since the most electable candidate is not acceptable to a large segment of the party faithful, perhaps even a majority, a great deal of support is going to go to the number two slot. If there were a clear ranking with a strong second place, this would not be a big deal, but this is a weak field with a relatively small spread in general electability. The result is a primary that's unstable and susceptible to noise.

Think about it this way: let's say the top non-Romney has a twelve percent perceived chance of getting to the White House, the second has eleven and the third has ten. Any number of trivial things can cause a three point shift which can easily cause first and third to exchange places. Suddenly the candidate who was polling at seven is breaking thirty and the pundits are scrambling to come up with an explanation that doesn't sound quite so much like guessing.

What the zero property and convergence can't explain, momentum does a pretty good job with. Take Perry. He came in at the last minute, seemingly had the election sewn up then dropped like a stone. Conventional wisdom usually ascribes this to bad debate performances and an unpopular stand on immigration but primary voters are traditionally pretty forgiving toward bad debates (remember Bush's Dean Acheson moment?) and most of the people who strongly disagreed with Perry's immigration stand already knew about it.

How about this for another explanation? Like most late entries, Perry was a Rorschach candidate and like most late entries, as the blanks were filled in Perry's standing dropped. The result was a downward momentum which Perry accelerated with a series of small but badly timed missteps. Viewed in this context, the immigration statement takes on an entirely different significance. It didn't have to lower Perry's desirability in order to hurt him in the polls; instead, it could have hurt his perceived electability by reminding people who weren't following immigration that closely that Perry had taken positions that other Republicans would object to.

Of course, showing how a model might possibly explain something doesn't prove anything, but it can make for an interesting thought experiment and it does, I hope, at least make a few points, like:

1. Sometimes a simple model can account for some complex and chaotic behavior;

2. Model structure matters. D + ED gives completely different results than D + E;

3. Things like momentum, zero sum constraints, convergence, and shifting to and from ordinal data can have some surprising implications, particularly when;

4. Your data hits some new extreme.

[For a look at what a real analysis of what's driving the poll numbers, you know where to go.]

Model assumptions

2011-12-08T11:22:00.003-05:00

Felix Salmon and Matt Yglesias:

The entire debate in congress over taxes is that President Obama wants to restore the top marginal rate to the level that Dimon thinks it already is. Meanwhile, Dimon doesn’t even know what tax rate he pays.

I think that this quote is really, really important. Classical economic models presume that individuals act to maximize their utility. But real people often have limitations, including lack of perfect information about what costs really are. I would be surprised if Mark did not have follow-up thoughts.

But the key point is that if these assumptions about informed persons can't hold for the CEO of JP Morgan Chase (whom you would assume is numerate) then how likely is that these models are going to be good at prediction? After all, we presume Jamie Dimon is maximizing his utility for a 39.6% marginal tax rate; so a change in taxes to what he currently thinks that they already are would alter his incentives how?

Quote of the day

2011-12-07T22:41:00.002-05:00

However, one view of pure research is that it is research that has not yet found application; pure research is a long-term investment just as applied research is a short-term investment.

M.F. Goodchild
"Geographical Information Science"

Defined Contribution Health Insurance

2011-12-07T11:38:00.004-05:00

Via Austin Frakt, there is an interesting piece on defined contribution health insurance. It is an interesting idea and likely not a bad policy direction. I know I would contribute more to my health saving account if the balance could roll over. But, as things are currently set up, it is impossible to plan against a major medical event.

I think that it might be useful to consider this model with some tweaks. Essential to making it work is to include catastrophic event coverage (major medical insurance). Patients will not go out of their way to have heart attacks, stroke, and major cancers just to take advantage of their health care insurance. These events are what really create the "risk" (and thus insurance) part of health care.

Otherwise, it is actually plausible for people to budget for health care expenses and tax sheltered accounts might be a great transition move.

Eating Eric Roberts

2011-12-06T23:51:00.002-05:00

I've spent half my life in small town and rural America, so I have a pretty good feel for just how big a role the postal service plays in many people's lives. And it's not just in the country. There are millions of others who depend on the mail, housebound seniors, the unbanked, people left behind by the internet age. (To say nothing of the businesses that rely on the service and the benefit we all get as a society from being able to get documents and packages to anyone in this country.)

I don't see a lot of concern about these people, not from the pundits and certainly not from Patrick Donahoe, the U.S. Postmaster General, who seems to view himself as a consultant brought in to smoothly dismantle the institution rather than a leader appointed to represent its interests.

And (because my mind works in strange ways) that got me thinking about the South Park episode where members of the town are trapped by a storm and decide to eat visiting celebrity Eric Roberts. What makes the bit so inspired is how quickly and casually the townspeople descend to the last resort, arguing that they could be there for hours and that some of them had skipped breakfast.

I see similar reasoning in this debate. We have jumped to the extreme measures (having mass layoffs, slowing down first class mail, closing small town post offices) when there are simpler, far less painful steps that can usually be achieved just by loosening some of the highly restrictive rules that hobble the USPS:

Allow pricing a little closer to what the market would bear. Even after a twenty percent jump, postal rates would still be a good deal;

(From Andrew Gelman) Round prices up to the nearest round number (would anyone really mind paying forty-five or even fifty cents instead of the current forty-four?);

(From Felix Salmon) Allow the post office to offer a wider range of products and services;

End Saturday delivery (not my favorite, but less drastic than much of what's been suggested);

And finally, remind congress that since they passed all these rules effectively preventing the service from turning a profit and storing money away in good times they should take responsibility when times turn bad.

I realize that at some point drastic steps may be necessary, but I don't see why they always have to be our default option.

Your tuition dollars at work

2011-12-06T03:01:00.001-05:00

Remember, when we underwrite student loans for private schools, we subsidize this:

SIEGEL: So, who would be the highest paying university president who remained in place?

STRIPLING: That would be Nicholas Zeppos, who's the president of Vanderbilt University. He collected just under $1.9 million for the 2009 calendar year.

SIEGEL: And there's another measure used, you say, which is this year you also compared university presidents' pay to the pay of professors on their campuses. What did you find?

STRIPLING: Well, we found that, by and large, most presidents make about three and a half times that of full professors on their campus. At the same time, we found six institutions where presidents made more than 10 times that of professors on their campus. The biggest disparity was at Stevenson University in Maryland, where Kevin Manning made 16 times that of professors on this campus.

A big part of that was a deferred compensation payout that he received in 2009. But, at the same time, even if you looked at him in the year prior, he still made seven times that of professors on his campus, which was considerably greater than the median.

Agendas

2011-12-05T15:22:00.004-05:00

I think that this is correct:

Less honest single-payer advocates ignore the issue entirely. More honest and thoughtful single-payer advocates sometimes address it by talking about central planning, global budgets, and transition away from any fee-for-service care. They also talk about moving to an all-non-profit-facility delivery system. And if you think single-payer is unpopular now, wait until people start hearing about those things.

I get why many on the right are uncomfortable with this. There are days I am, too. But I’ll concede one point: if Medicare is so awesome for people age 65 and up, why is it socialism for someone who’s 64?

I, of course, like the plan of going for central planning, global budgets with competitions between treatments based on QALY's, reducing or eliminating fee for service, and see all non-profits in medicine as a great idea. It would do wonders for efficiency and make medical care widely available. It would also do very bad things to people currently invested in health care.

Trying to find a way to compromise on this front is a hard issue. Unlike Dr. Carroll, I think a discussion of end state is important even if it is not a politically feasible option (as it is good to have the end state out and in the public debate). We could lose the debate, but better to lose a debate (this is a democracy and not all policy ideas are going to be implemented) than to try (or appear to try) to sneak an long term agenda in under the radar.

That way there can be an evidence based debate on the issues. So I think that this is a good focus point for those of us thinking single payer -- we need to really lay our cards on the table and explain the totality of why we think that it would be an objective improvement. That way we present a hypothesis against which evidence can be applied and political will gauged.

Cascading failure

2011-12-05T01:59:00.005-05:00

"A cascading failure is a failure in a system of interconnected parts in which the failure of a part can trigger the failure of successive parts."

Wikipedia

Here's Paul Krugman again railing against the cult of balance:

All indications are, however, that Campaign 2012 will make Campaign 2000 look like a model of truthfulness. And all indications are that the press won’t know what to do — or, worse, that they will know what to do, which is act as stenographers and refuse to tell readers and listeners when candidates lie. Because to do otherwise when the parties aren’t equally at fault — and they won’t be — would be “biased”.
This will be true even of those news organizations specifically charged with fact-checking. Yes, they’ll call out some lies — but they’ll also claim that some perfectly reasonable statements are lies, in order to keep their precious balance. This is already happening: as Igor Volsky points out, one of the finalists for Politifact’s Lie of the Year is a Democratic claim — that Republicans want to abolish Medicare — that happens to be entirely true.

While Bruce Bartlett discusses how reliable sources of information have been dismantled because they've been politically inconvenient:

In addition to decimating committee budgets, he also abolished two really useful Congressional agencies, the Office of Technology Assessment and the Advisory Commission on Intergovernmental Relations. The former brought high-level scientific expertise to bear on legislative issues and the latter gave state and local governments an important voice in Congressional deliberations.
The amount of money involved was trivial even in terms of Congress’s budget. Mr. Gingrich’s real purpose was to centralize power in the speaker’s office, which was staffed with young right-wing zealots who followed his orders without question. Lacking the staff resources to challenge Mr. Gingrich, the committees could offer no resistance and his agenda was simply rubber-stamped.

Unfortunately, Gingrichism lives on. Republican Congressional leaders continually criticize every Congressional agency that stands in their way. In addition to the C.B.O., one often hears attacks on the Congressional Research Service, the Joint Committee on Taxation and the Government Accountability Office.

Lately, the G.A.O. has been the prime target. Appropriators are cutting its budget by $42 million, forcing furloughs and cutbacks in investigations that identify billions of dollars in savings yearly. So misguided is this effort that Senator Tom Coburn, Republican of Oklahoma and one of the most conservative members of Congress, came to the agency’s defense.

And Andrew Gelman (and countless others) have pointed out numerous cases that suggest there is no real consequence when a journalist doesn't bother to get even the most basic and easily-checked facts right.

I don't want to push this analogy too far -- there are some important dissimilarities -- but all sorts of failures have grown more common in what you might call our feedback system, the channels we use to get the information we, as a democracy, need to make informed collective decisions. Worse yet, these failures have the potential to trigger and intensify each other, leading to catastrophic results.

1. Reliable information sources like the CBO are undermined;

2. An increasing amount of our information comes from unreliable subsidized sources like Heritage;

3. Journalists suffer no penalty for publishing inaccurate information;

4. Journalists also fashion for themselves an incredibly self-serving ethical rule that lets them, in the name of balance, avoid the consequences that would have to be faced if they honestly assigned responsibility for screw-ups;

5. A growing tendency to converge on a narrative makes the media easier to manipulate.

All these things are serious. All are getting worse. And if we don't do something about them, I think we're all pretty much screwed.

p.s. I added a link to number 4

What fictional character has been worst served by his or her movie adaptation?

2011-12-04T14:34:00.002-05:00

Here's my nominee.

Student Loans: a continuing series

2011-12-04T11:54:00.006-05:00

This is a really depressing story about how devastating referrals are in modern student loans:

Notice anything?

Original balance: $37,099.00

Current balance: $35, 908. 41

I’ve been in repayment since 2006. I had to do one deferral – as to not default. I signed up for a program to minimize my payments that, I was told, was beneficial to someone who is going through financial difficulties – yet I regularly made payments over the minimum payment.

Because Sallie Mae helpfully provides a payment history, I was able to whip out a calculator and count up the exact amount I have paid over these last few years.

That amount is $23, 449.65

The penalties are pretty spectacular for needing to defer the loans. After 5 years of repayment, Ms. Antonova paid 50% of the starting balance of the loans. Presuming that she is being honest, the effective interest rate on this loan beats that of unsecured debt. Is this really a sustainable pattern? Do the "no bankruptcy provisions" not reduce the risk of the debt and suggest more moderate effective interest rates.

If we consider this in light of the "risk-free" borrowing rate (TIPS are now 0.2%) then an inflation adjusted loan at such rates should be 50% gone already. Why are rates not reflecting the new reality of how hard it is to be forgiven your student loans?

Also germane to Mark's recent post, there is an ant/grasshopper dichotomy here as well:

We have a myth of the “deserving poor” in our culture – it’s similar to the myth of the “good rape victim.” But like most people living real lives, I have my financial ups and downs. I’ve all sorts of things these last few years: walking people’s dogs for grocery money, sitting in a cafe in Chelsea, drinking a glass of moderately priced champagne and asking the readers of this blog for Paypal donations.

As a writer and journalist, I supplement my income with freelance writing gigs, much like my director husband supplements his with acting gigs. All of that together makes up our family budget. When the gigs dry up, so does the money going towards my loans. We’ve been chasing more work, but as the economy continues to suffer, and the cost of living goes up while jobs evaporate, people like us end up competing for jobs that barely exist.

Now it is true that some people manage to graduate with degrees and without debts. In many cases, they have families who made huge sacrifices in order to make this happen -- they feel like they avoided a debt trap through virtue. But the plain truth is that a lot of young Americans can pick between college (and bankruptcy proof, high interest debt) or questions about "why didn't you go to college"?

If we walked back and asked if education is a public good, that would be a good step. I don't want to spur a false dichotomy, but we have the highest rate of incarceration in the world in the United States. That isn't free, either. Are we sure that we have our priorities correct?

h/t: Erik Loomis

I happen to like handles on my coffee cups

2011-12-02T23:56:00.005-05:00

Other than that, though, I pretty much agreed with everything Thomas Hayden had to say in this interview about 'crap technology,' devices with "no cachet but all the functionality you'll need."

And yes, I listened to the interview on a Coby media player. It's more than a year old, cost me twenty-four bucks and I also watch videos on it when I'm at the gym.

More "moral" economics via Chait

2011-12-02T23:41:00.009-05:00

While we're on the subject...

One of the really insidious things about the ant-and-the-grasshopper view of the European crisis is the way that the conflicting facts have been revised and the revisions have gone directly into the conventional wisdom. Jonathan Chait has a recent example:

David Brooks today devotes his column on Europe to the familiar conservative morality tale, in which the European countries in trouble are paying the price for their slothful, profligate ways:

Over the past few decades, several European nations, like Germany and the Netherlands, have played by the rules and practiced good governance. They have lived within their means, undertaken painful reforms, enhanced their competitiveness and reinforced good values. Now they are being brutally browbeaten for not wanting to bail out nations like Greece, Italy and Spain, which did not do these things, which instead borrowed huge amounts of money that they are choosing not to repay.

Does anybody else on the Times op-ed page care to rebut this? Perhaps somebody who has glanced at the relevant data? Yes, you there, the bearded man with the Nobel Prize in economics:

How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. Turn on your TV and you’re very likely to find some pundit declaring that if America doesn’t slash spending we’ll end up like Greece. Greeeeeece!

But the truth is nearly the opposite. …

Only Greece ran large budget deficits during the good years; Spain actually had a surplus on the eve of the crisis.

On his blog, Krugman also has a chart showing that Italy and Spain both had shrinking debts as a percentage of GDP in the dozen years before the crisis.

Perhaps the most remarkable thing about this is the fact that Krugman and numerous other economists have been trying to correct these mistakes for a long time, often in prominent forums, and yet even normally reliable sources like Marketplace nonchalantly refer to the profligacy of Spain and Ireland alnog with that of Greece as established facts.

It's funny. In a debate that focuses so much on virtue and personal responsibility, so little attention is given to dishonest arguments and professional negligence.

Economics and Morality

2011-12-02T12:38:00.003-05:00

I have noticed a rather poisonous idea that is starting to get noticed -- the link between moral virtue and economic success. Consider these two points below.

Matt Yglesias:

To be clear, I don't think we're looking at hypocrisy exactly. Instead it goes back to the preference for morality tales. Whoever is up at the moment must be up because of their greater moral virtues. I seem to have somehow missed the conservative articles lauding Germany and the Netherlands from back four or five years ago. Instead at the time I was reading lots of stories about the triumph of the Celtic Tiger, the genius of the flat tax in the Baltic states, articles praising Silvio Berlusconi and so forth. Certainly at no point during the Bush administration was there a lot of talk in the right-wing press about the evils of household debt, the overwhelming merits of current account surpluses, or any of the rest of it.

Andrew Gelman:\

Nothing here about “hardworking” or “virtuous.” In a meritocracy, you can be as hardworking as John Kruk or as virtuous as Kobe Bryant and you’ll still get ahead—if you have the talent and achievement. Throwing in “hardworking” and “virtuous” seems to me to an attempt (unconscious, I expect) to retroactively assign moral standing to the winners in an economic race.

The reason that I consider this to be a poisonous idea is that distracts us from the actual moral actions of the people involved. I'd consider the "all bosses are bad" to be an equally poisonous notion. Painting a social class with either virtue or vice is likely to distort thinking and policy in bad ways.

Economic success is good; we all like living in a world where utility is maximized. But I'd thought the linking of material success to moral virtue (consider the finale of the story of Job) had gone out of style. Instead we live in a world where people with significant moral failing (think Steve Jobs) can still contribute to economic success.

Linking these two concepts interferes with assisting the economic losers as it tends to attach the stigma of blame. This is not to say that hard work may not correlate with economic success but that it is important to remember that hard work does not necessarily lead to economic success.

Just ask a medieval serf!

"So crazy it just might work"

2011-12-02T01:39:00.002-05:00

Another strong effort from This American Life with all the superlatives that normally apply, but this one is of special interest to the kind of people who would read a blog called Observational Epidemiology. It describes an unlikely collaboration between a cancer researcher and a layman who claimed to have more or less invented a cure for cancer in his garage. The story lays out in painful detail how differently a scientist and a non-scientist see problems, even when they seem to be in agreement.

You can listen for free but I'd strongly recommend sending them a few bucks in appreciation.

Act One, Mr. Holland's Opus. OK, true story. A guy goes to college on a music scholarship. And then afterwards, he ends up going into science. And he becomes a cancer researcher. His name is Jon Brody. And 19 years after graduating, Jon is invited back to his old college to give a talk about his work. And the speech he gives is mainly about how important it's been in his research to think outside the box, to use an overused phrase. To think outside the box, to be ready to turn away from what's familiar and try some new idea.

And then after his speech, Jon is approached by his old orchestra teacher, a guy named Anthony Holland. And Professor Holland, to Jon's great surprise, says, "Speaking of thinking outside the box, I've actually been working on an experiment for a few years that I'd like to show you. Come look at this video. I think you'll find it very interesting." So what could Jon do? He'd just actually given a whole talk about keeping an open mind.

What resulted from this was the kind of scientific collaboration that almost never, ever happens-- a serious cancer researcher teaming up with an amateur to try to make a breakthrough. Gabriel Rhodes is a documentary filmmaker. And he's been following the story from the beginning, back when Jon watched that video.

Intellectual Property

2011-12-01T10:45:00.002-05:00

Apple appears to be suing as part of its business plan:

Apple makes great products, but you wouldn’t know it from the way it’s attacking Samsung. Rather than let the marketplace decide whose products are better, Apple wants the courts to decide. Specifically, Apple is slugging it out with Samsung in a minimum of 19 lawsuits in 12 courts in nine countries on four continents.

Let that sink in for a minute. Apple is trying to use intellectual property law as a bludgeon around the world to protect its sales.

I think that we need to think carefully about what these laws exist to do and to promote. Apple is a profitable and successful company even with competitors. It might well be less profitable and successful if competitors could not enter into it's space. Imagine if the basic functionality of the telephone (talking remotely to people) was under patent. What would be the incentive for innovation?

Intellectual property is a very slippery idea; the gap between compensating for innovation and creating rent-seeking behavior seems razor thin.

Emotionally an eight-year old

2011-11-30T01:22:00.003-05:00

An enormously revealing (bordering on the delusional) response from Washington Post reporter Paul Kane. The questioner said that there was " no factual basis" for a claim that Kane and his colleagues made. This charge was part of a larger widely-circulated accusation that Kane and co. have repeatedly distorted their coverage to maintain a comfortable narrative and avoid the blowback that inevitably follows when you hold powerful people responsible for their actions.

Kane is familiar with these accusations (he's the one who brings up the subject) and it's clearly a sore point, because when he hears the question he angrily... Well, I'm not sure what the hell he does but he certainly does it angrily.

Q. (IM)MORAL EQUIVALENCE

Paul, I'm guessing you won't be sympathetic to the following point, but I'll put it out there anyway. Most reporting on the supercommittee--like most reporting on the deficit--reflects an acceptance of a basic fallacy. Whenever there is an impasse, there seems to be a desire to blame both sides equally, on the theory that if only Democrats would concede more, Republicans would reciprocate (all evidence to the contrary notwithstanding). Yes, Democrats have drawn lines in the sand, but as Greg Sargent and other commentators have documented, when you compare the specifics, there is no factual basis for blaming both parties equally. So my question is, why does the Post's coverage do so anyway, either explicitly or implicitly?
– November 21, 2011 11:48 AM

A. PAUL KANE:

Yeah, you're right. I think this point is just absurd and ridiculous. This is a big thing among folks calling it "moral equivalence" (Fallows, Ornstein) and others calling it the "cult of balance" (Krugman).

It's just stupid. If you want someone to tell you that Republicans stink, read opinion pages. Read blogs. Also, the underlying sentiment on the left is that this is the real reason why things went wrong in 2010: That the mainstream media is to blame. Sorry, I think that's the sorta head-in-sand outlook that leads to longer term problems for a movement.

Greg is a fine writer. He's an opinion writer, in the opinion section of the web site. I encourage you to keep reading him. And I encourage you to keep reading the news coverage, which should always strive to present both sides of the story. If you really don't want to hear anything about the other side of the story, I really do encourage you to stop reading the news section.

You'll notice he never says "I never implied that both sides were equally to blame." or "Both sides are equally to blame." Instead he calls the complaints 'stupid' and says that if people don't like his rules they can just go home.

Kane's stunted emotional development might be amusing if not for the bigger story. I'll try to come back later and flesh the following out but here is the need-to-get-to-bed version.

Our ability to have a productive public discourse has been eaten away by this and other problems including:

a decline in standards of accuracy;

undermining of authoritative sources like the CBO;

subsidized debate by partisan foundations;

an increased use of press releases as news and a tendency of journalists to simply print what they're told;

coziness with subjects;

more and more groupthink.

As someone who likes the idea of a democracy, these things scare the hell out of me.

Lots of good stuff

2011-11-29T22:34:00.002-05:00

From NPR:

Priya sits between two operating tables. When she finishes one patient, usually in less than 10 minutes, she turns to the next table, where the patient is draped and ready. This way, there is no time wasted between surgeries. Priya says she performs 30 to 40 surgeries a day.

And Marketplace:

But what if I told you that there's a way to cut the deficit by as much as $7 trillion over the next 10 years? That's way more than the $1.2 trillion the super committee was supposed to cut. And the best part? Congress wouldn't have to do much at all. Anything, really.

And Richard Thaler via Salmon:

Having decided that charitable giving is a worthy cause, the government subsidizes charitable gifts from certain households, and for those chosen to be part of the plan, every dollar donated to a charity is increased by a specified percentage. To qualify, taxpayers must have a substantial home mortgage; the subsidy rate increases with taxable income. Low-income taxpayers receive no subsidy, but donations from qualified high-income taxpayers are subsidized by as much as 40 percent — or more…

And Harvard via TPM:

I hate John D. Cook

2011-11-28T23:23:00.002-05:00

As God as my witness, I swear I was getting ready to do a post looking at argument from authority in terms of informative priors.

Apple Stock

2011-11-28T21:07:00.003-05:00

Karl Smith is bearish on Apple:

On the one hand you can buy Apple stock for $375 a share and pay $7 to ScottTrade. On the other hand I also have a trash can in which you can deposit your $375, pay me $5 and I will set it on fire for you.

Clearly, I am offering the better deal as in both cases you have approximately zero probability of getting your money back and I am willing to burn it for $5 whereas you have to pay ScottTrade $7.

This is really one of the paradoxes of the stock market. It is not clear whether or not companies that do not issue dividends will ever be investments that pay off. The longer Apple puts its cash in executive compensation without rewarding owners, the higher the risk that Karl Smith is right.

How many rich families do you know that sustained multi-generational wealth via the stock market? How many do it with real assets? It is worth thinking about.

Another statistics/auteur theory post -- causality

2011-11-28T00:39:00.003-05:00

[the second in a very infrequent series]

From the LA Times:

Cinema trends ebb and flow, but one facet of Hollywood moviemaking proving remarkably consistent is gender inequality, according to a study being released Monday by USC's Annenberg School for Communication & Journalism.

In a survey of the top 100-grossing movies of 2009 — including "Transformers: Revenge of the Fallen," "Harry Potter and the Half-Blood Prince" and "The Twilight Saga: New Moon" — researchers found that 32.8% of the 4,342 speaking characters were female and 67.2% were male, a percentage identical to that of the top-grossing movies of 2008.

"We see remarkably stable trends," said USC Annenberg associate professor Stacy L. Smith. "This reveals an industry formula for gender that may be outside of people's conscious awareness."

...

Researchers found that the sex of the storytellers had a significant effect on what appeared on-screen. In movies directed by women, 47.7% of the characters were female; in movies directed by men, fewer than a third of the characters were female. When one or more of the screenwriters was female, 40% of characters were female; when all the screenwriters were male, 29.8% of the characters were female.

The article doesn't quite come out and say it explicitly but I think it's fair to read this as claiming that there's a causal relationship between director's gender and the number of female characters, and that's really not feasible.

Gender of characters with speaking roles (which seem to be the ones we're talking about) are specified in the screenplay and, despite a widely held opinion to the contrary, directors don't write screenplays. This leaves us with two possibilities: writer/directors are confounding the data or the causal relationship runs the other way -- a screenplay with more female characters is more likely to be directed by a woman (perhaps because female directors are seen as less capable of handling male-heavy action films).

This question of causal direction has interesting implications for other auteurist analyses. How many of the common themes we see in a director's work are the result of the artist's personal vision and how many are the result of a certain director being assigned a certain type of picture (director as subgenre)?

Take Dial M for Murder. Thematically, it certainly feel like Hitchcock, but it was a successful stage play before it was a movie and pretty much all of the themes were in place before anyone even considered a motion picture version. In this one case isn't it reasonable to suggest that the themes caused the studio executives to pick Hitchcock rather than Hitchcock being responsible for these themes?

Sad news

2011-11-27T12:48:00.002-05:00

I think that the statement speaks for itself:

My wife, Kimberly Webb Joyner, died this morning in her sleep from unknown causes. She was 41.
She leaves behind two little girls she loved more than anything, Katie, who turns 3 on New Year’s Eve, and Ellie, who was born June 21.

I have always respected Dr. Joyner (even if I often disagreed with him) and I am deeply sorrowed to hear of this tragedy. Best wishes to him and his family from the OE team.

Contradictions

2011-11-27T12:02:00.004-05:00

Karl Smith is striking me as an optimist:

In any case, during the GOP Google debate there was a poll that asked GOP voters if someone should be denied medical treatment because they could not afford it. 80% said no. This is the end of the major question in my mind. If you answer no then you have de facto signed on to socialized medicine through some means.

After all, he is demanding consistency here. I am not sure that humans are especially good at consistency. People often get quite annoyed at me when I drive the speed limit. I have the attitude that if we all want to drive faster on the road I am game, but I am unwilling to get a speeding ticket because local government cannot reach consensus on an appropriate speed limit.

In the same vein, I suspect that there can be a lot of daylight between the principle here and the application. That being said, I'd be delighted if we did adopt a more socialized medical system, purely for reasons of economic efficiency.

Living with Mistakes the easy way -- larger points

2011-11-27T02:07:00.002-05:00

Andrew Gelman fact-checks the New York Times:

For example, David Brooks wrote the following, in a column called “Living with Mistakes”:
The historian Leslie Hannah identified the ten largest American companies in 1912. None of those companies ranked in the top 100 companies by 1990.
Huh? Could that really be? I googled “ten largest american companies 1912″ and found this, from Leslie Hannah:
No big deal: two still in the top 10 rather than zero in the top 100, but Brooks’s general point still holds. As Brooks said, we have to live with mistakes. This is more a comment on how a statistician such as myself will see a number and immediately feel the urge to check it.
...
Again, this is no criticism of Brooks—as a journalist, he’s of course more interested in good stories than in getting the details right (recall the notorious $20 dinner at Red Lobster). That’s ok. Storytelling is his job, numbers are mine.

I appreciate Gelman's sharp eye and I can understand why, being a nice guy, he tends to favor catch-and-release criticism, but I disagree sharply with his conclusions here.

For starters, creative destruction a big part of the story Brooks is telling, both in this column and in his body of work collectively. In this narrative, it's a tough process, but a healthy and fundamentally fair one. Here's the sentence that precedes Gelman's excerpt from Brooks: "Even if you make it to the top, it is very hard to stay there."

We can argue about the validity of this view, but there's no question that Brooks' incorrect statement supported this point while the corrected version undercuts it. There are millions of businesses and if success is truly determined solely by who has the best business model, the best execution and the best timing, a long run in the Fortune 500 (with shifts in markets and changes in management) would be a hell of a feat. The number we actually see would certainly imply something more at work (regulatory capture, anti-competitive practices, etc.).

So yes, I would call this a big deal with respect to the story Brooks is telling.

Perhaps more importantly, I have a problem with the distinction drawn here between statisticians and the rest of the world. It's true that the ability to sniff out suspect numbers and questionable findings is an essential part of being a good statistician, but it's also part being a good journalist (and a good engineer and a good accountant and any number of other professions).

As statisticians we need strong mathematical intuition and a heightened sense of how numbers relate to each other, but we don't have any claim to the urge to check the unlikely. David Brooks was simply being a bad journalist when he wrote that passage. It was not because of inability -- Brooks is smart and highly capable -- but because he didn't care enough to get it right. He know there would be no real consequences either for him or his paper if he got it wrong.

And a lack of consequences, my friends, makes living with your mistakes amazingly easy.

"[T]he numbers show that wage inflation is — literally — the least of the problems when it comes to university cost inflation"

2011-11-26T16:45:00.001-05:00

The quote comes from Felix Salmon and it's part of an excellent discussion (nicely summarized at Rortybomb). If you're interested in either education or the economy (where student debt is becoming a major factor), you should read all of the posts, but if I had to pick one point it would be this unbelievable projection cited by Malcolm Harris:

And while the proportion of tenure-track teaching faculty has dwindled, the number of managers has skyrocketed in both relative and absolute terms. If current trends continue, the Department of Education estimates that by 2014 there will be more administrators than instructors at American four-year nonprofit colleges.

Also posted at Education and Statistics.

Probably the damnedest thing you'll see this weekend

2011-11-26T03:21:00.002-05:00

And you think you have trouble getting out there for your morning jog...

Peak Life Expectancy

2011-11-25T13:50:00.002-05:00

I am often skeptical of these claims that we will see the next generation have a shorter life expectancy as these claims require models. These models may be incorrect for a variety of reasons: misspecification, noise, shifting patterns of disease, unexpected technological improvements, and so forth.

But what was fascinating was the map in the article. The places in the United States where life expectancy is dropping are focused mainly in the Southeast. Now that distribution is, itself, interesting as the southeast has long had health issues: think of the classic stroke belt. Furthermore, it is an area of high inequality that has a climate that is very compatible with a sedentary lifestyle.

Contrast this with the California coast (and especially Los Angeles) where life expectancies are actually rising, or even New York city. Could it be that an urban lifestyle is actually life enhancing (both in terms of quantity and quality)?

So perhaps, instead, what we have is an ecological experiment to really try and understand these phenomena.

Glycemic control and diabetes: today's evidence

2011-11-25T11:46:00.004-05:00

This paper has the potential to be pretty important:

Intensive glycaemic control for patients with type 2 diabetes: systematic review with meta-analysis and trial sequential analysis of randomised clinical trials

The article is free online but let me quote from the conclusion:

Intensive glycaemic control does not seem to reduce all cause mortality in patients with type 2 diabetes. Data available from randomised clinical trials remain insufficient to prove or refute a relative risk reduction for cardiovascular mortality, non-fatal myocardial infarction, composite microvascular complications, or retinopathy at a magnitude of 10%. Intensive glycaemic control increases the relative risk of severe hypoglycaemia by 30%.

This is actually quite important. It is very difficult for patients to maintain low levels of blood glucose, with consequences in both quality of life and adverse events. Tight glycemic control, for example is the reason that some policy makers have concerns about diabetics driving (due to worries about hypoglycemic attacks).

Given the difficulty of getting diabetics to adhere to tight glycemic control (and concerns about issues like driving), perhaps we should be more cautious in pushing tight control? More interestingly, we should ask why this association seems non-linear, as it is obvious that objectively poor glycemic control is very cardiotoxic.

But this was a very interesting paper for highlighting what we do and not not know.

Things that make you wince science writing edition

2011-11-22T22:05:00.004-05:00

I heard a brief discussion of Milgram's six degrees by KCRW's Sara Terry and NYT's Somini Sengupta. It wasn't pretty, but it did get me thinking about science stories that are consistently misreported. Two immediately jumped to mind:

Milgram's Small World

The Butterfly Effect

Now that we've got things started, I'm opening the floor to nominations. What science stories can you count on to make you wince?

Tax Levels

2011-11-22T20:00:00.002-05:00

From Don Talyor:

If we adopted 21% of GDP as a future target for balancing the budget, we would be saying government spending will be less while the baby boomers are eligible for Medicare and Social Security than it commonly was when they were paying taxes to support these same programs. This will be very hard. Plans seeking balance at lower levels seem implausible.

I think that this is worth keeping in mind. A 21% of GDP budget target would already be a painful and difficult process to achieve with the headwinds we have already due to population aging. Lower levels require a really novel idea about how to reverse these headwinds.

But the options that might really shift the balance (immigration) seem to be out of favor right now.

Toys for Tots -- reprinted, slightly revised

2011-11-20T20:31:00.002-05:00

A good Christmas can do a lot to take the edge off of a bad year both for children and their parents (and a lot of families are having a bad year). It's not too late to pick up a few toys, drop them by the fire station and make some people feel good about themselves during what can be one of the toughest times of the year.

If you're new to the Toys-for-Tots concept, here are the rules I normally use when shopping:

The gifts should be nice enough to sit alone under a tree. The child who gets nothing else should still feel that he or she had a special Christmas. A large stuffed animal, a big metal truck, a large can of Legos with enough pieces to keep up with an active imagination. You can get any of these for around twenty or twenty-five bucks at Target;

Shop smart. The better the deals the more toys can go in your cart;

No batteries. (I'm a strong believer in kid power);*

Speaking of kid power, it's impossible to be sedentary while playing with a basketball;

No toys that need lots of accessories;

For games, you're generally better off going with a classic;

No movie or TV show tie-ins. (This one's kind of a personal quirk and I will make some exceptions like Sesame Street);

Look for something durable. These will have to last;

For smaller children, you really can't beat Fisher Price and PlaySkool. Both companies have mastered the art of coming up with cleverly designed toys that children love and that will stand up to generations of energetic and creative play.

* I'd like to soften this position just bit. It's okay for a toy to use batteries, just not to need them. Fisher Price and PlaySkool have both gotten into the habit of adding lights and sounds to classic toys, but when the batteries die, the toys live on, still powered by the energy of children at play.

The most disgusting image I could come up with in the education reform debate

2011-11-20T15:28:00.001-05:00

You can read my thoughts on dismembered puppy math over at Education and Statistics.

Statements that I violently disagree with

2011-11-20T10:43:00.002-05:00

From Tyler Cowen via Scott Sumner:

Congratulations to Matt Yglesias on his new gig. He’s arguably the best progressive economist in the blogosphere, which isn’t bad given that he’s not an economist. I said “arguably” because Krugman’s a more talented macroeconomist. But Yglesias can address a much wider variety of policy issues in a very persuasive fashion. So he’s certainly in the top 5. His blog is the best argument for progressive policy that I’ve ever read. (But not quite persuasive enough to convince me.)

Now do not get me wrong: I post a lot about Matt Yglesias because I think that he is a fine thinker and has some really nice points to make. But there is now way he is competitive to be the top progressive economist in the blogosphere. I can't claim to be an expert but, off the top of my head, I have have:

Noah Smith
Paul Krugman
Bradford Delong
Mark Thoma

Plus the Worthwhile Canadian Initiative folks occasionally drift into progressive territory and are always worth reading. And this is just off the top of my head and including blogs I read regularly. Again: the provocative policy thinker with good ideas and a solid grasp of economists label definitely applies to Yglesias. But I find him a very odd choice for #1 given the alternatives. If anything, I find him awfully centrist on economic matters, at times (which, I suppose, could explain the appeal).

Evaluating evidence

2011-11-19T09:13:00.003-05:00

I want to steal a quote from Paul Krugman to illustrate a point:

And in the end, Ryan’s answer is that we need strong economic growth, the kind that we get by cutting taxes on the rich. Because that’s why the Clinton years were an economic disaster and the Bush years so prosperous.

Is this strong evidence?

First of all, we need to consider a number of causal hypotheses:

1) Tax rates on the rich are unrelated to economic growth
2) Higher tax rates on the rich increase economic growth
3) Economic growth makes it easier to tax the rich
4) Higher tax rates on the rich decrease economic growth

Then we need to consider lags between tax policy and changes in economic growth. I am suspicious of anyone who says that this is an easy problem. After all, what we really want (the counterfactual of what would happen if Bush/Clinton not changed tax policy) is completely unavailable.

So what value is this evidence?

It does rule out one very clear talking point in the debate. It suggests that moderate changes in tax policy (Bush Tax cuts) do not have a stronger effect on economic growth than the economic fundamentals do. We may even take this as weak evidence of hypothesis #4 above (with all of the caveats about not being able to make a strong inference).

So the ideas that tax cuts [focused on high income earners] are a good response to short term problems with weak economic growth seems to be contrary to the best evidence available. Nor does looking at period like the 1950' (with very high marginal rates and rapid growth) seem to provide a lot of support for Hypothesis #2.

But if it is case that Hypothesis #2 is true, we know that it is unlikely to overcome other economic issues (or it would have made the Bush years a time of prosperity). Or, in other words, that the overall effect size of this tax policy change is small relative to other factors (if it works in the direction predicted by Hypothesis #2). Now one can reframe this as a moral question, and some do.

But it is worth considering that, in the absence of controlled experiments, how do we update our expectations when a strategy that sounds reasonable doesn't seem to give expected results.

Why aren't you reading the incidental economist?

2011-11-18T13:57:00.003-05:00

Because if you care about health care, they are one of the most informative blogs around for those of us in the medical research community.

Consider this statistic:

By 2010, more than 60% of people lived in areas where insurance premiums cost at least 20% of their income. And that’s just premiums; it doesn’t include deductibles, it doesn’t include co-pays, and it doesn’t include co-insurance.

This is likely unsustainable. The growth rate of insurance is far above that of wages, meaning that health care costs are going to consume a higher and higher percent of people’s incomes in the future. Moreover, this is a problem of the non-elderly. Because of Medicare, few elderly have premiums which consume this level of income.

This statistic very nicely frames the entire underlying issue with the explosion in medical costs. Placed in such stark terms, the question shifts from "can we reduce medical costs" to "how are we going to reduce medical costs".

Hard work

2011-11-17T06:07:00.004-05:00

Noah Smith has a couple of interesting posts up, but the one that I really found interesting was "Why conservatives can't get people to work hard". It had several insightful comments including the classic:

One basic idea is that hard work should be rewarded. Obvious, right? I mean, we're supposed to be economists here! People respond to incentives, and they are risk averse. A winner-take-all society is not very conducive to hard work; I'm not going to bust my butt for 30 years for a 1% shot at getting into The 1%. But I am going to bust my butt for 30 years if I think this gives me a 90% chance of having a decent house, a family, some security, a reasonably pleasant job, a dog, and a couple of cars in my garage. An ideal middle-class society is one in which everyone, not just anyone, can get ahead via hard work.

Even more interesting, he points out the underlying ambivalence among conservatives as to whether hard work has a causal link to productivity:

Conservatives, meanwhile, are all too often divided on whether they actually believe that hard work works. Plenty of conservatives have undermined Cowen's hard-work-and-discipline bloc by saying that success in life is all due to natural differences in ability. These "I.Q. conservatives" see inequality as the natural order of things. They have focused on getting people to accept their place in society and learn to live with what they have, rather than strive to move up in the world. This is a very Old British sort of conservatism, a nobility-and-peasants ethos dressed up in the faux modernism of psychometric testing.

Conservatives need to look in the mirror and ask themselves: "Do we really want people to work hard and be disciplined? Or do we just say that in order to keep the peasants from getting restless, when deep down we believe that it's all about good genes?" Because if it's the former, conservatives should do some hard thinking about what actually gets people to work hard. And they should think about how to respond to those among their colleagues for whom it is simply the latter.

I think that the "I.Q. conservatives" (as Noah calls them) are actually a fairly concerning movement. We all know that social structures based on accepting one's lot in life (think feudalism) have shockingly low levels of productivity. A social creed that suggests that this lack of productivity is due to innate personal differences is also one that cannot address any social dysfunction that may be present. After all, if the reason person A is successful is that they are the "right sort of person" then we don't have to handle questions like "why is person B unsuccessful".

A broad adoption of this ethos would be an unfortunate outcome for any society because it then concentrates decision making ability into a more and more restricted class. Democracy and capitalism succeed by making the information base broad. It's not that they always succeed in creating good outcomes. But the track record of a narrow elite making decisions is . . . poor.

Laboratory animals in biomedicine -- a recycled reply

2011-11-17T02:31:00.000-05:00

In response to Joseph's recent post on the over-reliance on mice in medical research (which was prompted by this thought-provoking piece in Slate), I thought I'd dredge up something I wrote on the subject last year:

Landscapes and Lab Rats

In this post I discussed gradient searches and the two great curses of the gradient searcher, small local optima and long, circuitous paths. I also mentioned that by making small changes to the landscape being searched (in other words, perturbing it) we could sometimes (with luck) improve our search metrics without significantly changing the size and location of our optima.

The idea that you can use a search on one landscape to find the optima of a similar landscape is the assumption behind more than just perturbing. It is also the basis of all animal testing of treatments for humans. This brings genotype into the landscape discussion, but not in the way it's normally used.

In evolutionary terms, we look at an animal's genotype as a set of coordinates for a vast genetic landscape where 'height' (the fitness function) represents that animal's fitness. Every species is found on that landscape, each clustering around its own local maximum.

Genotype figures in our research landscape, but instead of being the landscape itself, it becomes part of the fitness function. Here's an overly simplified example that might clear things up:

Consider a combination of two drugs. If we use the dosage of each drug as an axis, this gives us something that looks a lot like our first example with drug A being north/south, drug B being east/west and the effect we're measuring being height. In other words, our fitness function has a domain of all points on our AB plane and a range corresponding to the effectiveness of that dosage. Since we expect genetics to affect the subjects react to the drugs, genotype has to be part of that fitness function. If we ran the test on lab rats we would expect a different result than if we tested it on humans but we would hope that the landscapes would be similar (or else there would be no point in using lab rats).

Scientists who use animal testing are acutely aware of the problems of going from one landscape to another. For each system studied, they have spent a great deal of time and effort looking for the test species that functions most like humans. The idea is that if you could find an animal with, say, a liver that functions almost exactly like a human liver, you could do most of your controlled studies of liver disease on that animal and only use humans for the final stages.

As sound and appealing as that idea is, there is another way of looking at this.

On a sufficiently high level with some important caveats, all research can be looked at as a set of gradient searches over a vast multidimensional landscape. With each study, researchers pick a point on the landscape, gather data in the region then use their findings to pick their findings and those of other researchers to pick their next point.

In this context, important similarities between landscapes fall into two distinct categories: those involving the positions and magnitudes of the optima; and those involving the search properties of the landscape. Every point on the landscape corresponds to four search values: a max; the number of steps it will take to reach that max; a min; and the number of steps it will take to reach that min. Since we usually want to go in one direction (let's say maximizing), we can generally reduce that to two values for each point, optima of interest and time to converge.

All of this leads us to an interesting and somewhat counterintuitive conclusion. When searching on one landscape to find the corresponding optimum of another, we are vitally interested in seeing a high degree of correlation between the size and location of the optima but given that similarity between optima, similarity in search statistics is at best unimportant and at worst a serious problem.

The whole point of repeated perturbing then searching of a landscape is to produce a wide range of search statistics. Since we're only keeping the best one, the more variability the better. (Best here would generally be the one where the global optimum is associated with the largest region though time to converge can also be important.)

In animal testing, changing your population of test subjects perturbs the research landscape. So what? How does thinking of research using different test animals change the way that we might approach research? I'll suggest a few possibilities in my next post on the subject.

The limitations of laboratory animals in biomedicine

2011-11-16T17:50:00.003-05:00

There is a very interesting take in Slate on the reliance of Mouse Models in biomedical science. You can see the temptation in a fast growing animal that elicits limited sympathy from the general public. But the concern with missing key drugs is real -- especially when the diseases in mice operate differently than in humans.

But the real kicker was the discovery that control mice are overfed, under-stimulated and obese. This puts an entirely new spin on studies that restrict caloric intake. They may be saying that eating a normal diet is life enhancing and not caloric restriction. These sorts of blind alleys can have enormous consequences.

Go and read -- it is worth it.

How not to convince people

2011-11-15T06:37:00.002-05:00

The approach taken by Occupy Seattle here seems to be deeply counter-productive. I think that new ideas and paths forward require us to spend less time in "gumming up process" and more time deciding how to address real problems.

Not a good start for a dynamic movement seeking change.

Tone poem -- how Duncan Black and company missed the big picture

2011-11-15T01:36:00.002-05:00

I'd thought about blogging this yesterday, then I decided that too much had been written about Penn State, at least too much by people like me who knew nothing about the subject. I reconsidered when I followed this link from Brad DeLong. DeLong, Black and co. see David Brooks' statements as standard issue liberal bashing, but I think they missed a more significant part of story.

Take a look at this excerpt from All Things Considered:

RAZ: In the just short time we have left, E.J., I want to ask you about Penn State - both of you. Obviously, the university president and the head coach, Joe Paterno, were fired by the board of trustees.

Do you think they should've considered shutting down the program for a year?

DIONNE: Yeah. Well, you look at that indictment, I mean, what happened was hideous. What was done to kids, 10-year-old boy and others that young, was just awful. And you had an institution that seemed more interested in self-protection than anything else. And we've seen that before.

And I understand Joe Paterno is a much-loved figure in sports terms. He was one of the better college coaches. His kids graduated. But this entire episode is so ugly and it, again, you hate institutional protection over the interests of little kids.

RAZ: David.

BROOKS: Yeah, I guess think - it's I have a bigger view, which is that when we have a society where we don't know how to handle the concept of evil when we see it, we don't know how to deal with it, we're not really aware of it and people hid away. I do not think they should shut down the program, however. I think a lot of very honest football players have committed themselves to that program. I don't think they should be punished.

If you've followed any of the major debates going on now, you have to be discouraged by the lack of progress. You will see some good substantive arguments but more often the pundits will simply focus on maintaining the appropriate tone and making the right associations.

David Brooks is a master of this kind of punditry. That skill has allowed him to maintain his reasonable conservative persona under very difficult circumstances (look at what happened to David Frum). See how he hits both notes here, first chastising us for moral relativism then warning against excessive reaction. In terms of tone, this combination of conservative values and measured responses is almost perfect. As an argument, though, it's gibberish.

There is no way to reconcile the two sides here. You can't condemn society for lacking the strength and clarity of vision to deal with evil then recommend that we not punish an institution that tolerated and enabled genuine atrocities. Brooks, who is a very intelligent man, undoubtedly knows what he said makes no sense, but he also knows that, as long as maintains that proper tone, most people won't care.

Cross sectional reasoning

2011-11-14T11:32:00.003-05:00

I want to follow up on a post by Bad Astronomy that has been discussed by both Mark and Noah Smith. The post comments on the results of the 2010 census on employment rates:

I highlighted one in particular: Astronomy and Astrophysics. Note that it has a 0% unemployment rate; in other words, last year everyone who majored in these fields got a job! Now, I find myself being a tad skeptical about this, but if there’s some weird thing going on with this survey, I can at least make the broad assumption that the relative job numbers are probably OK. Majoring in astronomy is still a good idea, and will strengthen your chances of getting a job after college.

I want to take this in a different direction. What this metric shows is that, if you were lucky enough to have majored in Astronomy in 2005 then you were very likely to be employed in 2010. It says nothing about what will happen to somebody who enters the program in 2011 and whether they will be employed in 2015.

See, I was actually a physics major in the mid 1990's, in a school with a large astrophysics group. I knew a lot of these students and even took classes with them. Do you know what they mostly ended up as: High School Teachers. Plus a few academics. At the time there was a terrible job placement rate in physics and we were all depressed by the poor employment outcomes. Using the tool, I see a 4.5% unemployment rate for physics, which does make me wonder how many astrophysicists are counted in this group.

But, in general, past performance is no guarantee of future employment. A depressed job market could easily have led to full employment years later, long after only the most dedicated students remained. I've seen this phenomenon in a lot of fields -- people go where the markets signal but, in education, the signals are lagging indicators.

So maybe we are seeing the unemployment ghettos of the future?