A good story on structural unemployment and an excuse to bring up intra/inter-group dynamics again

From Marketplace:

Basically, [Management professor Peter Cappelli at the Wharton School] thinks employers are just being cheap. He says this is something they learned from the downsizing of the 1980s. It was so easy to snap up laid-off workers somebody else had already trained. So then companies downsized their own training programs to save money. 

Meanwhile, they’ve steadily raised the bar on job applicants -- demanding ever-more credentials and work experience -- then complain they can’t find good help.
...
And which employees do companies provide with the most skills-enhancement? According to the training organization’s data, it’s not production workers, or customer service reps or new employees. It’s supervisors, managers and executives.

For a variety of reasons (demographic, economic, political, educational), I suspect that the group cohesion in management and the associated social classes has gotten stronger over the past few decades. If this is true, we would expect executives to hold an increasingly high perceived value for executive work while seeing non-executive work as less valuable and more interchangeable.

You can make the case that much of the training given to executives is of limited value. By comparison a strong and unambiguous case can be made for training that, for example, increases workers' relevant computer skills. If we're spending more on the first than on the second, there's something wrong. My theory is intra/inter-group dynamics. Any other suggestions?

Thought provoking idea of the day

Maybe meritocracy is more complicated than I assumed:

What this means paradoxically, is that to encourage an honest “meritocracy”, one may have to discard equality of opportunity. To come from a dishonored or disgraced family would be a hurdle to overcome. To come from a family with an unblemished record for integrity, would be boost. Not because this is fair to the child. It is demonstrably unfair. But, because it may be the only enforcement mechanism that will work against ambitious parents.

The context for this post is Karl Smith thinking about why cheaters will rise to the top of a meritocracy and the implications that this will have.  I often disagree with Karl Smith but, on this point, I think that he might be on to something that is hard to deal with in a social context like that of the United States.

But I would be delighted to be proven wrong.

One more point about that "On the Media" story

There's something I should have spelled out explicitly in my previous rant. "Sociopathic, genocidal dictators plant propaganda in respected news outlets through think tanks and paid experts" is bad enough. These commissioned op-eds can do real damage, muddying the debate and preventing or delaying sanctions and other actions against these regimes, but the more frightening headline is "Even sociopathic, genocidal dictators can plant propaganda in respected news outlets through think tanks and paid experts."


We are literally talking about some of the worst people in the world arguing some of the most indefensible positions imaginable. If they can, with enough money, buy not only a platform but also a veneer of journalistic respectability then there really is no standard. No speaker or message is too repugnant or dishonest to be whitewashed by the press.

If editors and publishers won't bother to vet proxies for Assad and Charles Taylor, what kind of scrutiny can we expect for a political party or a Fortune 500 company? When we read an editorial about global warming or see a study on tax increases cited, can we assume that the journalistic standards are any higher?

Education Reform: back from the grave?

It has been a while since we did a post on education reform.  But Karl Smith Adam Ozimek reported on a recent paper by Jesse Rothstein on teacher firings. Since this was similar to a discussion here on Observational Epidemiology. I thought that I would quote it in full:

But they assume that replacement teachers can be hired without limit, with no increase in compensation, from the same quality distribution from which current teachers are drawn. This is implausible. The elasticity of labor supply to teaching is unlikely to be infinite. Moreover, one would expect reductions in job security to require a compensating differential even to maintain the current level of supply. Thus, if salaries are not adjusted, filling positions vacated by fired teachers would likely require reducing hiring standards and thus, presumably, quality.

And then quote a line from Karl Adam Ozimek:

As a theoretical exercise I wouldn’t draw too strong conclusions from the study, but it does tell an important story that I think is often ignored in the education debate: many reforms increase risks to the teaching profession, and absent some offsetting benefits, this will decrease labor supply.

What I find interesting here is the need to hedge on very simple economics when they have a non-conservative conclusion.  Of course labor is not infinitely elastic.  But we take economists deadly seriously when they discuss things like dead-weight loss in taxation.  In these cases we are often willing to accept the theoretical conclusions of high taxes = lower growth despite inconvenient empirical examples (compare growth under Eisenhower to Kennedy, or Clinton to George W Bush).

That being said, to give credit where credit is due, Karl Adam Ozimek does then go on to talk about the policy implications of these changes.  What comes out is the story of a tough trade-off in policy and the need to cleverly design a system.  That is a possible path to improvement.  Careful rethinking and redesign may work, as might seriously questioning ideas like credentialism.

But these ideas are not a clear path forward with risks or costs.  Thoughtful reform can work and does work.  Cutting resources because you dislike "government workers" is a very strong belief in the absence of public goods.

EDIT: Name error noted in comments is corrected

A rant about On The Media and journalistic criticism

I found myself listening to NPR's On the Media in the car this afternoon. It's not something I do often. I have a huge problem with the current state of journalistic criticism, a field that now seems to consist entirely of  self-serving, self-satisfied trivialists and tribalists united by a blood oath not to acknowledge any of the serious problems facing journalism. OMD is often among the worst offenders.

I got lured into this story partially because the topic (brutal regimes hiring PR firms) interested me and mainly because there was nothing else interesting on the radio.

Here was the introduction:

"The New York Times reported this week that the Assad family employs Western PR firms to polish its image for the rest of the world. A few years ago, Harper’s contributing editor Ken Silverstein went undercover and approached PR firms as a fake representative of a tyrant who needed to improve his image. He talks to Bob about what he learned."

The interview was carried out with the usual mixture of smugness and breathlessness. The superiority was understandable if annoying (they were, after all, talking about apologists for dictators), but the surprise was truly difficult to fathom. Silverstein told about firms competing for these huge contracts as if the behavior was unprecedented. Not only was what he described pretty much what you'd expect; it was also perfectly consistent with what we see from law firms, lobbyists and consultants. In other words, there wasn't really a story there.

Silverstein then described what he called the "dirty little secret" of the industry, namely that the work (according to him) wasn't that effective, an assertion he supported with an anecdote about a firm that had bragged about getting a client off a ten-worst list by getting it moved down to the eleventh spot. He didn't seem to realize that this point undercut the importance of much of what he had said before (why should we care about dictators hiring PR firms if those firms are ineffective?). Nor did he seem to realize that in this context, moving past threshold values like 1, 5, and 10 really is a big deal.

Buried in the middle of this, Silverstein quickly and casually threw out the following: the firms promised clients that the firms would "write and place op-eds in American newspapers [and] recruit academics or think tanks to put their name on it." I at that point assumed that even Garfield (who is truly terrible at his job) would jump in and and ask for details, but the subject held no more interest for him than it did for Silverstein.

In any sane world, "Sociopathic, genocidal dictators plant propaganda in respected news outlets through think tanks and paid experts" would be the lede on a program about the media while "PR costs more when you're caught doing horrible things but it may not be worth the money" would be, at best, a side note. Unfortunately, OMD tends to follow the Jack Shafer school of journalistic criticism: sins are weighted by the sinner's membership and position in the journalistic tribe (multiple examples available on request).

The PR firms described here are certainly sleazy but not in a surprising or perhaps even unethical way. I would certainly have more respect for a PR firm or law firm that refused to have dealings with these regimes but I'm not sure any rules are being broken by taking them on as clients. As for the suggestion that these monsters are not getting their money's worth, I'm not entirely sure I buy the argument and even if it's true, I don't find it particularly newsworthy or worrisome. Lots of goods and services aren't worth the price and if someone is going to get screwed on a deal, I'd actually prefer it to be a murderous dictator.

By comparison, there are clear and serious ethical breeches by the editors who print unvetted op-eds by experts with undisclosed conflicts of interest and by the reporters who cite commissioned studies as if they represented reliable, impartial research, but under the Shafer system, the offenses of the PR firms are more heavily weighted because they are committed by outsiders.

I know this inter/intra-group explanation may seem like a bit of a jump, but there's clearly a problem with journalism and accountability. If you have an alternate theory, I'm open to suggestions.

Hoisted from the WCI comments

Comment from Shangwen on Worthwhile Canadian Initiative:

I think a corollary of your title could be, "liberalization matters, not privatization". When most people argue for or against the "privatization" of health care, all they are really talking about is changing the payment stream so that individuals (out of pocket or privately insured) pay entirely for the same system for which the government now pays a majority share. But that does not involve changing occupational monopolies, disencumbering drug development, or making it possible for innovation to force prices down. That is flipping only one switch in a very large machine.

I think that this is a really good point. As a private individual I cannot purchase most medicines (even at the marginal cost) without a prescription from a medical doctor. But there are some conditions (e.g. hypertension) where I could probably do a better job of monitoring on my own using a snazzy blood pressure machine and being able to look at factors like time of day or day of week.

In the same sense, if I get an infection at 5 pm on a Friday afternoon, my options are essentially the emergency room or, just maybe, urgent care. There are no circumstances in which I could call a nurse with my symptoms and try a first line antibiotic before heading into the emergency room.

It is really unclear that market forces will work under these restricted conditions. And this ignores other factors like information asymmetry. Nor am I convinced that all of these conditions are necessary to force innovation forward -- restricted resources can also be an effective spur to innovation and American (and Canadian) medicine has mostly avoided that scenario so far.

A clever puzzler from the departing Car Talk boys

I've seen similar puzzles that involved changing one sentence into another by moving spaces before (Gyles Brandreth had a whole chapter on them in The Joy Of Lex), but I've never come across one that got three different words or sets of words out of the same letter.

RAY: What can I say? Here we go. I'm going to read you a sentence that has five words missing. The missing words will each be denoted by a "blank." Your job, if you so choose, is to fill in the blanks.
"The (blank) doctor was (blank) (blank) to operate, because she had (blank) (blank)." So there are five words that are missing. 

TOM: I could make up all kinds of fill-ins for that. 

RAY: But, here are the constraints. The letters used to fill in the first blank - after the word "the" - are going to be the same letters used to fill in the two blanks after the word "was" and, the two blanks after the word "had." 

So, if for example there are ten letters in that first blank, then the two blanks after word "was" will use those same ten letters, but to make two words. That will also be true for the two blanks after the word "had." 

But here's the twist. You cannot re-arrange the letters. Only the spaces between the letters can be changed.

This time I won't make you wait for the answer.

Another story about the business of air travel

From, appropriately, APM's the Story.

Whenever I hear one of these golden ticket stories about American Airlines's decision to issue (then un-issue) tickets good for unlimited first class travel, I always am struck by:

1. The terrible job American did pricing these tickets;

2. How clumsy and tone deaf their attempts to claw them back were;

3. The fact that the guy's name really is "Vroom."

An interesting story on the economics of air travel

From NPR's The World:

Canadian airports don’t like the trend either. They say Canada’s losing $2 billion a year to “passenger leakage.” Daniel-Robert Gooch, president of the Canadian Airports Council, said the problem is that Canada’s air travelers are expected to pay for airport improvements through taxes and fees.
“We have taken an approach in Canada to aviation that’s different from the U.S. and other parts of the world,” Gooch said. “We don’t subsidize airports in the way that takes place in the U.S. and other parts of the world, so we see the users paying 100 percent of the costs.”
A June 5th report from the Canadian Senate echoed those concerns, arguing that Canada’s airports need tax breaks to compete with their subsidized neighbors to the south.
Airline passengers in the U.S. do pay fees to support airport infrastructure. But U.S. taxpayers pick up the tab for other improvements — like a $30 million dollar upgrade to the Bellingham airport runway.

who's in cell four? or why a trip to the airport feels like a trip to 1987

I was planning to go into more detail with this follow-up but it looks like I'll need to settle for the short version (deadlines, deadlines...)

I bought a car a few years ago and was amazed at the innovations I could get for a little over 20K. The engine, the transmission, even the key were based on technology that would have been unavailable or prohibitively expensive a decade earlier. By comparison, when I travel by air I'm amazed at how little innovation I've seen over more than the past quarter century. How do we explain the difference?

We often hear that businesses will automatically innovate if the government just gets out of their way but that's not the way companies works (at least not based on the projects I've been on). For starters, feelings toward innovation are often mixed. Innovation is usually costly and often professionally risky and, since successful innovation almost always has benefits that pay out over a number of years, it is likely that credit for your ideas will go to your replacement.

Businesses therefore need a good reason to innovate, good enough to outweigh the costs and risks. Two of the biggest (and most closely related) factors in the cost benefit analysis are competition and persuadable customers (customers who will buy your product if you take the action and won't if you don't).

For both auto manufacturers and dealers, the level of competition is high, as is the number of persuadable buyers. Customers have a abundance of choices and an open buying window. In this environment, a well-designed feature or clever bit of technology can often cinch a forty or fifty thousand dollar sale.

By comparison, people needing to make long-distance trips generally have extremely limited choices and  a tight buying schedule. The number of persuadables is very small; most are geographically predisposed to one airport and a handful of airlines. If you're counting on market forces to drive innovation in that situation, you don't understand market forces.

upate: sorry, I had originally meant to talk about a matrix of consumer behavior where persuadable customer were in the fourth cell.

A new recurring theme for OE

I have to run in a few minutes so I won't have time to go into much detail but Joseph's recent post seems like a good opening for a topic that's been popping up in our phone calls for the past few months:, the shifting role of inter- vs. intra-group perceptions and interactions.

The groups I'm primarily focused on here are based on class, generation, race, region, party and, particularly in the case of journalism,  profession (for example, the only way to find any intellectual coherence in Jack Shafer is to view his writing as a defense of the journalistic tribe and its hierarchy with writers like Michael Kelly and Maureen Dowd at the top).

Much of the odd, talking-past-each-other quality of many of our recent debates becomes more understandable if you allow for the possibility that a different set of rules and definitions are being applied to the speaker's group. Phenomena like mass incarceration or the perceived hardship of getting by on 300K only make sense when viewed in terms of an us-them dynamic.

And to loop things back to Joseph's post, I suspect that executives with ostentatious lifestyles are more likely to identify with their own class and coworkers and less likely to worry about the interests of mostly middle class investors.

One more issue with Principal Agents

Erza Klein points out a study that suggests that there is an inverse relationship between a CEO being frugal in their private life and their propensity to commit fraud in their professional life.  This remains a classic problem of trying to balance the management of public companies with distributed ownership (much of which is not really able to vote).

This is a hard problem.

Blogger moves

Megan McArdle has moved on from the Atlantic

A quick thought on the decline of country music

It used to be that country songs had a by-god body count. Innocent men were executed, lovers killed, miners buried alive...










Now it's a big deal if you key somebody's car.

Utopian urbanists and the will of God

Here's a hypothetical discussion I'd like you consider, not because it could ever happen but because I think it makes an interesting thought experiment.

Imagine we're sharing a cup of coffee with Edward Glaeser and we make them the following proposal: let's take a large metropolitan area in the South or West and just zone the hell out of that puppy, set aside huge swathes of land right through the middle of the city, allow no development whatsoever, not even any roads except for a couple of elevated highways.

I predict that Glaeser would object strenuously to the suggestion. He would probably start things off by waxing eloquently on the evils of zoning, then decry the inefficiency of wasting land that could potentially house millions of city dwellers.

Suitable chastised we drop that idea and change the subject, asking him what cities in the South or West we should look to as models. I'll make a second prediction: he would cite either Seattle or San Francisco (and possibly both), praising them for their density, walkability and lack of sprawl.

The trouble is that all of these appealing aspects are pretty much a direct result of large swathes of undeveloped land that cover large parts of these area, swathes that can be driven across only by way of a handful of elevated highways.

Of course, it's awfully easy to be unfair to someone when you're writing his dialogue for him. It's quite possible that I've misrepresented Glaeser's positions on one or both of my predictions. Still, when I read Glaeser, I can't shake the impression that he's not just suggesting policy changes that can make things better; he's talking about a utopian product of libertarian ideals.Because of this I get the feeling that a city building around a body of water is fundamentally different than a city building around a piece of zoned land, even if the end result is the same. (Is it even possible for the end result to be the same? That's a topic for another post)

None of this makes Glaeser's analyses bad or diminishes any of his many good ideas, but when it comes to setting policy, utopianists always make me nervous.