Punch, brothers! punch with care!

Conductor, when you receive a fare,
Punch in the presence of the passenjare!
A blue trip slip for an eight-cent fare,
A buff trip slip for a six-cent fare,
A pink trip slip for a three-cent fare,
Punch in the presence of the passenjare!

CHORUS

Punch, brothers! punch with care!
Punch in the presence of the passenjare!

If you don't recognize these lines, you should probably go here before going any further. If you do catch the reference, be warned. Some news stories are like Sam's jingle and unfortunately this is one of them:

"Pat Sajak: Should Public Employees Always Be Allowed To Vote?"

MBA thinking , gestalt and the death of humanities

The following comes from Stanley Fish:

What he didn’t know at the time is that it had already happened, on Oct. 1, when George M. Philip, president of SUNY Albany, announced that the French, Italian, classics, Russian and theater programs were getting the axe.

For someone of my vintage the elimination of French was the shocker. In the 1960s and ’70s, French departments were the location of much of the intellectual energy. Faculty and students in other disciplines looked to French philosophers and critics for inspiration; the latest thing from Paris was instantly devoured and made the subject of conferences. Spanish was then the outlier, a discipline considered stodgy and uninteresting.

Now Spanish is the only safe department to be in. Russian’s stock has gone down, one presumes, because in recent years the focus of our political (and to some extent cultural) attention has shifted from Russia to China, India, Pakistan, Iran, Iraq. Classics has been on the endangered species list for decades. As for theater, the first thing to go in a regime of bottom-line efficiency are the plays.

And indeed, if your criteria are productivity, efficiency and consumer satisfaction, it makes perfect sense to withdraw funds and material support from the humanities — which do not earn their keep and often draw the ire of a public suspicious of what humanities teachers do in the classroom — and leave standing programs that have a more obvious relationship to a state’s economic prosperity and produce results the man or woman in the street can recognize and appreciate. (What can you say to the tax-payer who asks, “What good does a program in Byzantine art do me?” Nothing.)

President Philip cites as one justification for his action the fact “that there are comparatively fewer students enrolled in these degree programs.” Of course, in a bygone time seats in those programs’ classes would have been filled by students who were meeting quite specific distribution requirements; you remember, two advanced language courses, one course in American lit and another in British lit, and so on.

Those requirements have largely gone away. SUNY Albany does have general education requirements, but so many courses fulfill them — any one of dozens will meet your humanities requirement — that they are hardly a constraint at all, something the Web site acknowledges and even underlines with pride. This has happened in part because progressive academics have argued that traditional disciplinary departments were relics from the past kept artificially alive by outmoded requirements.

Perhaps this is being unfair to MBAs (God knows there are plenty of examples elsewhere), but there's a certain misguided kind of thinking that's common in business school graduates, an approach to complex problems that fetishizes metrics yet takes a dangerously naive approach to numbers. Factors that are difficult to quantify are casually dismissed. Synergy is a heavy-rotation buzzword but simplistic reductionism is the actual default.

New Coke was a notorious example of metric-driven thinking. The metric here was a taste-test score, a well-defined scalar that seemed to measure the nebulous concept of appeal. The executives were so pleased to have an actual number that they put one of the world's most popular and profitable brands at risk in an effort to optimize that metric.

What they overlooked was the need to look at every successful product, institution or organization as a gestalt where the success is a function of the whole.

I am certain president Philip can point to extensive cost benefit analyses justifying the school's decision. I am also certain that these analyses rely almost entirely on easy-to-measure quantities and short-term projections and largely (if not completely) ignore important factors that are more difficult to deal with.

The American university system has been a tremendous success over the past century or so and a major part of that success has been the rich and diverse intellectual gene pool that universities offered. It would be next to impossible to quantify the value of that gene pool but it's safe to say that narrowing it will come with hidden costs.

Wolfmeat

It's time to face the ugly truth: the readership of Observational Epidemiology tends to run more than a little nerd-heavy. That's okay. With the success of the Big Bang Theory, geek chic has never been less uncool.

So there's no reason not to check out this list of math-based games I put together for beginning teachers. You can even go here and find still more.

Of course, I still wouldn't mention it around the cool kids.

Greg Mankiw's reply -- dishonesty or just bad prose?

From Mankiw's follow-up to his NYT editorial:

Aren't you motivated by more than money? Of course. I have never suggested that money is my, or anyone's, sole motivation in choosing a lifestyle.

The phrase "sole motivation in choosing a lifestyle" is going to cause us some problems; it's difficult to rebut this kind of practiced vagueness, but we were talking about the choice to do certain work. If we read choice of lifestyle to mean choice of work, then yes, he did suggest exactly that.

Let's roll the tape:

By contrast, without the tax increases advocated by the Obama administration, the numbers would look quite different. I would face a lower income tax rate, a lower Medicare tax rate, and no deduction phaseout or estate tax. Taking that writing assignment would yield my kids about $2,000. I would have twice the incentive to keep working.

If doubling the money you're paid doubles your incentive, doesn't that suggest that your incentive is solely pecuniary?

Make sure to thank the senator

I forgot to mention in my last post that Senator Richard Shelby (also known for his work as a character actor in shows such as Dark Shadows and Nero Wolfe) was the one who pointed out the nominee's lack of qualifications.

So thanks, senator. We certainly appreciate everything you and your party has done to uphold the quality of the Fed.

If the President wants to get his nominees approved...

Maybe he should stop nominating boobs who can't even stay awake through a seminar.

The indispensable Professor Thoma

Having spent a lot of time recently on the issue of compensation, this post by Mark Thoma caught my eye:

Greg Mankiw complains that if taxes go up for people with incomes as high as his, he won't work as hard and that means he won't be able to leave as much for his kids. Incentives matter he says. If that's the case, I wonder why someone who is trying to take away the incentive for his kids to work hard and be successful on their own doesn't leave academia and become a high paid consultant.

I'm sure Greg Mankiw could clean up as a consultant. The same effort he puts into academics would be much more highly compensated somewhere else. The fact that he decided to become an academic in the first place indicates that it's not all about the money.

As Greg Mankiw makes clear every chance he gets, he's at Harvard. That tells me that the return to his ego is every bit as important as the financial return. I'd further guess that even if the New York Times stopped paying him for his column, he'd write it anyway. It's a boost to his ego and reputation that he'd want even without whatever small payment he gets for each column (he could make more by using the time to prepare a talk "to a business group, consulting on a legal case, [or] giving a guest lecture," so the opportunity cost of the column is quite high).

I have only anecdotal evidence for the following statement (but it is pretty damned extensive anecdotal evidence so here goes):

When it comes to assumptions, statisticians and economists (particularly freshwater economists) tend to take opposite approaches. Statisticians generally insist on running through more assumptions than the listener has any interest in hearing about, often including those of no relevance to the situation you're in. (A former manager of mine once joked that it was easy being a statistician -- whatever the question, you just answered "it depends.") Economists tend to leave assumptions unsaid, even the really important ones that probably aren't being met.

I can give you plenty of examples of these buried assumptions (if you can make it through a chapter of Freakonomics without finding a few you're not paying attention), but there are also economists who do their best to unearth these assumptions, to bring them back into the debate where they belong. One of the best and most diligent of those diggers is Mark Thoma.

Which brings us back to Greg Mankiw's recent column. On one level, Mankiw's argument is sound. Every product that reaches the marketplace did start with the producer asking "Is this worth my while?" Tax rates do factor into that calculation, so, yes, there can a situation where dropping the Bush tax cuts would cause someone to decide not to make a product.

But there are a couple of big assumptions here. First, since we're talking about a return to Clinton (not Eisenhower) era tax rates here, a product would have to be just barely worth doing now -- the drop in returns under the proposed change is very small. Since this is known economic territory, we know that Clinton's tax increase caused at most a trivial number of products and services to be dropped for the reason Mankaw suggests and the Clinton rates were as high or higher than anything proposed by Obama. (Mankiw gets around this by starting out talking about the income tax increases for people making over 250K then slipping in the estate tax about half a page down, leaving most readers with the impression that making the income tax slightly more progressive will cut his take home pay in half but that's more a case of lying through misdirection than of burying the assumption).

The second, and more important assumption is where Thoma really shines. The idea that a producer will stop making a product if the tax rate passes a certain point assumes that primary return on that product is taxable, an assumption that is in no way justified here. As Thoma points out, the compensation Mankiw receives in the form of ego-stroking and reputation-building far exceed the $650 he gets for each column. I would add to that the satisfaction of influencing the debate. Conservative groups spend millions of dollars getting anti-tax arguments in the papers. When Mankiw does it, the papers send him the check.

When the compensation for a product or service is overwhelmingly non-taxable, an increase in tax rates will almost never cause a provider to drop that product or service. Mankiw is smart enough to be aware of this (he is at Harvard, after all); he just doesn't want the rest of us to realize it.

"Who would have thought that Erik Estrada would have the more dignified career?"

Just to start your Monday off on a sufficiently weird note.

Education Reform

I want to very quickly return to first principles. When Mark and I began discussing tenure reform, it was in the context of a "crisis" in education. This terminology continues to this day.

However, the real impact of recent news is that proposed reforms don’t have the potential to make immediate and dramatic improvements in education outcomes. Why does this matter?

Because if there is an incipient crisis and known strategies can directly address them then it would be grossly unethical not to try and address this in the fastest way possible. However, if there is not an immediate crisis the correct way forward is one that addresses all of the stakeholders and not radical top-down driven reform. In other words, Baltimore and not Washington, DC.

In the long run educational reform may be inevitable and positive. One of our well versed commentators (Stuart Buck) opined about the evidence:

It's consistent with any number of stories, including increased quality of teaching, better curriculum, finding a better fit for each individual students (some do better in a smaller school, for example), and the factors that you mention.

In my view, this suggests that we are going to experiment with news modes of education. After all, many people who I respect are strongly advocating for experimenting further with education reform (Jon Chait, Megan McArdle, Matt Yglesias, Alex Tabarrok come immediately to mind).

So why are there concerns about the process by which educational reform is occurring? Because, the discussion began with a question of where to allocate resources. Seyward Darby was arguing that we needed to accept teacher layoffs as part of the price if educational reform:

The president's beef is with a provision to prevent teacher layoffs, which Democrats tacked onto the bill along with several other domestic priorities. To pay for the measure, the House agreed to cut money from some of the president's key education reform initiatives. Obama isn't happy about it. Nor should he be.

Now, if there is a real and immediate crisis in education than, of course, dramatic measures can make sense. But is this really the time to spark a round of teacher layoffs in order to make slow improvements in who decides to apply for teaching jobs? Maybe, but it seems naive to think that we should fuel the testing of educational reform with layoffs at this precise moment. Readers of Felix Salmon may remember this week's jobs report:

Meanwhile, as the school year begins, we have this:

Employment in local government decreased by 76,000 in September with job losses in both education and noneducation.

As states and municipalities around the nation start running out of money, they’re going to fire people; this is only the beginning. And if October is any indication, the job losses in the local government sector are going to be at least as big as the job gains in the private sector.

So the real issue is whether this is the time for radical teacher employment restructuring -- should we lay off teachers to test educational reform? We do have a duty to the future but we also have a duty to the current students as well. The conversation would be different if the net resources for education were increasing but claiming that education is a priority in the midst of layoffs due to lack of funding seems disingenuous.

My interest in this subject grew from two arguments in the blogosphere. One, that the crisis in educational was so bad that the state should massively break contracts without cause. Notice that in cases like AIG and TARP, we were willing to spend a lot of money as a society to preserve financial contracts. Two, that reform has likely to be so important that teacher lay-offs in the midst of a recession were an acceptable sacrifice as the students would be better off.

If we don't accept that there is an immediate crisis then we can still move forward. But then it becomes an American-style bottom-up reform and not a Soviet-style top down reform. I like the Baltimore example -- specific communities negotiating ways to respond to the crisis and continuing to try ways to create a better future for their children. The result of a thousand experiments with engaged communities could very well result in a far better educational system in the long run.

And I think that is a good outcome.

"The Secret of Doublets"

I've got a new (OK, newish) site up called "Education and Statistics." The idea is to have a place that's more focused on education and less scary to the general reader (I've noticed people tend to shy away when I tell them I blog at "Observational Epidemiology").

There will be lots of dual posts and reprints, but you'll also find quite a bit of E and S exclusives like this introduction to Lewis Carroll's addictive word game, doublets (a.k.a. word links, word ladders and word golf). Come by and see if you too can evolve APE into MAN

I don't like to go to the well too often, but...

(I know this is two in a row, but how could I let this one go?)

When mortgage bankers engage in strategic default, the cost in PR damage, public backlash and potential regulation far exceed the savings on mortgage payments. When a wealthy lawyer writes self-pitying articles about the difficulty of scraping by on three or four hundred K, he builds support for the very progressive tax policies he opposes. When Wall Street millionaires publicly and angrily insist they were entitled to every penny of support they were given, they make it much more likely that the next time they need assistance it will come at a cost to them.

These people are not stupid nor are they irrational. They do these things because of their worldview.

It is not just that we have a group of people who believe they are entitled to a special set of rules; it is that they have internalized this belief so completely that they no longer see it as a belief. The concept has become as intuitive and self-evident to them as Euclidean geometry. The thought that others might see things differently doesn't occur to them.

This can lead to some embarrassing spectacles, but it does make life easy for Daily Show writers.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Mortgage Bankers Association Strategic Default
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity

Red Half-state, Blue Half-state

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Indecision 2010 - Divided Delaware
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity

Apparently we've reached the goalpost-moving stage of the game

We all knew the case for incentive pay for teachers. The argument was simple and it made a lot of sense: teachers' unions and tenure limited the consequences of poor performance and bad behavior while the lack of bonuses limited the incentives for excellence. You could hardly blame the reformers for pushing it. Who could disagree with the statement that people respond to incentives?

Unfortunately, like so many appealing theories, it didn't do that well in the messiness of the real word. First researchers concluded that the data was too volatile and confounded to identify poor teachers, and now a major study by Vanderbilt and Rand has failed to show anything more than trivial results from incentive pay. Faced with these unpalatable facts, reform supporters have stayed true to their conviction that education (or at least education reform) should be run like a business and have done what so many project managers before them have done: they've moved the goalposts.

Eric A. Hanushek, from the Hoover Institution, assures us that he knew it all along:

"The biggest role of incentives has to do with selection of who enters and who stays in teaching - i.e., how incentives change the teaching corps through entrance and exits," Hanushek said. "I have always thought that the effort effects were small relative to the potential for getting different teachers. Their study has nothing to say about this more important issue."

Jonathan Chait echoed the Hoover line (bet you never thought you'd hear that one):

Of course, the point of performance pay isn't to wring better results out of the same teaching pool. It's to change the composition of the teaching pool. Teachers tend to come from the lower ranks of college graduates. That's natural, because the profession pays poorly compared with other jobs requiring college degree and does not offer financial rewards for success. The idea of merit pay is that you lure into the profession people who want to be treated like professionals -- they run the risk of being fired if they're incompetent, but they can also earn recognition and higher pay for exceptional performance.

It's true that there important secondary selection benefits from a well-designed incentive system, but how credible is the claim that all the reformers were interested in from the beginning were the selection effects, that the Vanderbilt results were unimportant, even, according to Hanushek, expected?

Why did these reform supporters push ahead with high profile research that they believed would prove nothing and would make the movement look bad? This was not a cheap study. In addition to conventional funding, a private donor, presumably a reform movement supporter, put up 1.3 million dollars of his own money to test the hypothesis that incentive pay for teachers would improve student test performance. If "the point of performance pay [wasn't] to wring better results out of the same teaching pool," why waste over a million dollars to see how well performance pay did just that?

For a fraction of that money, you could have funded research that would have directly addressed the question of teacher self-selection by conducting a quick and cheap survey-based study that would look at the correlation between attitudes toward incentive pay and factors like GPA.

And even if we accept the I-meant-to-do-that response, the Vanderbilt study still presents advocates of incentive pay with a huge problem. The assumption behind their theory is that competent, hard-working people will go where competence and hard work are rewarded. Unfortunately, the study indicates that either the incentive metrics are largely out of teachers' control or teachers were generally doing what they could to maximize student performance before bonuses were on the table.

Keep in mind, we're talking about individual bonuses, not the kind you get for an organization meeting some goal. Do we have any evidence, even anecdotal, to show that more desirable employees are attracted to compensation plans with large individual incentive components even when the employees have been shown to have little if any influence over the value of those incentives?

If we were talking about a good, well-designed compensation scheme you could make a strong case for positive selection effects, but we're not even close. We are talking about incentive pay based on hopelessly confounded and volatile data. We are talking about incentive pay based on easily manipulated metrics. We are talking about incentive pay that does not incent.

You really need to read that last one out loud to get the full effect:

We are talking about incentive pay that does not incent.

Just so we're clear, the reform advocates are saying that we take money from things like salary and training and divert it to bonuses that are based on poor-quality data and have not been shown to provide incentive value. We should do this because this poorly-designed compensation scheme will attract a better class of applicant.

And on top of all that, they're asking us to believe this was their plan from the very beginning.

More thoughts on education reform

Dana Goldstein has a nice piece about how education reform can proceed without mass teacher firings. It seems that Baltimore has agreed to a new teacher contract (with the union) that will experiment with many of the reforms that are being proposed. In particular, I like the idea of defining "lead teacher" as being one per school. This nicely side-steps inter-school competition (where the incentive is to try and shift weak students to new schools) and puts the focus on doing one's best with the students they have. Plus, on an individual school basis it is likely that information will be more complete than would be the case when you focus entirely on standardized test scores.

Mark has noted the odd anti-union stance of even liberal education reform advocates. Curiously, I would hypothesize that if reforms are worthwhile and carefully thought out then it is possible to get teachers to agree to them (even if they are not entirely in the best interests of the teachers). After all, it's not a ridiculous idea that many of teachers went into teaching in hopes of helping children to succeed (those focused entirely on financial rewards may well have chosen other lines of work). But perhaps this is a good example of positive reform. I may not like every element of it but it is at least a reasoned attempt to experiment with modern reforms.

Matthew Yglesias buries the lede... deep

Matthew Yglesias again steps up to defend the honor of charter schools with a post on Anders Böhlmark and Mikael Lindahl's paper “Does School Privatization Improve Educational Achievement? Evidence from Sweden’s Voucher Reform” (PDF) from which he concludes:

In effect, Swedish practice is like what exists in American states (Arizona, for example) with lots of charter schools and it’s quite similar to what the Obama administration (and I) are pushing. The big difference is that for-profit operators are allowed to run schools in Sweden, which I’d be for allowing.

There is, however, an asterisk next to the name of the paper. The footnote is easy to miss (you have to click on the 'More>>' button to find it), but it's worth the effort. It reads:

* Their answer? It does in the short-term, but the gains fade. All else being equal I favor more choice, so I’d regard the reform as a good thing but I assume the architects of the reform were hoping for something more.