Goodbye little buddy

This is a cat named Turtle, who will be sorely missed by his adoptive parents. He had a unique ability to express himself and has left a Turtle sized hole the lives of all who knew him. Rest in peace, little buddy.

"Especially when it’s done wrong"

Felix Salmon has another intriguing (and, more to the point, important) post on saving and investing based on this (also intriguing and important) paper by Wade Pfau on saving and investing. I won't try to summarize but I have to quote this one paragraph.

Investing can be exciting, especially when it’s done wrong. You follow the markets rising and falling, you obsess about your retirement-fund balance, you rotate out of this and into that, you read books and magazines and blogs to try to learn more about what to do. You might even, in a moment of weakness, find yourself watching CNBC. Budgeting, by contrast, is like going on a diet: it’s a drag, and it’s hard to get any pleasure or excitement out of it. But the latter is much more likely to get you well-set in retirement than the former.

There is no market solution to the blankonomics problem

And obviously God has not listened to our prayers to end the plague:

Spousanomics: Using Economics to Master Love, Marriage, and Dirty Dishes

From Yahoo's Shine:

Splitting the dishes, laundry, vacuuming, and other household chores may seem fair, but an unbending line right down the middle can lead to more friction, not less, because no one is good and fast at all things. But when couples adopt the economic principle of “comparative advantage,” which says it’s not efficient to take on every task you’re good at, only the ones you are relatively better at, couples can gain time for the things they really want to do, the authors write.

“In economics, having the comparative advantage in something means you produce it at a lower cost and really quickly,”* Paula Szuchman said in an interview with Yahoo! Shine. So if one of you is better at laundry, then do it. And if the other can do the dishes and clean up the kitchen faster every night, while the better cook cooks, go for it.

The authors, both accomplished journalists (Szuchman: Wall Street Journal and Anderson: New York Times, where she spent years covering Wall Street and delivered award-winning coverage of Merrill Lynch) decided the time was right for an economics-approach how-to for a successful union for a few reasons. One was a pretty tough first year of marriage for Szuchman, who was surprised it was harder than she thought to merge two lives and that “something as banal as housework could get in the way” of all the fun she heard people were having being married. Another was the prevalence of economic terms suddenly in the national lexicon at the time of the financial meltdown. All at once, terms like “moral hazard” and “loss aversion” were all over the news to help explain a seemingly unexplainable economic freefall. “There seemed to be some useful parallels,” Szuchman said.

If you can get beyond the incredibly annoying title (and I can think of no reason you should), the fundamental analogy is still fatally flawed. Economic approaches tend to be reductionist; they work best on problems with clearly defined objectives and components that can easily and accurately be assigned scalar metrics (problems distinctly unlike those involving relationships).

If the purpose of a marriage were to optimize the completion of chores, the authors might be on to something other than a band wagon here, but, of course, that's not why people enter into the institution. This is not to say that things like chores can't have a major impact on a relationship or even that the advice the authors give about dividing up chores based on competence is necessarily bad, but that even if the authors are right here, they are still using a terrible model.

A flawed model may occasionally, simply by accident, lead to an accurate prediction, but so can guessing and in one important way guessing is far superior. The model brings with it a sense of rigor and reliability, of intellectual seriousness. With a guess you know what you're getting.

* Maybe an economist out there can help me out. This sounds like absolute advantage -- "I can do A better than you." I thought comparative advantage was something like this "I can do A better than B and better than you can do A (or at least more profitably). Your B is as good or better than your A (though possibly not as good as my B). I should focus on A (because of the opportunity costs of B) and you should focus on B."

Anyone care to clear this up?

Environment is complex

Via Tyler Cowen:

A case in point is provided by the recent study of regular tobacco use among SATSA's twins (24). Heritability was estimated as 60% for men, only 20% for women. Separate analyses were then performed for three distinct age cohorts. For men, the heritability estimates were nearly identical for each cohort. But for women, heritability increased from zero for those born between 1910 and 1924, to 21% for those in the 1925-39 birth cohort, to 64% for the 1940-58 cohort. The authors suggested that the most plausible explanation for this finding was that "a reduction in the social restrictions on smoking in women in Sweden as the 20th century progressed permitted genetic factors increasing the risk for regular tobacco use to express themselves." If purportedly genetic factors can be so readily suppressed by social restrictions, one must ask the question, "For what conceivable purpose is the phenotypic variance being allocated?" This question is not addressed seriously by MISTRA or SATSA. The numbers, and the associated modeling, appear to be ends in themselves.

The idea that culture, itself, is an environmental exposure does shed some serious doubt on twin studies as the gold standard to separate genetic and environmental influences on phenotypes. Tyler Cowen says it well here:

"Culture" and "genes" are two major factors determining individual outcomes, toss in parenting, and if you wish call parenting and culture two parts of "environment." It is obvious that culture matters a great deal, and this comes from knowledge which existed prior to rigorous behavioral genetic studies.

I say "soda" and people in Nebraska say "pop." Singapore vs. southern China. German musical tastes in 1780 vs. today. Rural Africa vs. urban Africa. Most concretely, if I meet someone I want to know what country he came from and grew up in; in fact that is the first thing I wish to know. "The culture word" may be overused and abused, but still the power of culture is evident.

I think that we should think carefully about how quick we are to ascribe behaviors to genetics (once we account for within culture variability) without considering between culture variability. Even worse, it is not clear that the modern world has a sufficient degree of cultural variation (given our connectivity in the modern world) to even measure this parameter properly.

Mark also has another insight as to a limitation of twin studies that I hope he posts at some point.

A nice comment on investment strategies

James Joyner:

Aside from diversifying one’s portfolio over both time and scope of investments, there’s no great option. As I recently told an investment counselor who was encouraging me to move investments from one fund to a one that “would have a higher rate of growth,” if she really had the ability to accurately predict which stocks would go up, she wouldn’t need to be advising clients for a living. Anyone who claims to know what the market is going to do over the long term is an idiot or a liar.

I think that this comment is right on. I always get worried with investment professionals (who gets paid based on a percentage of your portfolio and not based on how it performs) giving advice on very specific investment options. Diversification and dollar cost averaging are the only elements that really seem to be under my control. Otherwise, as Mark says, focusing on savings is your best option to control your ability to retire.

The unreliable magic of compound interest

Felix Salmon has been doing remarkably good work recently but this column stood out as particularly relevant:

My point is that the range of remotely sensible investment strategies for a working person is actually pretty narrow. You can’t just wave a magic asset-allocation wand and change your annualized return over a period of 35 years by 300 basis points. Frankly, you’d be doing well if you could improve it by 30 basis points. The market will return whatever the market will return and you will do a little bit worse than that, most likely.

So the way to have a comfortable retirement is not to think that by making a clever choice when it comes to stock-picking or investment strategy that you can somehow make up for the money you’re spending rather than saving. Instead, it’s to diligently save as much as you can, from as early an age as possible and simply invest it in a non-idiotic manner. The more you save, especially in your 20s and 30s, the more you’ll end up with in retirement.

Wall Street would love us to believe that the magic of compound interest gives us a free lunch; that a small amount of savings, if compounded at a high enough rate, can set us up for life. That might be true mathematically, but saving doesn’t work that way in the real world. Interest rates are low, now, and wages are growing sluggishly.

The three big drivers of big retirement accounts — sharply rising salaries, sharply rising house prices and a sharply rising stock market — are all looking very uncertain these days. So let’s not perpetuate this pipe dream that if only we can get an 8% return on our funds, everything will be fine. Because chances are we won’t. Absent that 8% return, the only way of getting to where we want to be is to simply spend less and save more.

There are two factors here: how much you save and how effectively you manage that savings. An entire industry has grown up around the second, usually based on appallingly optimistic estimates, often bordering on the fraudulent.

These financial gurus have done their best to popularize the idea that a good investment strategy was more important than how much money you put away and they've tried their hardest to avoid the unpalatable truth that there is only one aspect of our financial futures we have any real control over. Most of us can't really choose how much we'll make and we certainly can't control the performance of the market but we can decide how much of our disposable income to spend.

Spend less, save more, and ignore everything you hear on CNBC.

Another note on Herman Mankiewicz, Peter Bogdanovich, and the definition of 'hack'

Following up on an earlier topic, I had known that Herman Mankiewicz had worked on the Wizard of Oz, but I had left it out of this post because I assumed his contribution was insignificant. Then I came across this:

In February, 1938, he was assigned as the first of ten screenwriters to work on The Wizard of Oz. Three days after he started writing he handed in a seventeen-page treatment of what was later known as "the Kansas sequence". While Baum devoted less than a thousand words in his book to Kansas, Mankiewicz almost balanced the attention on Kansas to the section about Oz. He felt it was necessary to have the audience relate to Dorothy in a real world before transporting her to a magic one. By the end of the week he had finished writing fifty-six pages of the script and included instructions to film the scenes in Kansas in black and white. His goal, according to film historian Aljean Harmetz, was to "to capture in pictures what Baum had captured in words--the grey lifelessness of Kansas contrasted with the visual richness of Oz." He was not credited for his work on the film, however.

Aljean Harmetz certainly knows what she's talking about and, if she's quoted accurately, this would require an awfully broad definition of 'hack.'

If you don't post it someone else will

I was planning to do a post on these comments by Edward Glaeser, but I decided to put it off because:

a) Joseph told me he was reading the book and could give me a better assessment of how the ideas held up;

b) I'd recently criticized Glaeser at some length;

c) I had about a dozen other posts I wanted to do.

One of the comments that annoyed me was Glaeser's comparison of public schools and restaurants, now Dominik Lukeš has spent two thousand plus words taking the analogy apart stone by stone and salting the ground. If you're in the mood for a good dismantling and salting you should definitely follow the link.

Weekend Gaming -- Quickie book review edition

The world is too much with me this weekend, at least too much for adequate posting, but here are a couple of books to keep the board gamers out there busy for the next year or so.

The first is a Gamut of Games by the legendary game historian, designer and collector, Sid Sackson. As Wikipedia puts it:

Many of the games in the book had never before been published. It is considered by many to be an essential text for anyone interested in abstract strategy games, and a number of the rules were later expanded into full-fledged published board games.

If Sackson isn't enough for you, there's always David Parlett's comprehensive Oxford History of Board Games. Parlett is also a distinguished game designer, having won the Spiel des Jahres award (which is a big deal for people who follow this sort of thing). When I was designing games, I had a rule: if Parlett didn't have a similar game, I could call an idea original.

I'll have an actual game next week.

Social Security

Some thoughts on social security:

First, let's remember that Social Security actually provides support at a very modest level. Last year, the average retirement benefit was $1,170 a month, or about $14,000 a year, with the average disabled worker or widow receiving slightly less. (It would be wonderfully educational for the cable talkers and newspaper editorialists to live on that amount for a few months — they would not only lose weight but gain empathy.)
Remember, too, that despite our status as the largest and most productive economy in the world, Social Security is among the least generous retirement programs among all the developed nations. As a percentage of the average worker's pre-retirement wages, the benefit has been declining for years and will continue to fall without any further cutbacks.

and

The actuarial experts whose job is to monitor Social Security's fortunes have long assured us that small and gradual rises in the tax revenues that support Social Security, accompanied by small and gradual shifts in benefits over the coming years, will solve whatever fiscal challenges the program may eventually confront. There is no reason to panic, and there is certainly no reason to consider wholesale changes in benefits.

Well, there is a reason, but only if your real aim is to destroy the system and replace it with something less useful but more profitable. Wall Street and its servants on Capitol Hill have lusted after Social Security's revenues for many years. And they regard the current uproar over the budget as a fresh opportunity to get their hands on a trillion-dollar bonanza. Given their record in recent years, it is all too easy to imagine how badly that would work out for everybody — except them, of course.

I think that this is precisely correct. The amount of profit that could be derived from the privatization of social security is astounding and I think that it is the real reason that the program is always under attack. Consider this:

But Fred Reish, an employee benefits lawyer, says it is not uncommon for fees on a small 401(k) plan to break down like this: 0.25% a year for the plan adviser, 0.25% a year for the record keeper and 0.75% a year for mutual funds, totaling 1.25%.

Note that this is in addition to the fees charged by mutual funds that most 401k plans allow you to invest in. The average equity mutual fund charges around 1.3%-1.5% The real rate of return on the United States stock market is typically between six and seven percent; likely less under current market conditions. It is easily to imagine half of a person's returns being eaten up by fees (which is a very good deal for people who run retirement funds).

So it is worth keeping in mind that attacks on Social Security, as a program, seem to mostly revolve around attempts to create new markets for investment bankers. In terms of actual budget issues, Paul Krugman puts it best:

What would a serious approach to our fiscal problems involve? I can summarize it in seven words: health care, health care, health care, revenue.

I just wish we would see more of this sort of sanity in the discourse about government fiscal problems.

EDIT: See also; most interesting quote:

Recently, Vanguard has begun urging people to contribute 12% to 15%, including the employer contribution, because of the stock market's weak returns and uncertainty about the future of Social Security and Medicare.

But the article is interesting throughout.

Edward Glaeser

Two quotes from the first chapter of his new book, triumph of the city:

All of the world's older cities have suffered the great scourges of urban life: disease, crime, congestion. And the fight against these ills has never been won by passively accepting things as they are or by mindlessly relying on the free market.

and

Infrastructure eventually becomes obselete, but education perpetuates itself as one smart generation teaches the next.

so far the book itself is beating my expectations based on his recent articles. Already there is a strong theme of needing to consider group interests relative to individual interests (and the collective action problems that result when you do not properrly regulate a city). We'll see if the rest of the book holds up or not.

Zonkers and millionaires

Partially making up for recent indiscretions, Paul Krugman gives us a wonderful analogy for proposals that leave out the hard part:

When I was in college, we sat around eating, among other things, Screaming Yellow Zonkers; they weren’t especially tasty, but the copy on the boxes was fun. Among the instruction was the Disappearing Zonkers Trick:

After putting on your magician’s outfit, look around the house for a handkerchief, two hard boiled eggs, and a small piece of radium. Then take seven Zonkers and place them neatly into the exact center of the handkerchief. Two eggs are arranged near each other and under your hands. Tie a half-hitch knot in the radium. Then make the seven Zonkers disappear. Your friends will be amazed.

It occurred to me that this is a pretty good description of the Ryan Roadmap plan for controlling health care costs — make a lot of proclamations about responsibility, dress up in a reformer’s costume, then make cost growth disappear.

How to lie with statistics -- rare cinema history edition

From David Leonhardt (via DeLong):

When I read that John Boehner, the speaker of the House, had said that the federal government added 200,000 federal workers under President Obama, I wondered, “Really? Where?” I’m not aware of any major federal hiring initiatives since January 2009.

... It turns out that the 200,000 number is simply incorrect.

...

Second, Mr. Boehner was starting his clock in December 2008, the month before Mr. Obama became president. The Bureau of Labor Statistics conducts its monthly survey during the week that contains the 12th day of each month, so there is no reason to start the clock in December 2008 as opposed to January 2009. On Jan. 12, 2009, George W. Bush was still president.

To be more accurate there wasn't an honest reason. As Leonhardt points out later, 11,000 jobs were added by President Bush in his last month in office. Speaker Boehner was interval shopping, one of the most effective and time-honored methods of lying with statistics. (Given that, by Leonhardt's estimate, Boehner went from 57,000 actual jobs to a claim of 200,000, he used lots of effective and time-honored methods of lying with statistics.)

Interval shopping is based on the idea that if you can adjust the period being studied, you can make something look much better or worse than it actually is. For example, if you take one day off of the service record of the Titanic, it looks like a remarkably safe form of transportation.

The method also allows you to have a great deal of fun with denominators. You will often see people in positions of responsibility pointing to a period of growth that started just after a disastrous collapse and ends just before the next one. The worse that initial collapse was, the better your growth rate looks.

Interval shopping can be particularly effective when the groups being compared are at different stages of life. You can, for example, use it to argue that a product is less reliable than one that was introduced a couple of years later, not taking into account the difference in average ages, or you could 'prove' the mental inferiority of one immigrant group over another by comparing test scores, not taking into account the higher proportion of non-English-speaking first generation immigrants.

For beautiful example of egregious interval shopping, check out this excerpt from a rebuttal to Gore Vidal written by Peter Bogdanovich in the New York Review of Books:

Now I’m getting in a foul mood because I’m reading this sentence again: “The badness of so many of Orson Welles’s post-Mankiewicz films ought to be instructive.” That’s another of those glib, sweeping statements that play right into the reader’s lack of information and is written so as to presume a general critical atmosphere, which in this case is not just superficial, it is decidedly untrue, which makes it all the more offensive and irresponsible on Gore’s part. Almost everyone with any sense knows that Orson Welles is a great director and that Herman Mankiewicz was a talented hack,* but for the record, here is a list of the movies Orson Welles has directed since Citizen Kane:

The Magnificent Ambersons

The Stranger

The Lady from Shanghai

Macbeth

Othello

Mr. Arkadin (Confidential Report)

Touch of Evil

The Trial

Chimes at Midnight (Falstaff)

The Immortal Story

F for Fake

And these are all of Herman Mankiewicz’s post-Welles films:

Rise and Shine

Pride of the Yankees

Stand by for Action

Christmas Holiday

The Enchanted Cottage

The Spanish Main

A Woman’s Secret

The Pride of St. Louis

One of the surest signs of interval shopping is the arbitrary start point, but the key to making it work is finding an arbitrary point that doesn't look arbitrary. Here Bogdanovich is able to make use of a sloppy writing by Vidal. The phrase "post-Mankiewicz" implies that there is some special significance to these films coming after Citizen Kane. If Vidal were comparing Welles' post-Mankiewicz films to his pre-Mankiewicz films (which he obviously isn't), or if he were arguing that Welles was changed by working with Mankiewicz (which seems unlikely, though I'd need to get behind the paywall to be sure), then the wording would have been appropriate. Here, though, we simply have Vidal saying "post-Mankiewicz" when he means "non-Mankiewicz."

This small bit of imprecision on Vidal's part gives Bogdanovich the opportunity to use Kane as the start point for his interval (and Peter Bogdanovich has never been one to pass up on opportunity). When comparing careers you would normally look at entire careers. This interval includes all of Welles' films and less than half of Mankiewicz's.

To make matters worse, the intervals aren't even close to the same length for the two men. Mankiewicz drank himself to death in 1953. Welles died in 1985 (the last film on Bogdanovich's list was released in 1974).

More importantly, though, this list includes all of Orson Welles' career as a director barring some shorts and TV work, while it leaves out most of Mankiewicz's major accomplishments as a writer and producer. Even in his final, declining, alcohol-soaked years, Mankiewicz still managed a good picture or two, but a list of films that he wrote or produced before Kane would include Dinner at Eight, Million Dollar Legs (with W.C. Fields) and three out of four of the Marx Brothers' best movies Monkey Business, Horse Feathers and Duck Soup.

And when you leave out Duck Soup, that's just going too far.



*Bogdanovich's senseless group here include Mankiewicz collaborators and admirers such as Alexander Woollcott, Heywood Broun, Dorothy Parker, Robert E. Sherwood, George S. Kaufman, Marc Connelly and Nunnally Johnson, but that's a topic for another post and perhaps another blog.

Update: The conversation continues here and here.

An excuse to pull out my favorite John Ford quote

It's not often you have to correct Roger Ebert on film history, but his recent retrospective on the Grapes of Wrath opens with a statement that definitely needs correcting:

John Ford's "The Grapes of Wrath" is a left-wing parable, directed by a right-wing American director, about how a sharecropper's son, a barroom brawler, is converted into a union organizer.

It's true that Ford became more identified with the GOP in the late Forties (calling himself a 'Maine Republican') and turned sharply to the right in the mid-Sixties (around the time he turned seventy), but up until that sharp turn he had been a progressive (even afterwards his favorite presidents were FDR and JFK) and he was an ardent FDR man when he made Grapes of Wrath in 1940. He held to these basic principles even when they entailed significant professional risk in the Fifties.

From Wikipedia:

Ford's attitude to McCarthyism in Hollywood is expressed by a story told by Joseph L. Mankiewicz. A faction of the Directors Guild of America led by Cecil B. DeMille had tried to make it mandatory for every member to sign a loyalty oath. A whispering campaign was being conducted against Mankiewicz, then President of the Guild, alleging he had communist sympathies. At a crucial meeting of the Guild, DeMille's faction spoke for four hours until Ford spoke against DeMille and proposed a vote of confidence in Mankiewicz, which was passed. His words were recorded by a court stenographer:

"My name's John Ford. I make Westerns. I don't think there's anyone in this room who knows more about what the American public wants than Cecil B. DeMille — and he certainly knows how to give it to them.... [looking at DeMille] But I don't like you, C.B. I don't like what you stand for and I don't like what you've been saying here tonight."^[77]

Having made fun of Paul Krugman's puns, there's no way I can use the title "Darby's Rhee Lapse"

From the New Republic's Seyward Darby:

The mantra goes, “You either love or hate Michelle Rhee.” In the education world, there is no figure as polarizing as the former chancellor of Washington, D.C.’s public schools, who famously warred with the city’s teachers’ union and left abruptly when her boss, Mayor Adrian Fenty, lost reelection last year. Since then, she has started an organization called StudentsFirst to push for education reform nationwide. She announced the group in a Newsweek cover story, and it raised more than $700,000 in its first week. Andrew Rotherham, an education policy expert, told me, “Do people say, ‘I [am] kind of uncertain about Michelle Rhee’? No way.”

Count me, then, as one of the uncertain few. To be sure, I am generally a fan of Rhee. The world of liberal education policy consists, more or less, of two factions: reformers, who support performance pay, charter schools, and weakening seniority-based job protections for teachers; and opponents of these ideas, who are often allied with teachers’ unions. Like most reformers, I greatly admired Rhee’s tenure in D.C., in which she closed failing schools, fired underperforming teachers, and helped raise student achievement.

But, in reading about Rhee’s recent moves, I’ve felt a nagging sense of disappointment. She is now advising several conservative governors who line up with reformers on certain issues but whose commitment to public education is questionable. Meanwhile, she hasn’t offered robust answers to some of the thorniest matters facing education policymakers. Last week, I put these challenges to Rhee directly. And I came out of our conversation much as I went in: with decidedly mixed feelings about her vision for the education-reform movement.

I have long had decidedly mixed feeling about Seyward Darby (as you can see for yourself with a quick keyword search). Her reporting and analysis of the education reform movement has been, to put it simply, bad (better than Chait's but still bad). She was overly eager to accept the movement's preferred narrative, credulous about its claims, negligent about digging into the research that called these claims into question, and dismissive of those on the other side.

That last trait is still on display even now with the weasel-worded "more or less, of two factions... opponents of these ideas, who are often allied with teachers’ unions." The implication here is that the opponents are shilling for the unions. I don't know the alliances of everyone out there but I can tell you that I'm not allied with the unions (I never even bothered to join one when I was a teacher), nor is Joseph, nor is David Warsh, nor, to my knowledge are most of the people in my corner of the blogosphere. In my experience, it would have been more accurate to say "opponents who question the evidence presented by the reformers."

But there was no question in my mind that Darby is an intelligent, competent and basically honest journalist and that eventually the internal contradictions would start to get to her. One of the ways that people deal with cognitive dissonance is by convincing themselves that things have changed. Rather than question their original assessment and reaction, they convince themselves that they were right then but they are taking the opposite position now because things are different.

Michelle Rhee hasn't changed. She is constant as the northern star. Every point on her career trajectory is collinear. Those who didn't see her current incarnation coming either weren't paying attention or weren't being honest with themselves.

The rest of Darby's article is behind a paywall and I haven't had a chance to look at it. Perhaps something in the piece will invalidate something I've said here. If so let me know and I'll gladly make the appropriate retractions.