Question of the day

Roger Farmer:

Why is this a big deal? Because 90% of the macro seminars I attend, at conferences and universities around the world,  still assume that the labor market is an auction where anyone can work as many hours as they want at the going wage.  Why do we let our students keep doing this?

A model is a tool for better understanding the world.  While there may be problems where this particular simplification allows complex estimation, when labor markets (e.g. unemployment) is a major target of inference this simplification seems to remove the most interesting variation (e.g. employment friction and how it makes fast job changes undesirable all around). 

Clearly, if this is the state of the art, these models could be improved (heck, even an employment change penalty function would do wonders). 

Sometimes, the SAT you read about in the news doesn't look much like the actual SAT

[Unless otherwise noted, 'SAT' refers to the SAT Reasoning Test]

There are real concerns about the SAT. The emphasis on vocabulary can and sometimes does create a problem with cultural bias and the test has a history of being misused, as do most psychometrics. Though it is possible to make too much of these abuses, we should remember that, like the IQ test, people have and in a more subtle fashion, continue to use tests like the SAT to make racist arguments.

But while there are valid arguments for changing, deemphasizing, or even eliminating the SAT, these are not the arguments you will see in the anti-SAT editorials in Esquire or the New York Times. Instead, we get attacks on an SAT test that doesn't actually exist (Though it quite possibly may after David Coleman is finished with his reforms).

Though it has long tried to live down the fact for various reasons, the SAT was designed to be what its original name suggests, a scholastic aptitude test. It was also designed to be largely orthogonal to GPA and other information found in high school transcripts. (you can find a more detailed discussion of this point here and here)

In order to achieve that orthogonality the SAT test to be written in such a way that students have taken more advanced classes do not have an unfair advantage. Partly for that reason, the SAT is perhaps unique among major measures of academic accomplishment in that it has almost no rote memory component other than vocabulary.* (From here on out, I am going to focus primarily on the mathematics section though most of the general comments will apply to the entire test.)

An old professor of mine, Bill Condon, once described the analytic SAT as the toughest ninth grade math test you will ever take. That's an extremely apt way of putting it. All of the mathematical concepts are either common sense or things which a ninth grader should have covered. Almost all of the rules and formulas needed for the test are printed in the front of the booklet.

The trouble with coverage of the SAT and to a slightly lesser extent the ACT is that virtually everyone whom you will find discussing it in the pages of a major newspaper or magazine has intense but old and usually highly unreliable memories of the test. Add to that the generally poor quality of the emotionally-charged education reform debate and the result is an incredibly unproductive discussion.

For a  representative example, check out this opinion piece written by Jennifer Finney Boylan for the New York Times, which puts the trauma front and center starting with the first sentence:

I WAS in trouble. The first few analogies were pretty straightforward — along the lines of “leopard is to spotted as zebra is to striped” — but now I was in the tall weeds of nuance. Kangaroo is to marsupial as the giant squid is to — I don’t know, maybe D) cephalopod? I looked up for a second at the back of the head of the girl in front of me. She had done this amazing thing with her hair, sort of like a French braid. I wondered if I could do that with my hair.

I daydreamed for a while, thinking about the architecture of braids. When I remembered that I was wasting precious time deep in the heart of the SAT, I swore quietly to myself. French braids weren’t going to get me into Wesleyan. Although, in the years since I took the test in the mid-’70s, I’ve sometimes wondered if knowing how to braid hair was actually of more practical use to me as an English major than the quadratic equation. But enough of that. Back to the analogies. Loquacious is to mordant as lachrymose is to ... uh ...

This was the moment I saw the terrible thing I had done, the SAT equivalent of the Hindenburg disaster. I’d accidentally skipped a line on my answer sheet, early in that section of the test. Every answer I’d chosen, each of those lines of graphite-filled bubbles, was off by one. I looked at the clock. Time was running out. I could see the Wesleyan campus fading before my eyes.

High school is a trauma-filled time and its humiliations and disappointments can stay fresh for decades as they obviously have here. They do not, however, often lead to objective or accurate analyses. It may well have seemed unfair at the time to be judged on knowledge of relatively obscure words, but given that vocabulary tracks fairly well with reading ability, it doesn't seem unreasonable to ask a future English major to display an understanding of words like 'loquacious,' 'mordant' or even 'cephalopod.' As for the math section, I assume from the definite article that "the quadratic equation" refers to the quadratic formula. If so, that's an interesting choice because that formula does not appear on the SAT.

The math that does appear on the SAT relies on the following:

properties of numbers;

basic algebraic manipulation;

very basic (junior high level) geometry (with relevant formulas printed on the first page);

simple probability;

reading graphs and tables;

logic and problem-solving.

All of these fall into the good-to-know category for the general population and I'd argue the last is especially valuable for English majors (bad logic makes for bad literary criticism and often bad literature).

Boylan then goes on to complain that the SAT relies too much on memorization and to argue for the superiority of high school GPA as an academic metric. As mentioned before, the rote learning component of the SAT is extraordinarily small, far smaller than the corresponding component for almost every test-based grade a student will receive in junior high and high school.

This oddly self-defeating argument "We should drop the SAT because it's too ____; instead, we should rely more on grades/other tests/whatever (which happen to be more _____ than the SAT)" also features prominently in a less personal but much less coherent piece by Esquire.com news editor Ben Collins. Collins' argument consists of a series of largely arbitrary but highly emotional associations (it's not entirely clear why he makes these connections but he certainly feels strongly about them).

The first and possibly strangest of these associations involves Google.

Google, a company that evolved from a search engine into the world’s de facto incubator for great ideas that define our future, does not look at standardized tests when they hire applicants. They don't look at whether or not an applicant went to a Holy Grail of the standardized test lottery -- an Ivy League school -- either.

The wording here is somewhat unclear (this almost sounds like the company redacts the education sections from applicants' resumes), but I know that the big players like Google are very interested in students coming of top computer science programs like the UC schools and particularly Stanford. Take a look at this SAT breakdown for the school that produced Google:

Score	Percent of Applicants	Admit Rate	Percent of Admitted Class
800	15%	10%	25%
700–799	45%	7%	54%
600–699	28%	4%	19%
Below 600	12%	1%	2%

Keep in mind that these numbers include humanities majors.  The graduates that a company like Google are interested would almost all be in the first two bins. Google doesn't talk much about SATs at least in part because they've largely maxed out the metric.

Collins' piece actually gets worse from there.

All of that is antithetical to the dog-eat-dog, score-high-at-all-costs test-taking culture that America has distilled in its young people. And all of that is exactly why Google is the most futuristic corporation on this planet.

They know that this kind of ingenuity and collaboration — not just knowledge — is what makes a smarter world. It is also what makes better people.

We have ritually and ceaselessly sucked the fun and wonder out of learning in a country that is pushing kids into adulthood aimless, goalless, robotic and depressed as a way to feed a system that we now know does not work.

Then we blame the adults for questioning the intent of that system, even when there is none.

Do not mistake a less-tested America for an Everybody Wins America — an academic extension of those soccer games where nobody keeps score. We need to keep score to stay competitive, to remark on ingenuity and encourage drive, to understand where help is needed and where greatness needs to be challenged further.

But we don’t need to do it in this increasingly antiquated, old-world way, a holdover from when we knew much less about our kids’ biology, how they learn, and how to compel them to be better.

Currently, we have our kids fill in bubbles, and if those kids fill in the bubbles wrong on a forgotten Saturday morning when they are 17, they’re cast to a lower lot for the rest of their lives.

This cannot be the American ideal.

Make no mistake: The next revolution is not another industrial one or another technological one but it will be our first educational one. America can lead the pack if it gets over its hubris, identifies and changes its faults, and unshackles itself from the tyranny of rules and routine that exist only for the sake of themselves.

Why try to play catch up with the old world when the greatest companies in the new economy are already here, in this country, creating new ways to make the world better? These companies are disregarding the rest of the world’s urge to retrofit an exponential stream of new information into a few hundred bubbles on a thin, white sheet of paper.

Only those kinds of companies are forging our future. Why don’t our kids deserve to be taught the same way?

China has better test scores across the board than the U.S. They do not have Apple or Facebook or Microsoft or Google. They do not have our ingenuity. Let’s start appreciating it, rewarding it, fighting for it. Let's start drilling a love of learning into the brains of our kids, in the place where fear and anxiety currently reside.

Where to start...

In some parts of this passage, Collins seems to be talking about some tests other than the SAT such as the PISA exams when addressing China** or VAM-based tests when discussing the effects on learning.  If this had led up to a condemnation of tests in general the conflation might be at least internally consistent, but with the paragraph about the importance of keeping score that possibility goes out the window. We have to limit his criticisms, however odd, to the SAT.

The only real specific Collins offers about why the SAT should be singled out for elimination is that the test is old. That's partially true. The test has constantly evolved, driven by some of the best and most sophisticated analytic techniques in the field, but in terms of the test's format and its role in the education system, we've had the current set-up since 1930.

I'd argue that the country has had a pretty good run of innovation since 1930 and while I wouldn't claim that the SAT was a major driver, it would be difficult to argue that it held us back. Collins seems to agree on the first part but he takes a strange turn from there. As best I can make it out, he's arguing that America is the most innovative country in the world so it's essential that we drop a major, longstanding component of our education system or we'll become like China.

All snark aside, we probably should have a good debate about the way college admissions work and about the (I think misplaced) emphasis we have come to put on getting into the 'right' schools. Unfortunately, writers like Boylan and Collins aren't contributing to that debate; they're just supplying misplaced anger and emotional baggage.

*There's a big question (too big to address here) about the role of vocabulary in the SAT. Ideally there should be no rote learning element here at all. The vocabulary component is supposed to measure things like how reading volume and comprehension. Memorizing lists of words is, in a sense, cheating; it's also of questionable effectiveness compared to good, active reading habits.

** From China Daily:

The first annual report on the SAT performance of Chinese students found the average score was 1,213 points out of the total of 2,400, some 296 points lower than US students and 337 points lower than the benchmark set by College Board, the organizer of the test.

The gap is mainly derived from the reading and writing parts of the test. Chinese students scored 170 points less than US students in the reading part, which reveals Chinese students lack training in critical thinking, according to the report.

Chinese students, known to excel in mathematics, earned 547 points out of the total of 800, only 30 points higher than US students. The report attributed the lower-than-expected performance to Chinese students' poor knowledge of English mathematical terms and the test is aimed at a junior level which is easier for US students.

Professional Conduct

Dean Dad has the best view on the Nazareth College decision to rescind a job offer for a philosopher:

I understand the emotional appeal of rejecting someone before she rejects you.  It’s psychologically healthy to outgrow that phase.  Yes, it’s frustrating when a candidate you’re trying to hire comes in with unrealistic requests.  But sometimes grownups have to power through the disappointment.  Here’s a phrase I’ve used in turning down unrealistic requests:

“No, sorry, I can’t do that.”

 It would have likely accomplished the same outcome, without the chilling effect on future negotiations at the college.  Colleges have a great situation for hiring in fields like philosophy and it is likely that a much better fit could easily be found. 

Problems with modern reform paradigm

If this is correct then I see a potential problem with school (charter or not) use of standardized tests:

Parents don’t want their children’s teachers evaluated on the basis of student standardized test scores because they know it is unfair.
– Encouraged by the Obama administration, states now have teacher and principal evaluation systems that include test scores. Unfortunately, many teachers wind up being evaluated on the scores of students they don’t have or subjects they don’t teach.
Parents want to see their child’s standardized tests after completion.
– They can’t. The tests are proprietary.

Now remember that no instrument is perfect. But under what conditions does it make sense for the tests used to evaluate teachers not be made public?  What if there was an error? 

If evaluation is really the goal and we want to make data driven decisions, then are not the testing instruments themselves an important part of the environment?  Nobody would trust me to publish data from a Epidemiological study where there were not publically available instruments and public access data sets. 

Just look at the value that making NHANES public has generated.  Why should we not foster the same openness in education that has been so successful in public health? 

When threads collide -- David Coleman vs. Prof. Feynman

In all the coverage and controversy over the recent changes in the SAT, one of the aspects that troubles me the most is the one that seems to bother most people the least (emphasis added):

[David] COLEMAN: The new math section will focus on three things: Problem solving and data analysis, algebra and real world math related to science, technology and engineering fields.

The response from most journalists and pundits to this push for applicability has been either disinterest or mild approval, but if you dig into the underlying statistics and look into the history of similar educational initiatives, it's hard not to come away with the conclusion that this change pretty much has got to be bad (with a better than even chance of terrible).

The almost inevitable bad outcome will be the nearly unavoidable hit taken by orthogonality. As discussed earlier, the value of a variable (such as an SAT score) in a model lies not in how much information it brings to the model but in how much new information it brings given what the other variables in the model have already told us. Models that colleges use to assess students (perhaps with trivial exceptions) include courses taken and grades earned. We want additional variables to that model to be as uncorrelated as possible with those transcript variables. The math section of the SAT does this by basing its questions on logic, problem solving and on basic math classes that everyone should have taken before taking the SAT. Students whose math education stopped at Algebra I should be on a roughly equal footing with students who took AP calculus, as long as they understood and retained what they learned.

Rather than making the SAT a more effective instrument, "real world" problems only serve to undercut its orthogonality. Meaningful applied questions will strongly tend to favor students who have taken relevant courses. It might be possible to avoid this trap, but it would be extremely difficult and there's no apparent reason for making the change other than the vague but positive connotations of the phrase. (It's important to note here that Coleman's background is in management consulting and the ability to work positive-sounding phrases into presentations is very much a core skill in that field.)

Even more worrisome is the potential for the really bad question, bad enough to have the perverse effect of actually causing more problems (in stress and lost time) for those kids who understand the material. Nothing throws a good student off track worse than a truly stupid question.

Even if the test-makers know what they're doing, writing good, situation-appropriate problems using real situations and data is extraordinarily difficult. The vast majority of the time, real life has to be simplified to an unrealistic degree to make it suitable for a brief math problem. The end result is usually just an old problem with new nouns, take a rate problem and substitute "computer programmer" for "ditch digger."

You can make a fairly good case for real world questions based on teaching-across-the-curriculum -- for example, using Richter scale in a homework problem is a good way of working in some earth science -- but since the purpose of the SAT is to measure, not to instruct, that argument doesn't hold here.

The even bigger concern is what can happen when the authors don't know what they're doing.

From Richard Feynman's "Judging Books by their Covers":

Finally I come to a book that says, "Mathematics is used in science in many ways. We will give you an example from astronomy, which is the science of stars." I turn the page, and it says, "Red stars have a temperature of four thousand degrees, yellow stars have a temperature of five thousand degrees . . ." -- so far, so good. It continues: "Green stars have a temperature of seven thousand degrees, blue stars have a temperature of ten thousand degrees, and violet stars have a temperature of . . . (some big number)." There are no green or violet stars, but the figures for the others are roughly correct. It's vaguely right -- but already, trouble! That's the way everything was: Everything was written by somebody who didn't know what the hell he was talking about, so it was a little bit wrong, always!

Anyway, I'm happy with this book, because it's the first example of applying arithmetic to science. I'm a bit unhappy when I read about the stars' temperatures, but I'm not very unhappy because it's more or less right -- it's just an example of error. Then comes the list of problems. It says, "John and his father go out to look at the stars. John sees two blue stars and a red star. His father sees a green star, a violet star, and two yellow stars. What is the total temperature of the stars seen by John and his father?" -- and I would explode in horror.

Keep in mind, Feynman's example was picked to be amusing but representative ("That's the way everything was...a little bit wrong, always"). The post-Sputnik education reformers of his day were making pretty much the same demands that today's reformers are making. There's no reason to expect a better result this time.

Of course, there are good questions that do use real-world data (you can even find some on the SAT), but in order to write them you need a team that understands both the subtleties of the material and the statistical issues involved in testing it.

The more I hear from David Coleman, whether it concerns the College Board or Common Core, the less confidence I have in his abilities to head these initiatives.

Differential growth in life expectancy?

There has been a lot of discussion about Annie Lowrey's article on changes in life expectancy, documenting how most of the recent rise in life expectancy is among Americans of higher socio-economic status.  I did find the question of causality to be less compelling:

It is hard to prove causality with the available information. County-level data is the most detailed available, but it is not perfect. People move, and that is a confounding factor. McDowell’s population has dropped by more than half since the late 1970s, whereas Fairfax’s has roughly doubled. Perhaps more educated and healthier people have been relocating from places like McDowell to places like Fairfax. In that case, life expectancy would not have changed; how Americans arrange themselves geographically would have.

“These things are not nearly as clear as they seem, or as clear as epidemiologists seem to think,” said Angus Deaton, an economist at Princeton.

It is possible that there is a process of re-arrangement going on.  But that still doesn't make charts like the second one in this Aaron Carroll blog post easier to explain.  If the higher earning recipients of social security live longer than the lower earning recipients, then this association is not simple to explain with a direct appeal to the ecological fallacy. 

This is the sort of case where data is limited but we still need to make decisions.  It is odd that with some decisions we are desperately worried about getting things wrong when it advantages the affluent but we seem quite worried about over-interpreting data when redistribution would be the obvious policy solution. 

“The best thing that happened to the education system in New Orleans was Hurricane Katrina”

Joseph has already commented on one aspect of this Valerie Strauss article on Netflix CEO Reed Hastings, but a different passage caught my eye.

He appears to be presenting a vision of education in the United States where nearly all students are educated in collections of charter schools: “So what we have to do is to work with school districts to grow steadily, and the work ahead is really hard because we’re at 8% of students in California, whereas in New Orleans they’re at 90%, so we have a lot of catchup to do.”

As indicated by the Arne Duncan quote I used as a title, the notion of New Orleans as the educational ideal is strongly established in the reform movement. New Orleans has implemented the major tenets of the reform pedagogy to an extraordinary degree, particularly the rigid, metric-driven, no-excuses attitude. On this much, everyone can pretty much agree.

When we get to effects, however, the picture gets murkier. There has been some improvement in test scores but the 'reforms' coincided with increased spending which would be expected to boost scores. In addition, some of the increase can also be assigned to considerably increased pressure of students to take the tests seriously. Even putting all that aside, the improvements still don't look that impressive when compared to demographically similar schools in other states. Bruce Baker of Rutgers did the heavy lifting.

The bigger story for me, though, is in the details of the now dominant culture of New Orleans schools and in how parents and students have reacted.to the new regime. It's apparent that quite a few people are extremely unhappy.

A previous post mentioned students from one New Orleans high school walking out in a mass protest.



This was not an isolated incident.

Sci Academy, the flagship of the Collegiate Academies charter group, is known for high test scores and stringent discipline policies, such as requiring students to walk between lines taped on the floor. School leaders say the two go hand-in-hand: You don't have to walk on the right side of the hallway in college, but the discipline will serve you well.

But students at the group's two new schools, George Washington Carver Collegiate Academy and George Washington Carver Preparatory Academy, walked out the week before Thanksgiving, angry about such rules. On Wednesday (Dec. 18), about 60 students attended a rally. A letter of demands written by some students said kids were being suspended "for every little thing."

Recent state data show there are grounds for that claim. The three Collegiate schools had the city's highest suspension rates in the 2012-13 academic year. A full 69 percent of Carver Collegiate's student body was sent home at least once. Carver Prep suspended 61 percent of its student body. Sci Academy sent home 58 percent, a 9-point increase from the year before.

Anyone with experience with K-12 education can tell you that mass suspension and expulsion may possibly be the simplest and most effective way of improving test scores and making classroom management easier (a particularly pressing issue if you have high teacher turnover and rely heavily on programs like TFA). The problem with the technique is that it takes its greatest toll on the most vulnerable students. To fully grasp the brutality of these methods, you have to look at specific examples, such as this one from a parents' advocate in New Orleans:

The case that still breaks my heart involved a 14-year-old who kept getting demerits because his uniform shirt was too small and came untucked basically every time he moved. His mother was a veteran, well-educated, and had sold real estate but got divorced and ended up losing her job, and became homeless. They were living with friends and really struggling. The school expelled the child because he’d had three suspensions—the last one for selling candy to try to raise enough money to buy a new shoes and a new uniform shirt. I felt that if the mother went and told her story that the school would understand and wouldn’t hold up the expulsion. She didn’t want the school to know how impoverished she was but I convinced her to do it, so she came and told all of these people what she was going through—about her struggles. I thought for sure the board would overturn the expulsion, not just because her story was so compelling, but because there wasn’t actually anything in the school’s discipline book about selling candy. But they upheld it and it broke my heart that this kid was being put out of school because he was poor.

I don't know if this student went to one of the specific schools discussed here, but I can tell you that this is all too often what the process looks like, which is why responsible administrators use it so reluctantly.

A rare RPG post

Go and read Greyhawk Grognard on rare spell components.  With creativity you can make powerful spells tough to cast without needing to simply make them cost cash.  Finding each of these components would be an adventure in and of itself.  It makes components fun and interesting instead of just a "pay go" system. 

Has this person ever worked in a large corporation?

I ask in astonishment because I read things like this:

The newest bit of “wisdom” for public education comes to us from Netflix Chief Executive Officer Reed Hastings, who is a big charter school supporter and an investor in the Rocketship Education charter school network. At a meeting of the California Charter Schools Association on March 4, he said in a keynote speech that the problem with public schools is that they are governed by elected local school boards. Charter schools have boards that are not elected and, according to his logic, have “a stable governance” and that’s why “they constantly get better every year.”

See, in the private sector there was this phenomenon called "re-organization" (or re-org) for short that seemed to hit every couple of years.  Each time there was a massive shift in governance and lines of reporting.  If Netflix has managed to avoid these "re-orgs" then I see that as a very positive feature of the company, but it is hardly a guarantee that all private corporations will be able to do the same things.

It also leads to other tough questions.  The reason that the private sector works well is "creative destruction" as better companies outcompete poorer companies.  Is the charter school movement going to be immune to competition as well? 

And if they are immune to market forces, what are they accountable to?  If we think the answer is a higher level of government, then why do we think it will be more stable and more accountable than the school boards? 

This is not so much a defense of school boards (which I have seriously mixed feelings about) as it is a question of what model do we replace them with?  I am not sure that the command and control style socialist model of the state owned or supported corporation has been the most efficient alternative, has it? 

EDIT: Mark Palko wanted me to mention that Valarie Strauss has been going good work in this area for some time.  Also note that idea of California needing to "catch up" to New Orleans  -- it is possible for a former backwater to become dynamic (think Macedonia at the end of the classical Greek era) but this is often not the best bet to make.

NOTE: Mark here. For a bit more context, check out the reform movement gadfly Edushyster's take on the charter chain Hastings was promoting,

Texas versus California

I have been trying to decide if Scott Lemieux covered this too completely, but I decided that there were a couple of useful points in this article.  Especially as relates to my California versus Texas discussion with Mark, where we discuss the relative merits of the two states. For example:

And despite all the gloating by Texas boosters about how the state attracts huge numbers of Americans fleeing California socialism, the numbers don’t bear out this narrative either. In 2012, 62,702 people moved from California to Texas, but 43,005 moved from Texas to California, for a net migration of just 19,697.

This really points out how marginal the population shift is.  It isn't zero, but it is also not a mass population shift driven by the hellish California region.

Even more telling:

Oh yes, I know what you’ve heard. And it’s true, as the state’s boosters like to brag, that Texas does not have an income tax. But Texas has sales and property taxes that make its overall burden of taxation on low-wage families much heavier than the national average, while the state also taxes the middle class at rates as high or higher than in California. For instance, non-elderly Californians with family income in the middle 20 percent of the income distribution pay combined state and local taxes amounting to 8.2 percent of their income, according to the Institute on Taxation and Economic Policy; by contrast, their counterparts in Texas pay 8.6 percent.

And unlike in California, middle-class families in Texas don’t get the advantage of having rich people share equally in the cost of providing government services. The top 1 percent in Texas have an effective tax rate of just 3.2 percent. That’s roughly two-fifths the rate that’s borne by the middle class, and just a quarter the rate paid by all those low-wage “takers” at the bottom 20 percent of the family income distribution. This Robin-Hood-in-reverse system gives Texas the fifth-most-regressive tax structure in the nation.  

That leads to some really interesting questions about he relation of tax rates to prosperity.  If most people in Texas pay more taxes than California, then maybe this is another data point on the scale of more money for government leading to a stronger and more prosperous state.  But these points really don't make the case that Texas is clearly better than California.  Now both states have a strong streak of pro-business advocates, and so I think that both could end up as engines of American prosperity.  But I think that the future for California is pretty optimistic once the actual facts are broadly considered. 

The second half is more remarkable

Paul Krugman:

But my guess is that in a week or two we will once again hear a supposed wise man saying that we need to raise the retirement age to 67 because of higher life expectancy, unaware that (a) life expectancy hasn’t risen much for half of workers (b) we’ve already raised the retirement age to 67.

I completely understand why part a is misleading -- poorer workers get less social security already and making them work longer means fewer years of benefits increasing the benefits to wealthier contributors, who already get more per month. 

But the second part is the piece that I find truly remarkable.  I mean how hard could it be for the media to fact check that raising eligibility to 65 is current law?  Sure, you might want to protect the law but that is a completely different argument for forgetting that the low changed in 1983.  Or you could want to phase it in faster, but that would also be a) a different argument and b) seemingly ill-timed with the changes in the 401(k) system.

So I could imagine some debate about the first part (based around potential short term trends and the fact that we don't have the complete death curve for the population).  But the second is simply . . .  odd. 

This was both entertaining and thought-provoking

It was also a very clear headed explanation of some of the key mythologies of the modern cult of anarcho-capitalism.  I especially liked (edited with *'s for questionable language choices):

But if none of that stuff existed, there would be nothing stopping Jay-Z from taking your farm. In other words, you don't "own" ****. The entire concept of owning anything, be it a hunk of land or a house or a ****ing sandwich, exists purely because other people pay other armed men to protect it. Without society, all of your brave, individual talents and efforts won't buy you a bucket of ****s. So when I say "We're all in this together," I'm not stating a philosophy. I'm stating a fact about the way human life works. No, you never asked for anything to be handed to you. You didn't have to, because billions of humans who lived and died before you had already created a lavish support system where the streets are all but paved with gold. Everyone reading this -- all of us living in a society advanced enough to have Internet access -- was born one inch away from the finish line, plopped here at birth, by other people.

But it is a very straightforward explanation of the concept of interdependence, and the way that we are all connected based on social convention. 

Sometimes the Cracked site is surprisingly thought provoking. 

Orthogonality and the SAT

[Note: 'SAT' refers to the SAT Reasoning Test]

If you spend any time following the SAT debate, you will frequently encounter some variation on the phrase:

All in all, the changes are intended to make SAT scores more accurately mirror the grades a student gets in school.

The thing is, though, there already is something that accurately mirrors the grades a student gets in school. Namely: the grades a student gets in school. A better way of revising the SAT, from what I can see, would be to do away with it once and for all.

Putting aside the questionable assumption that the purpose of a colleges selection process is to find students who will get good grades at that college, there is a major statistical fallacy here, and it reflects a common but very dangerous type of oversimplification.

When people talk about something being the "best predictor" they generally are talking about linear correlation. The linearity itself is problematic here – we are generally not that concerned with distinguishing potential A students from B students while we are very concerned with distinguishing potential C students from potential D and F students – but there's a bigger concern: The very idea of a "best" predictor is inappropriate in this context.

In our intensely and increasingly multivariate world, this idea ("if you have one perfectly good predictor, why do you need another?") is rather bizarre and yet surprisingly common. It has been the basis of arguments that I and countless other corporate statisticians have had with executives over the years. The importance of looking at variables in context is surprisingly difficult to convey.

The explanation goes something like this. If we have a one-variable model, we want to find the predictor variable that gives us the most relevant information about the target variable. Normally this means finding the highest correlation between some transformation of the variable in question and some transformation of the target where the transformation of the target is chosen to highlight the behavior of interest while the transformation of the predictor is chosen to optimize correlation. In our grading example, we might want to change the grading scale from A through F to three bins of A/B, C, and D/F. If we are limited to one predictor in our model picking, the one that optimizes correlation under these conditions makes perfect sense.

Once we decide to add another variable, however, the situation becomes completely different. Now we are concerned with how much information our new variable adds to our existing model. If our new variable is highly correlated with the variable already in the model, it probably won't improve the model significantly. What we would like to see is a new variable that has some relationship with the target but which is, as much as possible, uncorrelated with the variable already in the model.

That's basically what we are talking about when we refer to orthogonality. There's a bit more to it – – we are actually interested in new variables that are uncorrelated with functions of the existing predictor variables – but the bottom line is that when we add a variable to a model, we want it to add information that the variables currently in the model haven't already provided.

Let's talk about this in the context of the SAT. Let's say I wanted to build a model predicting college GPA and, in that model, I have already decided to include high school courses taken and their corresponding grades. Assume that there's an academic achievement test that asks questions about trigonometric identities or who killed whom in Macbeth. The results of this test may have a high correlation with future GPA but they will almost certainly have a high correlation with variables already in the model, thus making this test a questionable candidate for the model. When statisticians talk about orthogonality this is the sort of thing they have in mind.

The SAT works around this problem by asking questions that are more focused on aptitude and reasoning and which rely on basic knowledge not associated with any courses beyond junior high level. Taking calculus and AP English might help students' SAT scores indirectly by providing practice reading and solving problems so we won't get perfect orthogonality but it will certain do better in this regard than a traditional subject matter exam.

This is another of those posts that sits in the intersection of a couple of major threads. The first concerns the SAT and how we use it. The second concerns orthogonality, both in the specific sense described here and in the general sense of adding information to the system, whether through new data, journalism, analysis or arguments. If, as we are constantly told, we're living in an information-based economy, concepts like orthogonality should be a standard feature of the conversation, not just part of statistical esoterica. 

Negotiation

This is a really interesting story about a failed academic negotiation.  It is pretty clear that nobody has covered themselves in glory here, although the response from the institution seems awfully harsh and a symptom of the sort of extremely tight labor markets that reduce employee choice.  One only hopes that the maternity leave condition was orthogonal to the decision to rescind the offer, although I suspect asking for a one year delay in start date was more likely as the culprit. 

The comments below are quite interesting as well.

More on inequality

As a follow-up to the last post consider this point by Chris Dillow:

Of course, this calculation only makes sense if we assume such redistribution could occur without reducing aggregate incomes. But such an assumption is at least plausible. The idea that massive pay for the 1% has improved economic performance is - to say the least - dubious. For example, in the last 20 years - a time of a rising share for the top 1% - real GDP growth has averaged 2.3% a year. That's indistinguishable from the 2.2% seen in the previous 20 years - a period which encompassed two oil shocks, three recessions, poisonous industrial relations, high inflation and macroeconomic mismanagement - and less than we had in the more egalitarian 50s and 60s.

It is not that there are no adverse consequences to redistribution.  Nor does it mean than any policy, taken to an extreme, will be as effect as it will on the margin when applied to current conditions.  But it is an even more compelling argument that inequality is not, in and of itself, self evidently a force for economic growth without some additional evidence. 

Data Intuition

Paul Krugman:

Even more strikingly, however, the level as opposed to the growth rate of French GDP per capita is substantially lower than that of the US.

This is my main concern about Ostry et al. Suppose we think that strong redistributionist policies reduce the level of output — but that it’s a one-time shift, not a permanent depression of growth. Then you could accept their result of a lack of impact on growth while still believing in serious output effects.

I might be able to accept the one time shift theory of redistribution, where reducing inequality lowers the overall GDP of the economy.  But if these effects are dynamic (they change the rate of growth instead of shifting the absolute level) then they should show up in the historical record.  After all, there are a number of highly unequal societies -- have they outcompeted the more equal societies repeatedly? 

Did the French revolution greatly depress French output and dynamism? 

Now it could be that this is one element of a complex system.  That is totally plausible.  But then it should also be a candidate for trade-offs.  But the countries that have done large levels of redistribution (think US versus Canada or Denmark) have not obviously done worse. 

In general, simple explanations for complex phenomenon are always suspect, especially if it is difficult to formulate a test that night falsify the hypothesis

Open Data

This is a pretty good argument for why there is resistance to completely open data:

When people don’t want to release their data, they don’t care about the data itself. They care about the papers that could result from these data. I don’t care if people have numbers that I collect. What I care about is the notion that these numbers are scientifically useful, and that I wish to get scientific credit for the usefulness of these numbers. Once the data are public, there is scant credit for that work.

It takes plenty of time and effort to generate data. In my case, lots of sweat, and occasionally some venom and blood, is required to generate data. I also spend several weeks per year away from my family, which any parent should relate with. Many of the students who work with me also have made tremendous personal investments into the work as well. Generating data in my lab often comes at great personal expense. Right now, if we publicly archived data that were used in the creation of a new paper, we would not get appropriate credit in a currency of value in the academic marketplace.

I think the key to this argument is that most of the effort in some fields lies in the collection of the data bit all of the credit is based on papers.  So you would end up, rather quickly, with a form of tragedy of the commons where the people who create the data end up with little credit . . . meaning we would end up with less data. 

Are there are alternatives to this paradigm?  Of course.  The US census is a excellent example of an alternative model -- where the data collection and cleaning is done by a government department on the behalf of all sorts of researchers.  Splitting data collection and data analysis in this way is certainly a viable model. 

But pretending that open data is a simple case of people being reluctant to share their information is really an unfair portrayal.  In my own career I have had lots of access to other peoples data and they are extremely generous so long as I offer to give proper credit.  So I don't think the open data movement is all wrong, but it does suggest that there is a difficult conversation to make this work well. 

How did we miss this one?

Mike the Biologist links to a remarkable statistic:

There are numerous problems with using VAM scores for high-stakes decisions, but in this particular release of data, the most obvious and perhaps the most egregious one is this: Some 70 percent of the Florida teachers received VAM scores based on test results from students they didn’t teach and/or in subjects they don’t teach

.Even more remarkable, this was only revealed after a court ordered the Florida Times-Union sued for access to the records.  The source also notes that this issue is live in Tennessee, which has similar problems.  Now we have a lot of moving parts in the area of education reform and there are arguments about the use of value added measures (VAM) testing. 

But nobody has a good argument about testing other teachers and making employment decisions based on their performances.  When we talk about peer effects, it is the students in the classroom and not colleagues that we are thinking of.  It is also striking how much room there is to game statistics when you only collect real data on one third of teachers.  Can we really presume that this data collection is a proper random sample? 

These issues are not necessarily small issues.  They have the potential to replace one set of issues in education with another.  Nor is it 100% clear that they address the issue of social mobility, either, as less job security for teachers does not appear to directly address the drivers of intergenerational social mobility. 

I have respect for people trying to solve a tough problem, but this does not seem to be a great way to go.

Biomedical Patents

In a follow-up to this post, I thought it would be worth looking at a piece of the patent system where I don't have major concerns -- namely drug patents.  According to the FDA, a drug patent is good for 20 years after filing. 

This is very much the low end of the intellectual property patent discussion.  Micky Mouse was invented in 1928, so the current duration of protection has been > 85 years.  On the other hand, a 20 year patent would have expired before the end of Walt Disney's life.  Or consider JRR Tolkien who wrote the hobbit in 1937 and the Lord of the Rings in 1954/55.  He died in 1973 -- meaning the Hobbit would have exited protection during his lifespan and the Lord of the Rings would barely have made it. 

Furthermore, the cost of biomedical drug development are huge.  You could imagine replacing this system with research grants, but there is no way to avoid the conclusion that this would immediately be one of the largest items in the Federal budget.  This is not to say that the process could not be improved or streamlined.  But given that we maintain the current cost structure for drug development, these patent lengths look either short or appropriate. 

Or, in other words, different areas have different issues. 

The frustrations of public health

Amanda Marcotte:

In other words, learning that they were wrong to believe that vaccines were dangerous to their kids made vaccine-hostile parents more, not less likely to reject vaccination. Mooney calls this the "backfire effect," but feel free to regard it as stubborn, childish defensiveness, if you'd rather. If you produce evidence that vaccination fears about autism are misplaced, anti-vaccination parents don't apologize and slink off to get their kids vaccinated. No, according to this study, they tend to double down. 

This is just so depressing that it is not even humorous.  It suggests that attitudes towards medical treatment are fundamentally irrational.  This has a ton of scary implications for the over-use of popular therapies (antibiotics) and under-use of  unpopular ones (vaccines).  In a sense, it has been too long since we saw the large numbers of deaths that diseases like smallpox used to inflict and we have lost our fear of these diseases. 

Even a paternalistic regulatory regime is going to find dealing with these problems to be challenging. 

Copyright

From Beat the Press:

The big winners get to be big winners because the government is prepared to devote substantial resources to copyright enforcement. This is crucial because if everyone could freely produce and distribute the music or movies of the biggest stars, taking full advantage of innovations in technology, they would not be getting rich off of their recorded music and movies.

The internet has made copyright hugely more difficult. The government has responded by passing new laws and increasing penalties. But this was a policy choice, it was not an outcome dictated by technology. The entertainment industry and the big "winners" used their money to influence elected officials and get them to impose laws that would restrain the use of new technology. If the technology was allowed to be used unfettered by government regulation, then we would see more music and movies available to consumers at no cost.

In other words, it is government regulation that makes a winner take all economy in this case, not technology.

I think that this really is the piece of the whole puzzle that is worth discussing.  The regulation of the market place creates outcomes that are going to favor some actors over others.  It is the sad true of rules -- all rules will hurt some people and help others.  But we cannot treat the current set of rules as if they are divinely ordained or immutable -- even if current winners would enjoy that approach.

It is also the place where a Libertarian perspective seems most at odds with the marketplace.  The idea that laws need to be enacted to protect the profits of specific industries (what was once called "industrial policy") seems to be the main concern of key thinkers in the movement (consider Ayn Rand and the plot of Atlas Shrugged). 

Since the argument for copyright is about the social benefits of encouraging innovation (i.e. it is an ends based argument, not a natural rights based argument), it does seem that we should consider whether these aims are being well met in the current legal environment.  I am not an expert on this area, but it does seem that it is possible that we are too far on one side of the spectrum, where the rewards are more than are needed to incent innovation.  After all, do we really believe Walt Disney would have abandoned Mickey Mouse as unprofitable if now, 48 years after his death in 1966, the early films left copyright? 


NOTE [from Mark]:

Here are a couple of links to some previous posts that provide some background on the Mickey Mouse angle.

Alice in Lawyerland

Intellectual property and business life-cycles

Do copyright extensions drive innovation? -- Hollywood blockbuster edition

Back (momentarily) on the terrestrial superstation beat part 1 -- GetTV

While checking the TV listings a couple of weeks ago I came across an interesting but unfamiliar station showing what appeared to be a Jack Lemmon film festival. A visit to Wikipedia revealed that GetTV was a new terrestrial superstation from Sony Pictures and a quick perusal of the channel and its schedule revealed a heavy unacknowledged debt to Weigel's ThisTV and (particularly) Movies!

If you're going to steal, you from the best. As I've mentioned before, Movies! is, after TCM, probably the best channel for film buffs currently broadcasting. Technically, it's a collective effort from Weigel and Fox, but the division of labor has Fox providing the brawn (stations, money, libraries) and Weigel providing the brains (concept, programming, ad campaigns). Sony has stuck closely to the Movies! model and the result is a nice addition to the free-TV landscape.

It also provides a telling data point, especially when you take a close look at the timeline. I'll explore this in more depth in an upcoming post, but the broad outline will do for now. Six years ago, the idea of using over-the-air television to launch TBS-style superstations was not generating much interest. The only entrant was the well-respected but decidedly minor regional player, Weigel.

The first effort, ThisTV, was successful enough to convince Weigel to take its popular local format national with METV. Weigel's historic crosstown rival WGN soon followed with AntennaTV. Then came Bounce (combining elements from Weigel and BET). Then NBC/Universal's COZI. Then Weigel and Fox's previously mentioned Movies! and now, GetTV. There are a few points that need to be emphasized here:

This has a remarkably slow and steady process with increasingly large investments coming in as new information has flowed into the system;

That information is quite detailed. Since terrestrial superstations are generally broadcast in partnership with other stations, lots of parties have rich, reliable data about viewership and revenue;

As far as I know (and I've been following this story closely), all of the stations launched in this market over the past six years are still around with either their original format or a significantly upgraded one. What's more, they all appear to be making money.

Also true for Epidemiology

From the ever interesting Andrew Gelman:

Don’t model the probability of win, model the expected score differential. Yeah, I know, I know, what you really want to know is who wins. But the most efficient way to get there is to model the score differential and then map that back to win probabilities. The exact same issue comes up in election modeling: it makes sense to predict vote differential and then map that to Pr(win), rather than predicting Pr(win) directly. This is most obvious in very close games (or elections) or blowouts; in either of these settings the win/loss outcome provides essentially zero information. But it’s true more generally that there’s a lot of information in the score (or vote) differential that’s thrown away if you just look at win/loss.

This is the same principle in a lot of medical problems.  There is often a tendency to define diseases based on continuous distributions as binary outcomes.  Consider:

• High blood pressure = hypertension
• High cholesterol (especially LDL) and/or low cholesterol (HDL) = dyslipidemia
• High blood glucose = diabetes

Now, there are case where the true value is obscured by treatment.  That can be a reason to dichotomize, especially if the effect of the drugs is variable.  However, even in such cases there are options that can be used to estimate the untreated values of the continuous parameter. 

But I think that you will see much better prediction if you first model change in the parameter (e.g. blood pressure) and then convert that to the binary disease state (e.g. hypertension) then if you just develop a logistic model for prob(hypertension). 

Light posting

The last major push of traveling season is upon me and I know Mark is in the later stages of a pretty cool project.  So we might be updating a tad less than usual. 

The Outlier by the Bay

[Homonym alert -- I dictated this to my smart phone then edited it late in the evening.]

There's an energetic debate going on over at Andrew Gelman's site regarding Richard Florida's theories of the creative class. I can understand the urge to rise to Florida's defense. After all, there's great appeal to the idea that the kind of smart, innovative people who tend to drive economic growth are attracted to diverse, tolerant, livable cities with vibrant cultures. To  some extent, I believe it myself, but I find myself having the same problems with Florida I have with the rest of the urban utopianists: first that they have a tendency to take interesting but somewhat limited findings and draw impossibly sweeping conclusions and TED-ready narratives; and that these narratives often mesh badly with the facts on the ground. I've already discussed the latter (in probably overly harsh but still heartfelt language). Here are some thoughts on the second.

Part of my problem with a lot of urban research is that there just aren't enough major cities out there to make a really good sample, particularly when you have data this confounded and so many unusual if not unique aspects with each area. For some cities, with New York and San Francisco being very close to the top of the list, these unique aspects make it difficult to generalize findings and policy suggestions.

When I look at Richard Florida's research, at least in the form that made it to the Washington Monthly article, the role of San Francisco strikes me as especially problematic.

What is by many standards the most Bohemian and gay-friendly area in America is also arguably the country's center of technological innovation. Even if there were no relationship in the rest of the country, that single point would create a statistically significant correlation. That would not be so troubling if we had a clear causal relationship or a common origin. Unfortunately, the main driver of the tech boom, if you had to limit yourself to just one factor, would have to be Stanford University, while the culture of San Francisco does not appear to have been particularly influenced by that school, particularly when compared to Berkeley. In other words, had Stanford chosen to establish his college in Bakersfield, we might still have had Haight-Ashbury but we almost certainly would not have had Silicon Valley.

What's more, when we start looking at this narrative on a city by city basis, we often fail to see what we would expect. For example, if you were growing up in a relatively repressive area of the Southeast and you were looking for a Bohemian, gay-friendly metropolitan area with a vibrant arts scene, the first name on your list would probably be New Orleans followed by, roughly in this order, Atlanta, Savannah, and Memphis. Neither Cary. North Carolina nor Huntsville, Alabama would have made your top 10.

Rather bizarrely, Florida discusses both the Research Triangle and and New Orleans in his WM article, apparently without seeing the disconnect with his theories.:

Stuck in old paradigms of economic development, cities like Buffalo, New Orleans, and Louisville struggled in the 1980s and 1990s to become the next "Silicon Somewhere" by building generic high-tech office parks or subsidizing professional sports teams. Yet they lost members of the creative class, and their economic dynamism, to places like Austin, Boston, Washington, D.C. and Seattle---places more tolerant, diverse, and open to creativity.

There are lots of reasons for leaving New Orleans for Austin, but tolerance, diversity and openness to creativity aren't among them.

Even stranger are Florida's comments about the Research Triangle:

Kotkin finds that the lack of lifestyle amenities is causing significant problems in attracting top creative people to places like the North Carolina Research Triangle. He quotes a major real estate developer as saying, "Ask anyone where downtown is and nobody can tell you. There's not much of a sense of place here. . . .The people I am selling space to are screaming about cultural issues." The Research Triangle lacks the hip urban lifestyle found in places like San Francisco, Seattle, New York, and Chicago, laments a University of North Carolina researcher: "In Raleigh-Durham, we can always visit the hog farms."

Remember, Florida said "Places that succeed in attracting and retaining creative class people prosper; those that fail don't," so is this spot withering away? Not so much:

Anchored by leading technology firms, government and world-class universities and medical centers, the area's economy has performed exceptionally well. Significant increases in employment, earnings, personal income and retail sales are projected over the next 15 years.

The region's growing high-technology community includes such companies as IBM, SAS Institute, Cisco Systems, NetApp, Red Hat, EMC Corporation and Credit Suisse First Boston. In addition to high-tech, the region is consistently ranked in the top three in the U.S. with concentration in life science companies. Some of these companies include GlaxoSmithKline, Biogen Idec, BASF, Merck & Co., Novo Nordisk, Novozymes, and Wyeth. Research Triangle Park and North Carolina State University's Centennial Campus in Raleigh support innovation through R&D and technology transfer among the region's companies and research universities (including Duke University and The University of North Carolina at Chapel Hill).

This is not to say that there is not some truth to Florida's narrative or validity to many if not most of his insights. It does appear, however, that the magnitude of the effects he proposes are far less than he suggested and that the absolute claims he is fond of making are often riddled with exceptions.

Weekend blogging --Hard boiled (foreign edition)

A couple more from the Criterion Collection for your cinematic to-do list (free for the next nine days).




 Akira Kurosawa's High and Low:





This next one is not as well known but it sounds interesting:
Ascenseur pour l'échafaud is a 1958 French film directed by Louis Malle. It was released as Elevator to the Gallows in the USA (aka Frantic) and as Lift to the Scaffold in the UK. It stars Jeanne Moreau and Maurice Ronet as criminal lovers whose perfect crime begins to unravel when Ronet is trapped in an elevator. The film is often associated by critics with the film noir style. According to recent studies, it also introduces very peculiar narrative and editing techniques so that it can be considered a very important experience at the base of the Nouvelle Vague and the so-called New Modern Cinema.

Context is everything

There has been some vigorous discussions about the Congressional Budget Office's claims that increasing the minimum wage would cost jobs.  But there really are two things to keep in mind. 

One, noted by Jon Chait, is that we don't seem to be worried about job losses in other contexts:

And yet the Congressional Budget Office, now brimming with conservative credibility, has spent the last five years issuing report after report assailing the Republican position. Republicans weeping for the half-million or so jobs that would be destroyed by a higher minimum wage would be shocked to learn that, according to the CBO, they have destroyed 200,000 jobs by blocking the extension of emergency unemployment benefits (which lift the incomes of destitute workers, creating higher demand). Likewise, the budget sequestration they have embraced as their cherished second-term Obama trophy has destroyed 900,000 jobs.

The other issue is that costs are being talked about in the absence of benefits:

As economic policies go, that's not bad. In the real world, there's no such thing as a policy that has benefits with zero costs. There are always compromises. In this case, in return for the small job losses, 16 million workers would get a direct wage increase; another 8 million would get an indirect wage increase; and nearly a million workers would be lifted out of poverty. That's about as good as it gets. 

The argument against the extensions of unemployment benefits is the cost to the deficit (or the need to increase taxes).   It is not a good plan to consider both costs and benefits for the policies that you do like, and not to consider benefits for the policies that you do like. On point is:

There is no policy I can think of that generates only benefits without any costs, and policy makers always have to weigh the two sides. In the case of the minimum wage, on the benefits side of ledger, the budget office shows that 16.5 million low-wage workers would directly get a much-needed pay increase at no cost to the federal budget.

Finally, the magic trump card of "innovation" can be considered.  The argument against increasing taxes is that it might reduce innovation by high performers.  Robert Downey Jr might make fewer movies, for example, as he might value his leisure time more.  I am not convinced by this argument, but at least there is some theory that links these two things (high taxes and innovation) together. 

However, with minimum wage you have the opposite problem.  Low wages are known to stifle innovation.  It is well accepted that one of the problems with slavery (in Rome, as a common example) was that the cheap labor made the returns on labor saving innovations small.  So making labor cost more could have the expected costs and benefits plus drive innovation.  And there is no tax increase to be considered. 

Now does this mean that this policy is a "no-brainer"?  No.  But it does mean that there really has to be a much deeper engagement with the pros and cons of such an argument. 

Chip and Pin

Kevin Drum:

Americans are already accustomed to using PINs, and would have no more trouble managing multiple PINs than Danes and Italians do. And while using one PIN for ten cards might not exactly be best practice, it's certainly better than no PIN at all. How could it possibly increase fraud? Signature cards can be used with nothing more than a scrawl.

And then we get to the last paragraph. If cards have PINs, banks and card issuers will have to spend a bit of money helping people change their PINs. 

And that seems to be what we're left with. Merchants are willing to make the switch. Consumers would get used to the switch pretty quickly. But card issuers don't want to bother because it might increase their customer support costs a bit during the transition.

 So clearly we are in a situation where there is not a really open market.  The quote from Capital One in another Kevin Drum post makes this even more clear: the banks are blaming retailers not wanting to adopt this system.  But I look at major events like the recent Target hacking and figure that secure payment systems would have huge market value.  Or the actual statements from retailers wanting the more advanced system and, again, ponder why this is so hard to arrange.  So why can't one specific bank just pioneer the new system (well tested in Canada and Europe) as a market advantage?

Well, the unified payment systems would seem to me to be the issue.  But that is an issue of infrastructure as we go to a post-cash world.  If fraud mostly affects merchants, the incentives for banks is to offload costs. 

Why can't we get to an equilibrium where everyone is better off? 

French inefficiency

So I had always presumed we make a painful choice between efficiency and social support.  That the United States has an efficient and dynamic economy because we make the hard decisions to leave workers with a lower support network so that companies can be more agile. 

But then I read about the French:

• Having better medical care
• Having faster broadband for less money
• Less expensive and faster infrastructure

And they do this with early retirement, unions, and a dense network of government regulations.  I don't want to make the mistaken attribution that they are perfect -- that would be clearly untrue.  But I want to think a bit more clearly about precisely where our advantages lie.  Because these were the areas that I thought might be the most likely candidates for the US to dominate, given low levels of  regulation and flexible labor. 

"The Wolf of Sesame Street"

I'm not sure whether this David Sirota exposé is a pension story (which is Joseph's beat) or a media story (which is more my territory). Either way it's something you ought to check out.

On December 18th, the Public Broadcasting Service’s flagship station WNET issued a press release announcing the launch of a new two-year news series entitled “The Pension Peril.” The series, promoting cuts to public employee pensions, is airing on hundreds of PBS outlets all over the nation. It has been presented as objective news on  major PBS programs including the PBS News Hour.

However, neither the WNET press release nor the broadcasted segments explicitly disclosed who is financing the series. Pando has exclusively confirmed that “The Pension Peril” is secretly funded by former Enron trader John Arnold, a billionaire political powerbroker who is actively trying to shape the very pension policy that the series claims to be dispassionately covering.

In recent years, Arnold has been using massive contributions to politicians, Super PACs, ballot initiative efforts, think tanks and local front groups to finance a nationwide political campaign aimed at slashing public employees’ retirement benefits. His foundation which backs his efforts employs top Republican political operatives, including the former chief of staff to GOP House Majority Leader Dick Armey (TX). According to its own promotional materials, the Arnold Foundation is pushing lawmakers in states across the country “to stop promising a (retirement) benefit” to public employees.

Despite Arnold’s pension-slashing activism and his foundation’s ties to partisan politics, Leila Walsh, a spokesperson for the Laura and John Arnold Foundation (LJAF), told Pando that PBS officials were not hesitant to work with them, even though PBS’s own very clear rules prohibit such blatant conflicts. (note: the term “PBS officials” refers interchangeably to both PBS officials and officials from PBS flagship affiliate WNET who were acting on behalf of the entire PBS system).

To the contrary, the Arnold Foundation spokesperson tells Pando that it was PBS officials who first initiated contact with Arnold in the Spring of 2013. She says those officials actively solicited Arnold to finance the broadcaster’s proposal for a new pension-focused series. According to the spokesperson, they solicited Arnold’s support based specifically on their knowledge of his push to slash pension benefits for public employees.

The foundation’s spokesperson said PBS executives approached Arnold “with the proposal for the series, having become aware of LJAF’s interest” in shaping public pension policy, and moving that policy toward cutting retirement benefits for public workers.

According to newly posted disclosures about its 2013 grantmaking, the Laura and John Arnold Foundation responded to PBS’s tailored proposal by donating a whopping $3.5 million to WNET, the PBS flagship station that is coordinating the “Pension Peril” series for distribution across the country. The $3.5 million, which is earmarked for “educat(ing) the public about public employees’ retirement benefits,” is one of the foundation’s largest single disclosed expenditures. WNET spokesperson Kellie Specter confirmed to Pando that the huge sum makes Arnold the “anchor/lead funder of the initiative.” A single note buried on PBS’s website – but not repeated in such explicit terms on PBS airwaves – confirms that the money is directly financing the “Pension Peril” series.

Much more of this if you follow the link.

Felix and pensions

I wish I could write as clearly as Felix Salmon:

Isn’t it better to just keep all your money for yourself, and make sure to save enough that you can live well in retirement?

This is a pretty libertarian, every-man-for-himself view of retirement: it makes few concessions to the idea that there’s a societal obligation to the elderly, or that groups can achieve more together than they can individually. At heart, it’s a view which benefits people like John Arnold, who pay a lot of taxes, at the expense of the poorest members of society, who might take out more than they put in. And, of course, it’s a view which benefits successful investors, like John Arnold, over schmucks who have no idea how to best invest their paltry 401(k) funds.

In reality, big pooled pension funds are much more efficient — and generate much higher returns — than anything an individual is likely to be able to manage. And in the specific realm of public finance, the case for group-funded defined-benefit schemes is even stronger. That’s because public servants — police officers, elementary school teachers, you name it — tend to have much longer tenure at their jobs than, say, hot-shot fund managers. They are also willing to work for relatively low salaries precisely because they know that their pension benefits are good: that they don’t need to worry about how they’re going to make ends meet in retirement. That peace of mind is hugely valuable, and rarely factors in to the calculations of the pension opponents, who seem to think that worrying about your individual retirement investments is a good thing.

I think that this point cannot be emphasized enough  -- the shift to defined contribution pensions is not a social neutral decision.  It's also worth noting that the wage depressing effects of security (noted as early as Adam Smith's day in the 1700's) can generate a lot of social benefit.  It's not that abuses do not occur -- we are a big country.  But there is a case to be made for efficiency . . .

More on the animosity of the education reform movement toward professional teachers

Following up on Joseph's post on Jonathan Chait and the education reform movement and on the ensuing discussion..

I've talked before about the inevitable tension between profession teachers (particularly highly competent and experienced teachers) and movement reformers like Chait.

First, because, pedagogically, the system has a reactionary bias, made worse by the fact that the most effective teachers, the ones you would want in your corner, are also the ones who are most reluctant to trade their methods in for something new and unproven.

I'm afraid, though, I've only discussed the point tangentially and I may have left readers with the idea that this was some sort of a hypothetical particle, that theory predicts reformers might occasionally want to get rid of teachers, not because they were incompetent but because they were reluctant to adopt untested methods (some of which can strike outsiders as a bit flaky).

Not only does this sort of thing happen, but, as pointed out in this Boston Globe story (via the invaluable Edushyster), it sometimes constitutes recognized policy.

But in most cases, the teachers at Dever and Holland should be of high quality. Principals of those schools were granted enormous flexibility to hand-pick their staffs under a 2010 state law that aims to rapidly overhaul failing schools. That hiring flexibility enables principals to get rid of any teacher, including those who perform well but disagree with the turnaround methods.

Free markets: a continuing story

Capitalism in action:

The NYT has a fascinating piece about threats that Tennessee Republicans are making against Volkswagen if they recognize a union formed by its workers . . . This is an interesting view coming from people who usually claim to be supporters of a free market and to believe that the government should not interfere in the running of a business.

Once again, this goes to the whole question of whether market outcomes are somehow moral.  Given that government is willing to provide pressure to distort the market based on ideology, there cannot be a clean economic meritocracy.  Which is fine -- I think mixed markets have some real benefits from an optimization point of view.

But we should all just note that "we should distort markets because, in the long run, unions in our state will do more harm than good" isn't really all that different in form than the whole idea of government regulation for health, safety, or equality (i.e. minimum wage laws). 

Points to Ponder

I don't always like the perspectives of this blogger, but this is a very good point in any world in which we are worrying about the knock-on effects of things like corporate taxes:

In the "debate" about welfare benefits, there's one point which is underweighted but so obvious that I'm embarrassed to mention it - that some form of welfare is beneficial not just to its recipients, but to capitalists.

Rightists like to point out - correctly - that the burden of taxes doesn't necessarily fall upon those who nominally pay it: corporation tax, for example, is paid by workers and not just capitalists.

But just as there's tax incidence, so there is benefit incidence; the benefits of benefits don't flow merely to their nominal recipients.

Housing benefit, for example, helps to sustain high rents and so could well be renamed landlords benefit.

Thinking about things in this sort of interlinked way makes it hard for me to understand why welfare programs are seem so negatively.  After all, they still create opportunities and it is not like the levels of pay-out make it actively fun to be employed. 

Feynman beautifully summarizes the problem with 'rigor' in primary and secondary math textbooks

From the previously mentioned essay by Richard P. Feynman, this does a perfect job boiling down the reaction that teachers with math backgrounds so often have to the books they're told to teach from.

It was a pretty big job, and I worked all the time at it down in the basement. My wife says that during this period it was like living over a volcano. It would be quiet for a while, but then all of a sudden, "BLLLLLOOOOOOWWWWW!!!!" -- there would be a big explosion from the "volcano" below. 

The reason was that the books were so lousy. They were false. They were hurried. They would try to be rigorous, but they would use examples (like automobiles in the street for "sets") which were almost OK, but in which there were always some subtleties. The definitions weren't accurate. Everything was a little bit ambiguous -- they weren't smart enough to understand what was meant by "rigor." They were faking it. They were teaching something they didn't understand, and which was, in fact, useless, at that time, for the child.

Jon Chait and Education reform

I honestly think Jon Chait and I are participating in completely different debates.  Consider this:

A major reason for this is obviously that charter schools are more aggressive about creating accountability standards to promote good teachers and coach up or replace bad ones. This puts them at a crossways with teachers' unions and their allies, which defend paying teachers by seniority and subjecting them to minimal performance accountability.

Now match this up with Mike the Mad Biologists description of the games that are being played with these tests (example from here).  Or the compensation paid to executives.  Also, there are concerns about the retention rates that charter schools have of problematic students.

So these are my issues:

• Are we really sure that an "at will" standard of employment is better than unions?
• Can we be sure that the testing is fair, objective, and measures what we want to measure? And that it will not be managed for "optics"?
• Is reducing teacher compensation to increase executive compensation where we should shift resources?
• Private day-cares and universities can expel students for any reason  Are we sure that won't become an issue when there is not a strong public school system that has to take students in the absence of strong evidence of problems for other students?

I also ask this in the context of the TPM article arguing that the current evidence isn't showing superior student outcomes.  Because, if the students are doing the same, then I think we should pay attention to the teachers who are worth protecting as well.

These are really the unanswered questions that I have.  Now would I trade charter schools for other policy gains.  For example, robust and progression taxation could create the possibility of redistribution which might lead to wider social benefits (and make me less wary of the corporate model of shifting earnings to the top).    

Mark: This is more your area.  Any perspectives on your part?