Hydra posts

I'm working on a post about this NPR story (take a look here and here and let me know if you have any reactions*). It started out as a post on kids and reading, then it became a post on kids and reading and the way we frame research questions, then it became a post on kids and reading and the way we frame research questions and the Hawthorne effect, then it became a post on kids and reading and the way we frame research questions and the Hawthorne effect and...

I assume I'm not alone in struggling with Hydra posts. They've always been a problem but since my schedule's gotten busier with contract work they've really  been coming fast and furious thanks to the double whammy of having less time and suffering from a strange ailment that reacts to tight schedules by coming up with more things to do.

The sad part is that the most substantive posts are the ones most likely to keep sprouting heads. It's the trivial ones that are easy to finish. I wonder if, in general, the unimportant writing in the blogosphere tends to drive out the important, sort of a Gresham's Law of blogging. 

* One of the points I'm curious about. I always assumed that the rationale behind reading to young children was to model the behavior, create positive associations and cultivate an appetite for stories and the written word. Did anyone else have a similar take on this?

Mixed Markets

Hoisted from the comments over at Dean Dad's blog:

This is also the core of the social security privatization movement. SS is a visible example of government helping people, it's very popular, and it's highly efficient.

(Well, the ideological affront of it all, plus what a sudden, massive infusion of taxpayer cash into the stock market would do for people who already have large holdings. Ahem.)

Gov't does a lot of things poorly, but social security, like higher ed, isn't one of 'em.

 Is there a reason that we are allergice to the idea that different approaches work better for different problems?  A screwdriver is a very useful tool but sometimes you need a saw instead.  I would think that adaptability is the most important feature of a society or an economy.  But for some reason we refocus adaptability to be entirely framed as competition between private firms without asking hard questions about where different approaches might have a comparative advantage.

I find it mystifying that efficiency is so under-rated in the discourse. 

"Wesleyan University offers a three-year bachelor's degree"

It's not exactly the way I'd do it, but on the whole I'd say this is a good idea.

Dual Class shares and free markets

Andrew Gelman weighs in on dual class shares: 

Now I’m just confused here. Who’s supposed to be “concerned” here? As a New Yorker subscriber, am I supposed to be concerned that dual-class firms underperformed the market? I just don’t get it. Why should I care? If the shares underperform the market, people can buy a piece of Facebook for less. That’s fine too, no?

I think that Andrew would be completely correct in a perfect market (one in which all of Mark Thoma's issues are not present).  If some financial products give a piece of the return while others give ownership plus return then people could choose which ones to purchase. 

However, the modern American economy has fallen in love with the 401(k) as an investment vehicle.  This leads to two problems.  One, investors are generally not free to switch to a different fund because they dislike the investment decisions of the fund that they are in.  Since the individual investor bears all of the losses of bad decisions but the employer has control of the fund (and has an incentive to cut costs) you have a classic principal agent problem.

This problem is made worse by giving a limited group of people control over a group investment.  One can easily imagine the small group making decisions that benefit them at the expense of the majority of shareholders.  Again, not necessarily a problem in an open market.  But with the constraints that individual investors are under this could be problematic as they lack the freedom to enter or exit the market. 

This is why I wax poetic about Social Security (or the Canada Pension Plan): they shift the risk from small investors (who generally can't bear it) to large entities (that can).  I totally get that there are total social resources constraints, but I would rather that they be dealt with openly.  Instead I see the stock market becoming a worse and worse deal just as a large American cohort (the "Baby Boom") is about to retire. 

I am not sure that this is a good thing. 

See also Matt Ygelasis and Felix Salmon.

The other (non-Shakespearean) thing I learned in my college Shakespeare class.

I've already mentioned that the tests in this class were unusual; the way I studied for them was a bit odd as well and though it wasn't a method that I'd recommend for wide usage, in this context it worked well.

I was, in my younger days, something of a procrastinator (a trait I've outgrown, of course, -- ask anybody). Papers were generally started at the last minute but I did, at least, make an effort to keep up with my reading (I was earning a BFA in creative writing so writing and keeping up with my reading was pretty much all that was asked of me).

Shakespeare was the exception with reading assignments being pushed back to marathon sessions the weekends before the tests. I wasn't that I didn't enjoy the material -- I did -- but the plays required a commitment and a focus that made them easy to put off.

I would therefore find myself with three or four plays that I had to know in considerable detail forty-eight hours after I cracked open my copy of the Riverside Shakespeare (which I still have, by the way). It's difficult to imagine a worse approach to studying but in this case it worked out surprisingly well.

I would spend the first couple of hours cursing myself for being an irresponsible moron and calculating how much sleep I'd be able to get if I continued reading at that glacial pace. After that, though, something changed: the rate at which I was reading increased; it became easier to focus; the characters became more vivid and the stories more coherent.

It wasn't until after the second test that I realized what was going on. Shakespeare is one of the most and least accessible writers most of us will ever read. He wrote in language that hasn't been used for centuries but if you can get past those centuries of linguistic drift, you find someone who could hold the interest of intellectuals like Ben Jonson while keeping what we would now call the cheap seats cheering and stomping instead of throwing rotten eggs.

If I would have shown some discipline and diligently put aside an hour a night to study for that course I would have devoted more time to it but I strongly suspect I would have done worse and gotten less out of it. I doubt that an hour, even an hour every night would have been enough time to acclimate myself to the language; I would have spent my time translating instead of reading. It took two or three hours to forget the plays weren't in the everyday vernacular.

It's important to note that waiting till the weekend before a test then doing a marathon study session would have been, in almost every other context, a horrible idea. Even in cases where language is a barrier (which includes math), you'd generally be better off working your way through in bite-sized chunks, but the plays were written to be experienced in a single sitting (or standing) and that's probably still how they work best.

So my experiences in that one class shouldn't suggest a general approach to studying but it is another reminder of the often made point that the "best" pedagogical methods are context sensitive, varying from student to student, teacher to teacher and subject to subject to subject. Beware of blanket solutions.

If we're going to discuss education, we need to make sure everyone's heard this one

From Bullfinch's Age of Fable:

Several similar contests with the petty tyrants and marauders of the country followed, in all of which Theseus was victorious. One of these evil-doers was called Procrustes, or the Stretcher. He had an iron bedstead, on which he used to tie all travellers who fell into his hands. If they were shorter than the bed, he stretched their limbs to make them fit it; if they were longer than the bed, he lopped off a portion. Theseus served him as he had served others.

"Of course, Shakespeare was much newer at the time"

Back when I was an undergrad I took a class in Shakespeare. I'm mentioning this because a couple of aspects came back to me recently while thinking about education. The first was the format of the tests the teacher used. They consisted of a list of quotes from the four plays we had covered since the last test. Each quote had a pronoun underlined which came with a two part question: who was the speaker and who was the antecedent?

I've never seen that format used in another class (even by the same teacher) and I always thought it was an interesting approach. I wouldn't necessarily recommend using it widely but I'm glad I had it in at least one course. It was a method that encouraged attentive reading (particularly useful with Shakespeare).

Experiencing different styles of teaching and evaluation are part of a well-rounded education. I've seen a wide range approaches. Some were successful. Some were not. Some successful as one-shots but weren't models I'd suggest routinely following, like the number theory class I took that didn't allow mathematical notation (all proofs had to be written out in grammatical sentences without abbreviations or symbols -- more or less the way Fermat would have done it). That pedagogical diversity has been of immense value.

A book on quality control I read a few years ago said that quality in a QC sense was equivalent to a lack of variation; quality meant all parts came out the same. Sometimes I'm afraid that the some in the education reform movement are starting to think of uniformity as an end to itself.

At the risk of stating the obvious, lots of cool things come out of MIT.

The secret is in a futuristic substance known as "LiquiGlide," a non-toxic, FDA-approved coating that can be applied to the interior of bottles. According to MIT PhD candidate Dave Smith, it's "kind of a structured liquid — it's rigid like a solid, but it's lubricated like a liquid." Regardless of what the bottle is constructed of, liquid or plastic, ketchup will flow out of it nearly effortlessly.

...
Interestingly enough, LiquiGlide wasn't initially designed to be used for ketchup — the original idea had the coating being used as an anti-icing coating, or a pipe coating that might help reduce oil and gas clogs. But as Smith explains, "most of these other applications have a much longer time to market; we realized we could make this coating for bottles that is pretty much ready. I mean, it is ready."

Putting our money in seed corn -- literally

Noah Smith has an excellent post arguing that spending our limited research dollars on bigger and bigger particle accelerators is, at this point in history, a bad idea.

Weinberg is a particle physicist, one of the heroes who developed the Standard Model. Thus it is not surprising that most of his article concentrates on particle physics experiments. Unfortunately, I think that appeals for governments to pour more money into particle accelerators are A) doomed to fall on deaf ears, and B) not really very convincing in the first place. Let me explain why.
First of all, the Standard Model of particle physics is good. Really good. In fact, we've never conducted an experiment where it makes an incorrect prediction at any level of precision!! In that sense, it is one of the most successful theories ever. Now, the Model may or may not fail at ultra-high energies (such as those that could be produced inside a black hole or a multibillion-dollar particle accelerator), or at galactic distances. But these are not environments that will ever matter for human beings on Earth. 

As Weinberg points out, the Standard Model is incomplete. It doesn't include gravity. But we have another theory, general relativity, whose track record is just as good, to describe gravity. Unifying these theories would increase our understanding of the nature of the Universe, but it's not clear whether it would improve our ability to predict our immediate surroundings. 

In other words, new particle accelerators may be able to answer interesting questions, but they are unlikely to produce much of technological value.

In fact, this has proven true for the last several generations of particle accelerators. We've discovered a zoo of new particles, and these discoveries have improved our theories greatly. But none of these new particles has been something we can exploit for technological applications. In the early 20th century, new fundamental physics led rapidly to applications like nuclear bombs, semiconductors, lasers, and GPS. But to my knowledge, nobody is even trying to make a device that exploits the properties of B-mesons or neutrino mass. 

To this, add another problem, which Weinberg discusses: We actually have no idea if the "next generation" of particle accelerators would find anything useful. In the past, we always had new theories that predicted stuff we should expect to see if bigger accelerators were built (for example, the Large Hadron Collider was built to search for the predicted Higgs Boson). As of now, new physics theories have made no new concrete predictions about what should come out of bigger and more expensive accelerators. If we build those accelerators, it will purely for speculative, exploratory purposes - to see what might be out there. 

Smith's piece was still fresh in my mind when I read this previously cited piece in the Washington Post:

On Wednesday afternoon, [Rep. Jim] Cooper rose to the defense of taxpayer-funded research into dog urine, guinea pig eardrums and, yes, the reproductive habits of the parasitic flies known as screwworms--all federally supported studies that have inspired major scientific breakthroughs. Together with two House Republicans and a coalition of major science associations, Cooper has created the first annual Golden Goose Awards to honor federally funded research “whose work may once have been viewed as unusual, odd, or obscure, but has produced important discoveries benefiting society in significant ways.” Federally-funded research of dog urine ultimately gave scientists and understanding of the effect of hormones on the human kidney, which in turn has been helpful for diabetes patients. A study called “Acoustic Trauma in the Guinea Pig” resulted in treatment of early hearing loss in infants. And that randy screwworm study? It helped researchers control the population of a deadly parasite that targets cattle--costing the government $250,000 but ultimately saving the cattle industry more than $20 billion, according to Cooper’s office.

My natural bias is pro-research and if the amount of money we spent on particle accelerators was unrelated to the amount of money spent on other research I'd probably say go for it, but in an era of tight money (or the perception of tight money), there are other areas that score higher on almost every non-ddulite criteria.

Smith suggests a number of projects related to replacing fossil fuels. Joseph would probably have a number of suggestions involving health and medicine. My first thoughts are agricultural. For starters I'd like to see something like the Human Genome Project for species that can have a potential impact (positive or negative) on our food supply.

It's easy to argue the economic benefits for this kind of research (discoveries like this can be worth $100 million a year which means, after a decade or two, you're talking real money). It's not so easy, however, to get journalists and politicians to give these fields the respect and support they deserve. Part of this comes from a combination of ddulite tendencies and scientific illiteracy -- the reporters love the high-tech stuff but really don't understand it -- but another (albeit related) problem is the tendency to approach the debate as a conflict between practical and pure science. The distinction is artificial and not particularly productive and it's less than clear which side the evidence comes down on.

I'd argue that, given the current state of the disciplines, you're more likely to make a major, change-the-way-we-see-the-world scientific advance digging for parasites in pig manure than analyzing results from the Large Hadron Collider. That's not to say that these results won't prove important, just that we're more likely to see bigger advances in the life sciences in the next few years and agricultural research is one of the best ways to pursue those advances (if not the best).

This could be an important shift

Felix Salmon:

And more generally, college is slowly moving from the “things which are bought” column into the “things which are sold” column — for-profit colleges, in particular, recruit aggressively in ways that would have been unthinkable to an earlier generation of tertiary educators. As a result, people drop out of college not just because it’s statistically certain that in any college class there will be some students who drop out, but increasingly because a lot of students, especially in courses offered by for-profit colleges, really can’t and shouldn’t be in those classes in the first place.

I think that this is a really dangerous trend for a purchase that is as expensive as education. Buying the wrong education is much worse of a mistake than buying the wrong car or house -- at least partially because you can have a car or house foreclosed on.  Furthermore, the focus on marketing will tend to make it more difficult to assess universities on quality.  Look at how hard it is to get good information on something as simple as an automobile (using Edmunds.com, for example).  Now considering needing to assess something as complicated as an educational program.

I do not think that this is a good trend at all.

"An overdose of pharmacy students"

As mentioned before, American Public Media's Marketplace has been doing exceptional work. Here's an example of particular interest to OE readers.

Exhibit A for our purposes today is the professional pharmacist. Just five years ago, a pharmacy degree was a near guarantee of permanent and well-paid employment. So much so that a lot of universities started their own schools of pharmacy. In Tennessee, they went from one pharmacy school to half a dozen. So you know what happens next.

More on the reaction to gutting the census

Mark Thoma sums it up:

The good news is this vote is being criticized across the political spectrum ... 

From the WSJ: Republicans try to kill data collection that helps economic growth... From the NY Times: Operating in the Dark... From AEI's Norman Ornstein at Roll Call: Research Cuts Are Akin to Eating Seed Corn... From the WaPo: The American Community Survey is a count worth keeping... And from Menzie Chinn at Econonbrowser: The War on Data Collection

"[N]ot a scientific survey. It’s a random survey.”

The first from DeLong. The LA Times ran a recent Op-Ed by John M. Ellis and Charles L. Geshekter complaining about liberals in academia.

Perhaps this is not surprising given that the tilt to the left among college faculty members has been growing nationwide for several decades. At UC Berkeley, the ratio of Democrats to Republicans even in the hard sciences had grown to 10 to 1 in 2004, many times what it was 30 years ago, according to a study by Daniel Klein and Andrew Western.

And the second courtesy of EconoSpeak

Catherine Rampell quotes Daniel Webster, who sponsored a bill to eliminate the American Community Survey, which was passed by the full House of Representatives: “We’re spending $70 per person to fill this out. That’s just not cost effective, especially since in the end this is not a scientific survey. It’s a random survey.” 

It should be noted that the LA Times Op-Ed is more or less a press release from the National Association of Scholars (Ellis, Geshekter, Klein and Western are all associated with the organization in some way) and that politically the NAS falls somewhere between the John Birch Society and Genereal Bullmoose.* Those concerned about subsidized research will find much to worry about here.

Just for the sake of argument, though, let's assume that the Klein and Western finding is valid. Is it possible that certain positions, statements and attitudes from prominent Republicans might have made people with scientific training uncomfortable with today's GOP?

In case you just joined the party, here are some previous posts of the anti-census initiative.



*obscure pop culture reference.

Adam Frank is better at science than business

This is Falcon 7, not Falcon 9

Astrophysicist Adam Frank is what you might call a fan of SpaceX:

So what's the big deal? Well, the Falcon 9 is a private spaceship, fully developed and owned by the private company SpaceX. And SpaceX is the brainchild of Elon Musk, the Internet billionaire who made his fortune from PayPal. With contracts from NASA to develop new launch platforms, SpaceX and other companies are poised to make space the domain of profitable businesses. And Musk has been explicit about his intentions to go beyond Earth orbit, to build commercially viable ventures that might take people to Mars in a decade or two.

His timing couldn't be any better or any more urgent. Even without the space shuttle, America needs to remain a leader in space. Now, when I was a kid, the U.S. space program fueled my imagination and led me into a life of science. But as I got older, it became clear that the real business of getting a human presence across the solar system was going to have to fall to business. Governments might get the exploration of space started, but the vagaries of election and budget cycles meant they could never go further.

Now, we've reached the point where it's the exploitation of space that matters. And while exploitation might seem a dirty word to some folks, they should stop to consider how dependent we are already on the commercialization of that region of space we call low earth orbit. Think of the billions of dollars in commercial activity tied to weather prediction, global broadcasting and global positioning. All this business depends on satellites orbiting overhead right now.

But if, as a species, we want to go beyond the thin veil of space directly overhead, then the basic principles of private venture and risk will have to apply. These are the ones that have always applied. While Queen Isabella may have given Columbus his ships to cross the Atlantic, it was private companies that built the seagoing trade routes and brought folks across to settle - for better or worse. Likewise, it's only through commercially viable endeavors that large numbers of humans are getting off this world and into the high frontier of space.

It's no small irony that the billionaires bankrolling the new space entrepreneurship built their fortunes not in jetfighter aerospace manufacturing but in the dream space of the Internet.

Frank's enthusiasm is understandable but his thinking about the business and economics of space ranges from the wishful to the hopelessly muddled, particularly when it comes to "the basic principles of private venture and risk."

Private space travel has not, if you'll pardon the phrase, taken off in a serious way because there is no credible business model to support it. No one has figured out a way to make money going beyond earth's orbit and until we see a major technological breakthrough, it's likely that no one will.

There's an important distinction that needs to be made, the economic forces Frank is alluding to only come into play when markets efficiently allocate resources where they will have the greatest return (and the markets have decided that doesn't include trips to Mars). What we're talking about here is having the government contract with an independent company. We can discuss the wisdom and practicality of that decision later, but claiming that this "the basic principles of private venture and risk" are behind SpaceX is like claiming that the hiring of Blackwater meant that the markets decided we should invade Iraq.

To salvage the Columbus analogy, before he returned with information about the existence and location of the new world, people didn't attempt voyages because the expected return on investment was negative. After people had that information the expected return was positive.

Giving some contracts to companies like SpaceX might be a good idea (that's a discussion for another time) but it will do virtually nothing to shift the economic fundamentals.

There are things that the government could do to improve those fundamentals -- research initiatives, mapping out resources, setting up infrastructure (ground and/or space based)* -- but they require lots of upfront money. Our only other option is to wait for technology to bring the costs of launching materials way down, but that is likely to take a long time.

When it comes to the exploration and exploitation of space, those are our realistic choices.



* This is a topic for another post but aerospace researchers are exploring some technologies that could shift those expected returns from negative to positive, such launching components and supplies by railgun.

Closing words on Facebook (in handy audio form)

Marketplace's Heidi Moore sums things up nicely. There's no transcript but it's worth taking a few minutes to listen to the story.

If I weren't on a business and technology kick

I'd probably be blogging about this fascinating example of modern journalism's ability to be both obsessively self-absorbed and incapable of self-examination.

(I'd also be saying mean things about MM, arguably my least favorite journalist, period.)

The continuing war on science part 46

We're back on the census beat thanks to another piece of news from Menzie Chinn:

From the National Association for Business Economics (NABE):
[t]he U.S. House of Representatives was considering an appropriations bill for Commerce, Justice, Science, and Related Agencies (H.R. 5326) that would drastically reduce funding for the Census Bureau and make participation in the American Community Survey voluntary.
... Regrettably, the legislation ultimately passed the House along party lines and was much more damaging than originally proposed. In its current form, H.R. 5326 will "devastate" the nation's economic statistics.
Specifically, the legislation will:

• Terminate the American Community Survey;

• Cancel the 2012 Economic Census; and

• Halt development of cost-saving measures for the decennial census.

Chinn points out that this would be devastating for researchers such as himself. It would also be a hell of a blow to business analytics people like me who use this data on a daily basis all to save a trivial sliver of the federal budget.

Yet another view on plagiarism

Quoted on Cheap Talk:

Oh, dear me, how unspeakably funny and owlishly idiotic and grotesque was that “plagiarism” farce! As if there was much of anything in any human utterance, oral or written, except plagiarism! The kernel, the soul—let us go further and say the substance, the bulk, the actual and valuable material of all human utterances—is plagiarism. For substantially all ideas are second-hand, consciously and unconsciously drawn from a million outside sources, and daily use by the garnerer with a pride and satisfaction born of the superstition that he originated them; whereas there is not a rag of originality about them anywhere except the little discoloration they get from his mental and moral calibre and his temperament, and which is revealed in characteristics of phrasing.

Though I'm not sure how far I'd trust this guy; I'm pretty sure he's using a fake name.

How about a virtual social network?

This is a thought experiment, not a business plan, so don't expect too much here, but how hard would it be to set up something that worked along these lines?:

It would allow users to set up circles of contacts and permit different levels of access determined by user-assigned rank ("casual" contacts could see some pages while "close" contacts could see more), degrees of separation and visitor attributes ("let all visitors who list Justified on their favorites see this page);

The pages could be of any format and would be hosted by whoever the user chose as long as it used standard access protocols and had a few standard features like a favorites section; Adding friends and updating settings would be done through a central site;

If run on a for-profit basis, revenue could come in through the central site with advertising and surveys (both targeted on user information), mining user data and selling apps for mobile access.

I'm not saying this is a good idea for a business (you'll notice I put it here and not on Kickstarter) but it certainly seems to fall in the realm of the possible and virtual social networks did start popping up they could conceivably eat away at the potential user base for Facebook. You can (and probably should) object at this point that this is a somewhat farfetched scenario. You'd be right. You could also point out that Facebook is a good company with a sound business plan, loads of technical talent and a huge first mover advantage.

If we were talking about Facebook's chances of having a nice, profitable run those points would end this conversation, but the buyers in tomorrow's IPO are betting that the company will have a flawless, even unprecedented run. Under those circumstances, it's worthwhile to take a moment to think about the possibilities.

Money and government

It is worth remembering that capitalism requires some form of currency:

Trade is important because, without it, it would be pretty difficult for some of us to survive only consuming what we produce well, especially those of us who haven’t figured out how to eat economics lessons yet. Technically, however, trade only gets us part of the way to what we would consider capitalism, since direct trade (i.e. barter) still requires a double coincidence of wants. 

 The problem with money is that it needs to be guarenteed or to have value independent of social contracts.  The second is the whole idea behind a gold standard.  But even with small and valuable items, it is hard to imagine the vast levels of wealth we see in the modern world existing if you had to store tonnes of gold in vaults.  It would be too simple to be robbed and options for recourse would be quite limited. 

So even the very well off require government to function in order to live in a modern society.  It think that we should remember this when we wonder whether or not we benefit from the existence of governing bodies. 

Reality vs. the Facebook valuation -- part 46

As mentioned before, in order to justify the numbers being discussed in the upcoming IPO, Facebook will not only have to add to its huge base of users; it will also have to bring in considerably more revenue per user. For this to happen, Facebook will have to keep advertisers convinced that the data and targeting algorithms are worth the expense.

Stories like this don't help (from NPR):

CHACE: Welcome to the warehouse district of Little Ferry, New Jersey. Right above the loading dock, I found Alex Melen. He runs Melen LLC. It's an internet marketing company. And he provides Facebook likes to people and companies for about $75 per 1,000 likes.
HENN: Liking something on Facebook means you're a fan. It lets a company talk to you. So clicking that little blue thumbs up actually has value. This company supplies likes for cash. It sells them. So I go in and I say, I want 200 likes. How much?
CHACE: Right. And when you go in, it's exactly what you'd expect. About 10 guys, computers, beer cans, Red Bull, iced coffees. The oldest one there is Melen. He's 28.

...

MELEN: And once we find a supplier that says OK, I have the--2,000 likes or 5,000 likes or whatever the client ordered, we just place the order with that network, and then they fulfill it.CHACE: So who is it that's actually clicking the like button for cash?
PREPIS: Danny Longshanks, Camel Love, Vida, Elvis Adon, Bruce Buffalo...
CHACE: Well, it's people from all over the world who are found on work-from-home sites.
PREPIS: And if they get paid 10 cents per like, then they like it. You know, even 500, the over month total. You're making $50 a month that probably took them, in total, maybe 20 minutes to do.
HENN: Or these Likers might not be people at all. Ben Zhao is a computer science professor at UC, Santa Barbara. He says there are much cheaper ways to get a supply of likes - social bots. These are fake people controlled by a computer. Or you can buy compromised accounts.
BEN ZHAO: Right now on the black market, you can actually buy and sell bundles of Facebook account credentials, tens of dollars or hundreds of dollars for hundreds of thousands of Facebook accounts.

I wonder if someone's researching this

The dual currency story reminded of a research question I thought might be potentially interesting (assuming it's not an old, mined out topic). Way outside my field but it might be worth passing along.

Some friends of mine are serious shellac collectors, the kind of people who spend hundreds of dollars for a hundred year old record. It's a big, well established market with the occasional natural experiment that ought to stand up to some analysis, but what caught my eye was the fact that though mainly cash-based, there's a significant barter aspect. what's more, the cash barter mix has been in place for a long time and seems relatively stable.

Seems like there ought to be some fun questions you could ask about a market like that. 

Dual currencies

NPR's the World has an interesting story on the Roman Empire's practice of letting conquered nations use both their own and the official Roman currency. It's a cool piece of history and it suggests some intriguing questions (particularly during the decline and fall of the Euro).

"Implicit Association Tests"

I hadn't heard of this technique before but this interview got my attention. Here's the Wiki version:

A typical IAT procedure involves a series of seven tasks.^[6] In the first task, an individual is asked to categorize stimuli into two categories. For example, a person might be presented with a computer screen on which the word "Black" appears in the top left-hand corner and the word "White" appears in the top right-hand corner. In the middle of the screen a word, such as a first name, that is typically associated with either the categories of "Black" or "White." For each word that appears in the middle of the screen, the person is asked to sort the word into the appropriate category by pressing the appropriate left-hand or right-hand key. On the second task, the person would complete a similar sorting procedure with an attribute of some kind. For example, the word "Pleasant" might now appear in the top left-hand corner of the screen and the word "Unpleasant" in the top right-hand corner. In the middle of the screen would appear a word that is either pleasant or unpleasant. Once again, the person would be asked to sort each word as being either pleasant or unpleasant by pressing the appropriate key. On the third task, individuals are asked to complete a combined task that includes both the categories and attributes from the first two tasks. In this example, the words "Black/Pleasant" might appear in the top left-hand corner while the words "White/Unpleasant" would appear in the top right-hand corner. Individuals would then see a series of stimuli in the center of the screen consisting of either a name or word. They would be asked to press the left-hand key if the name or word belongs to the "Black/Pleasant" category or the right-hand key if it belongs to the "White/Unpleasant" category. The fourth task is a repeat of the third task but with more repetitions of the names, words, or images.
The fifth task is a repeat of the first task with the exception that the position of the two target words would be reversed. For example, "Black" would now appear in the top right-hand corner of the screen and "White" in the top left-hand corner. The sixth task would be a repeat of the third, except that the objects and subjects of study would be in opposite pairings from previous trials. In this case, "Black/Unpleasant" would now appear in the top right-hand corner and "White/Pleasant" would now appear in the top left-hand corner. The seventh task is a repeat of the sixth task but with more repetitions of the names, words, or images. If the categories under study (e.g. Black or White) are differently associated with the presented attributes (e.g. Pleasant/Unpleasant), you would expect that the pairing that a participant associates with or believes would be considerably easier for the participant.^[1] In this example a participant may perform better when White and Pleasant are paired together than when Black and Pleasant are paired.

 I don't have an opinion on this research, but I can think of all sorts of interesting applications for something like this both in the social sciences and in business if the technique performs as advertised.

Has anyone out there played around with this?

Ddulite Alert I (II to follow shortly)

NPR's Steve Henn  has an excellent story here about Facebook and Yahoo. Lots of good points but a couple struck me as particularly relevant to the ongoing ddulite thread.

Today, Facebook CEO Mark Zuckerberg turns 28 and gets the ultimate birthday gift: His popular social networking site is expected to go public later this week. The IPO could be valued at nearly $100 billion. Meanwhile, Yahoo, another company that also once had a bright future, continues to undergo upheaval as it struggles to define its mission.

Facebook is expected to start selling stock to the public and begin trading on the Nasdaq Stock Market on Friday. One of the things that are remarkable is how quickly Facebook became so valuable. Can a company started less than a decade ago in a college dorm really be worth that much?

To put this in perspective, when Facebook goes public it will probably be valued at more than Boeing and Ford combined. But Facebook's profits are relatively minuscule.

So to justify its sky-high stock price, Facebook will need to grow like a weed for the next few years. The amount of money it brings in will have to double and then double again for this deal to make sense for long-term investors.

Right now, more than 80 percent of the money Facebook makes comes from advertising. So that piece of its business needs to expand really quickly. But Facebook doesn't want to clutter up its site with too many ads and annoy its users.

Late last week Facebook gave us one hint about where it might be headed. The company has huge amounts of data about each of its users. It knows your likes, your friends — and where you went to school. Right now it uses those data to sell ads aimed at you, but those ads only appear on its own website.

Friday Facebook tweaked its privacy policy, allowing it to use that information to place ads aimed at its users anywhere on the Web.

...

So Facebook has to walk this line, while at the same time adding members, selling ads and figuring out how to collect even more information about us.

If Facebook doesn't figure all of this out, it will be very bad news for investors.

Investors who buy Facebook this week and plan to own this stock for the long haul are betting on a kind of crazy, almost unprecedented growth. Because without that, Facebook begins to look a lot like another Silicon Valley company — Yahoo.

Right now, Yahoo and Facebook sell just about the same number of ads. They both have audience measure in the hundreds of millions. But Yahoo stock is worth one-fifth of Facebook's projected value.

...

So this week as Facebook goes public, it's worth remembering that Yahoo was once valued by Wall Street at more than $100 billion too.

First a fairly technical point about marketing. Let's say you're on Facebook and you're in the market for a car and, as luck would have, I own an area dealership that sells the make of car you prefer. Though it doesn't entirely replace the need for untargeted marketing for things like brand building, being able to get my ad to you is quite valuable, but that value drops quite a bit if I find out that some other local dealership hit you with a similar ad when you went to another site. The value probably doesn't drop by half (you're still a good prospect even if I have some competition), but the expected return on the ad has dropped.

Assuming rational players and reasonable efficiency, doubling the number of ads per user should increase Facebook's revenue, but by a factor of less than two.

This brings us to some more basic points. Facebook is a well established company with respectable revenue and a huge user base. If you were worried about Facebook going under, these would be wonderful attributes. If you're worried about Facebook not justifying its stock price, these are causes for concern.

In order for it to be a good deal, Facebook has to grow at a fantastic rate over the next few years. Unfortunately there is a limited pool of potential users and each of those users has a finite amount of disposable income. Of course, those are both very big numbers, but not so big that Facebook wouldn't have to command a significant share of both. That's not impossible but as a general rule, the closer those upper bounds get, the more difficult growth becomes.

And that's assuming almost complete market dominance. Facebook does have substantial first mover advantages but we're talking about a volatile segment of the economy that could be turned on its head by a major technological innovation. There's also the possibility of some other deep pocketed companies making a play for FB's marketshare (already happening with Google), or of small niche competitors getting a foothold or even a major open source alternative. Then, there are the potential regulatory issues Henn mentioned in one of the sections I didn't quote.

None of these things threaten the existence of Facebook but any one or two of them could prevent the company from justifying its price.

The comparison to Yahoo is especially interesting.Yahoo has recently become a bit of a whipping boy for the financial press, despite the fact that it's a company with some pretty good fundamentals (hundreds of millions of visitors and billions in revenue according to Wikipedia), more threatened by management hysteria than by any flaw in its business plan.

There are differences between the two companies and good reasons to value Facebook higher than Yahoo, but to get the gap we see here you have to start considering bad reasons as well, and ddulite investors are high on that list. At the height of the tech bubble a dozen years ago, Yahoo had the aura of being the next big thing in technology and its stock broke $118. Now the aura's faded, it's trading for more than a hundred dollars less and it can't get any respect.

Today that aura surrounds Facebook and people are once again failing to price in potential problems and limitations. Perhaps things will work out better this time (but I don't think that's how the smart money will bet).

A good point on J.P. Morgan

(If you're still getting caught up on the JP Morgan story, you should probably go by Marketplace and check out Heidi Moore's explanation of the fiasco.)

I don't have a direct source for this other than that I heard it on either Marketplace or All Things Considered, but a financial reporter made an observation I've been waiting to hear put concisely since this story broke.

The reporter explained that the group that had the huge recent loss had been given a dual mandate: hedge against losses and make lots of money. The reporter then wondered if assigning those two mandates to the same team was a good idea.

I wonder if this is an example of something I've seen before or at least if something I've seen before might have contributed to it. One of the recurring themes in these bad-finance stories is the arrogant dismissal of seemingly obvious points, things like "it's hard for a hedge to provide protection against big, risky bets going bad when it's also a big, risky bet." Part of this arrogance may come from people's mistaken belief in their own sophistication.

There's a common fallacy often encountered by people who build models and handle data. It's the belief that complication implies sophistication. The truth is largely the opposite: complication amplifies naivety. When people use complicated, impressive-sounding systems they tend to be less concerned with common sense questions like, "is my sample representative?" or "Are the relationships we're assuming stable? Are they likely to break down under extreme conditions?"

In the period leading up to the crash, we heard a great deal about how sophisticated Wall street and the financial sector had become, particularly with respect to risk. I wonder if we, in fact, saw just the opposite. Did the rise of the quants and the reliance on elaborate models simply enable naivety and wishful thinking?

I'm not claiming that this was the (or even a) primary cause of the crisis. I would put before it, in no particular order, greed, misaligned incentives, deregulation, the growth fetish and possibly a few other candidates. Still, I think it's fair to say that things were made worse by the belief that having complicated formulas to deal with risk somehow meant you were safe from it.

Update -- I took advantage of the ten minute blogging rule (you have ten minutes after posting to change things) and added the third paragraph.

For the weekend -- five words with something in common

Project
Record
Produce
Conduct
Progress

UPDATE: I noticed no one had a guess yet so I'll put some clues in the comment section.

"Ar go"

Unlike NPR's Planet Money, which started out with one of the best debuts in in recent journalism then faded rapidly, American Public Media's Marketplace has managed to maintain its exceptional quality for better than two decades.

Here are a couple of examples from today's show (I'll blog about them later if I get a chance):

A beautifully done story on a program to help teen mothers in Cincinnati (*and the source of the title of this post). **

And a good account of the pros and the cons of the coupon business.

This show is definitely worth setting aside a half hour of you afternoon.


** While listening to Rayana and Liyah's story, keep this in mind:

Hart and Risley also found that, in the first four years after birth, the average child from a professional family receives 560,000 more instances of encouraging feedback than discouraging feedback; a  working- class child receives merely 100,000 more encouragements than discouragements; a welfare child receives 125,000 more discouragementsthan encouragements.

A response to a response -- honest libertarians

Following up on Joseph's follow up to this post, there's an important distinction I'd like to make with regard to this argument from the Cato Institute (as reported to Business Week):.

Some believe the Census Bureau does too much already. “They waste a share of their budget on studies that no one actually uses,” says Chris Edwards, an economist with the Cato Institute, who cites periodic surveys on such items as the total hog count in the U.S. to prove his point. “A lot of that could be done by the private sector.”

As I pointed out before, Edwards is basically saying (in reverse order) that:

1. the private sector could perform major functions of the Census (which is demonstrably wrong since, as I pointed out before, the private sector has tried to do this repeatedly without ever coming close to matching the quality of government data) ;

2. no one uses reliable data about American agriculture (which is too laughable to waste any time addressing).

What's interesting and depressing here is not just the bad arguments that Edwards made but the valid ones that he didn't (or at least that he didn't make forcefully enough to be quoted). To understand these other arguments, it's useful to think of a simple value function for evaluating government projects

V = Returns - Traditional Costs - Libertarian Costs

Traditional costs are what you normally think of for a project, direct expense, opportunity costs, negative impact on other economic activities. Libertarian costs are the losses of liberty that go with any action where the majority forces the rest of society to take collective action.

Most of us don't give a lot of thought to LC but it's not zero and libertarians are performing a valuable service when they bring it up. In this case Edwards could have made the following valid arguments:

We're financing the census by taxing people who in some cases object to it.

The census is an invasion of privacy by the government.

A relatively small group gets a disproportionate share of the benefits.

I don't happen to agree with those arguments but they are valid and it's worth noting that Edwards chose to use invalid ones instead. We've seen this sort of thing before -- libertarian groups like Cato pushing flawed reasoning rather than make the honest but difficult-to-argue libertarian case. It's a practice that undermines their credibility.

Or it would if anyone cared about credibility anymore.

A quick response to Mark

I am travelling again with limited email access but I wanted to comment on this point by Mark:

Proprietary data that could be used without the privacy restrictions the government imposes would be worth an incredible amount of money. Despite all that trying, though, no private data source comes close. I realize that the Cato Institute might not like to hear this, but this is one of those cases where the private sector tried to do something the government does and couldn't do it as well.

I am increasingly annoyed at either pro-government extremists (Marxists) and anti-government extremists (Randians).  It is quite clear to me that, as a society, neither approach will work and that a pure version of either vision is difficult to find (we can argue about edge cases like "failed states" but I am not sure that really addresses the major point).

Now it will always be the case that some groups in society will do better with more or less government.  For example, the extremely wealthy are not impressed by the benefits of social security given how unlikely they ar to need this money.  On the other hand, infrastructure developers are probably not delighted by all of the ways that we put in veto points for development projects to weaken the power of government.

But it would be very helpful for the debate if we just admitted that some tasks were better done by some approaches?  Governments have a very hard time with the art of shopkeeping and keeping prices in line without free market price discovery.  Private individuals will have a tough time fielding a modern army.

Why not try to limit the argument to the middle where there is a lot of room to disagree?

Half the ranting I'd do if I were feeling better

Menzie Chinn points out a great Business Week article on the nickel-and-diming of the Census Bureau. It's an incredibly short-sighted place to save what is basically a rounding error.

In 2003 the bureau requested more funding to survey financial, real estate, and other companies on a quarterly basis, rather than wait to take their pulse with its Economic Census, which gathers data on business every five years. Census data are funneled to the Bureau of Economic Analysis, which shares its conclusions with the president’s Council of Economic Advisers, the Federal Reserve Board, and Congress. Every year, Census asked for the extra funds; every year, Congress denied them the money, leaving the Census Bureau largely blind to the health of a sector that made up more than half the total economy.

Finally, in early 2009, after the real estate-fueled financial crisis, Congress gave Census what it had been asking for—an extra $8.1 million. In the view of many, it was too late. “That’s a grand example of how nickel-and-diming statistics agencies can screw up the economy,” says Andrew Reamer, a research professor at the George Washington University Institute of Public Policy and a member of the BEA’s advisory committee. “The government saved $8 million, but how many trillions were lost as a result of not being able to see the crisis coming?”

That extra data, says Reamer, would’ve revealed just how quickly certain parts of the economy were slowing down. For example, in April 2008 the BEA, with no quarterly data to work with, estimated that finance and insurance sector activity fell 0.3 percent in 2007. In July 2011, the BEA recrunched those numbers using quarterly data and showed declines of 2.2 percent, 5.3 percent, and 9.9 percent for those sectors in the last three quarters of 2007.

Most U.S. economic data come from three federal agencies: the Census Bureau, the BEA, and the Bureau of Labor Statistics. They have a combined budget of $1.6 billion, less than 0.05 percent of President Barack Obama’s $3.7 trillion proposed budget. These agencies have always had to fight for more funding. Now they may have to fight just to keep their budgets intact. As part of $19 billion in nondefense discretionary cuts in Paul Ryan’s (R-Wis.) budget—recently passed by the House of Representatives—the agencies are likely to get less funding.

The Senate is unlikely to embrace the Ryan budget in its entirety. Yet specific proposals show what the House has in mind. The House Committee on Appropriations recently proposed cutting the Census budget to $878 million, $10 million below its current budget and $91 million less than the bureau’s request for the next fiscal year. Included in the committee number is a $20 million cut in funding for this year’s Economic Census, considered the foundation of U.S. economic statistics.

 Of course, the census is also an invaluable source of data for businesses, which explains this

One of the most vocal critics of the proposed cuts is the U.S. Chamber of Commerce, a deficit hawk. “The chamber is in favor of getting the deficit under control, but you’re not going to get there by gutting the statistics agencies,” says the chamber’s chief economist, Martin Regalia, who last July signed a letter in favor of fully funding the BEA. “The total amount of money saved is relatively small compared to the massive loss of information it would lead to. It’s like trying to balance your checkbook by buying cheaper checks.”

 I'm tempted to go on a rant here about the importance and economic value of research and data collection, but it's late, I'm fighting a cold and pretty much anyone who reads a blog called Observational Epidemiology is already in the pro-research camp. I do, however, want to say something about this part of the article.

Some believe the Census Bureau does too much already. “They waste a share of their budget on studies that no one actually uses,” says Chris Edwards, an economist with the Cato Institute, who cites periodic surveys on such items as the total hog count in the U.S. to prove his point. “A lot of that could be done by the private sector.”

Edwards packs a lot of wrong in here. Working backwards, the private sector has been spending a tremendous amount of money and effort gathering data similar to that gathered by the census. Proprietary data that could be used without the privacy restrictions the government imposes would be worth an incredible amount of money. Despite all that trying, though, no private data source comes close. I realize that the Cato Institute might not like to hear this, but this is one of those cases where the private sector tried to do something the government does and couldn't do it as well.

Then there's the stunning cluelessness of Edwards' example. Can he actually believe that no one uses data on pork production, one of America's largest agricultural industries (with stocks of 62 million, making us the world's second largest producer) and a major source of protein around the world. Or perhaps he's just so cynical that he assumes the journalists covering the story will be too ignorant of agriculture to spot the absurdity.

Either way, it's a disappointing performance from a spokesman for what is (or, at least, used to be) one of the country's most respected think tanks.

"How venture capital is broken"

Felix Salmon has a long but very pithy post on a new report from the Kauffman Foundation on the state of venture capital. It's a fascinating story with some significant connections to two long-standing areas of concern here at OE (ddulites and growth fetishists). You should definitely take a look.

The whole thing is quotable, but I'll limit myself to what Salmon identifies as the most astonishing part.

What you’re looking at here is the self-reported returns from all 100 of the Kauffman foundation’s funds, plotted on a time zero axis. In theory, if you believe the VC industry’s hype, the returns should look a bit like the green line: negative in early years, as you make investments which won’t pay off for a long time, and then positive by year 10.
In reality, reported returns peak very early on, in month 16 — which just happens to coincide with the point at which the GPs tend to start going out on sales calls, trying to raise their next fund. (The blue line shows total fund returns, while the red line shows returns net of fees — the money which actually goes to LPs.) Of course, at month 16, none of the returns are realized: they’re driven instead by increases in portfolio-company valuations, and those valuations are set by the GPs themselves.
If GPs were incentivized mainly by their 20% performance fee, then you’d expect something like the green line, or at the very least you’d expect the performance to rise over time, as the fund’s illiquidity premium manifested itself. If GPs were incentivized mainly by their 2% management fee, however, then you’d expect something much more like the real-world red and blue lines, where performance figures are used more to raise new funds than to make money.

Amazing.  

This is the second Justin Fox post I've looked at in the past few days

and the second I've felt the need to pass on. There may be a pattern forming (via Krugman).

Don't Like the Message? Maybe It's the Messenger

Back on the subject of agricultural research

I'll be coming back to this.

From the Financial Times

[Cary] Fowler reminds me that losing varieties of crops means losing genes that may one day come into their own. He recounts the story of Jack Harlan, who in 1948 was collecting plants in Turkey. Harlan came across a wheat variety that looked scarcely worth picking up. "It was the most miserable-looking wheat. It had a poor yield, it was susceptible to lots of diseases, it fell over with rot... before it could be harvested." Some years later, wheat in the north-west of the US was attacked by stripe rust, and researchers scoured seed collections to find a way to help. The "miserable-looking" wheat turned out to be resistant. New varieties were bred to incorporate this quality. Fowler estimates that feeble-seeming wheat has been worth more than $100m a year to the US agrarian economy.

DVR Alert

Sherlock returns this Sunday.

More on mergers and the growth fetish

As a follow-up to this post (which was part of a larger thread), this NBER paper (courtesy, I believe, of Felix Salmon or Brad DeLong) suggests that the business case for many if not most mergers is decidedly weak.

The study by professors at the University of California, Berkeley, concludes that acquisitions, while nearly always initially cheered by investors, end up hurting a company, and in particular its share price, in the end. Winning by Losing, which was released this week by the National Bureau of Economic Research, found that following an acquisition the stock of that company tends to underperform shares of similar companies by 50% for the next three years. Another finding of the study: Deals done in cash, which is often considered a more conservative way to pay for acquisitions, tend to do worse than deals done for stock. If an acquiring company doesn't want its new owners' shares, you shouldn't either.

Of course, just because the market overvalues acquisitions doesn't mean that it overvalues growth in general, but this is another piece of evidence for the pile.

The issue with targeted metrics

Felix Salmon talks about the Employment Participation Rate:

The number the politicians look at, however, is the unemployment rate, which ticked down to 8.1%. That’s still high, but it’s not a statistic to beat Obama round the head with.

and

For demographic reasons — the retirement of the baby boomers — the labor force participation rate is naturally going to fall over the next decade. But go back just one year, to March 2011, and look at the official CBO projection of the labor force participation rate. The CBO saw a rate of 64.6% in 2012 — a full percentage point higher than we’re at right now. The participation rate wasn’t expected to fall to today’s level of 63.6% until 2017.

What is interesting is that people focus on the Unemployment Rate.  WHich actually makes it a less useful indicator of anything -- as there are incentives to try and frame the number in a way that looks better than it really is.  Dropping people who would like a job but are no longer looking from the sample is a clever way to make the number look better. 

I suspect that the same issue will happen with any high-stakes metric. 

"Because he could do all these things, he imagined that he did do them."

Now that I think about it, I'm surprised that Pauline Kael's "Raising Kane" hasn't come up before while we were discussing taking credit for other people's work.

The Mercury group wasn’t surprised at Welles’s taking a script credit; they’d had experience with this foible of his. Very early in his life as a prodigy, Welles seems to have fallen into the trap that has caught so many lesser men—believing his own publicity, believing that he really was the whole creative works, producer-director-writer-actor. Because he could do all these things, he imagined that he did do them. (A Profile of him that appeared in The New Yorker two years before Citizen Kane was made said that “outside the theatre … Welles is exactly twenty-three years old.”) In the days before the Mercury Theatre’s weekly radio shows got a sponsor, it was considered a good publicity technique to build up public identification with Welles’s name, so he was credited with just about everything, and was named on the air as the writer of the Mercury shows. Probably no one but Welles believed it. He had written some of the shows when the program first started, and had also worked on some with Houseman, but soon he had become much too busy even to collaborate; for a while Houseman wrote them, and then they were farmed out. By the time of the War of the Worlds broadcast, on Halloween, 1938, Welles wasn’t doing any of the writing. He was so busy with his various other activities that he didn’t always direct the rehearsals himself, either—William Alland or Richard Wilson or one of the other Mercury assistants did it. Welles might not come in until the last day, but somehow, all agree, he would pull the show together “with a magic touch.” Yet when the Martian broadcast became accidentally famous, Welles seemed to forget that Howard Koch had written it. (In all the furor over the broadcast, with front-page stories everywhere, the name of the author of the radio play wasn’t mentioned.) Koch had been writing the shows for some time. He lasted for six months, writing about twenty-five shows altogether—working six and a half days a week, and frantically, on each one, he says, with no more than half a day off to see his family. The weekly broadcasts were a “studio presentation” until after the War of the Worlds (Campbell’s Soup picked them up then), and Koch, a young writer, who was to make his name with the film The Letter in 1940 and win an Academy Award for his share in the script of the 1942 Casablanca, was writing them for $75 apiece. Koch’s understanding of the agreement was that Welles would get the writing credit on the air for publicity purposes but that Koch would have any later benefit, and the copyright was in Koch’s name. (He says that it was, however, Welles’s idea that he do the Martian show in the form of radio bulletins.) Some years later, when C.B.S. did a program about the broadcast and the panic it had caused, the network re-created parts of the original broadcast and paid Koch $300 for the use of his material. Welles sued C.B.S. for $375,000, claiming that he was the author and that the material had been used without his permission. He lost, of course, but he may still think he wrote it. (He frequently indicates as much in interviews and on television.)

“Foible” is the word that Welles’s former associates tend to apply to his assertions of authorship. Welles could do so many different things in those days that it must have seemed almost accidental when he didn’t do things he claimed to. Directors, in the theatre and in movies, are by function (and often by character, or, at least, disposition) cavalier toward other people’s work, and Welles was so much more talented and magnetic than most directors—and so much younger, too—that people he robbed of credit went on working with him for years, as Koch went on writing more of the radio programs after Welles failed to mention him during the national publicity about the panic. Welles was dedicated to the company, and he was exciting to work with, so the company stuck together, working for love, and even a little bit more money (Koch was raised to $125 a show) when they got a sponsor and, also as a result of the War of the Worlds broadcast, the movie contract that took them to Hollywood.

A truly remarkable piece of misreading

To some degree we've all been guilty of hearing what we expected to hear rather than what was said. At the risk of belaboring the obvious, this has always been a part of human nature and it's probably grown more common with the advent of the internet. Even with that in mind, though, this is a truly remarkable example.

Here's the context. A few days ago, Jonathan Chait wrote a long and unflinching take-down of Paul Ryan. He razed the man, left no stone on stone, salted the ground so... well, you get the point. What's more, Chait was just as direct and damning in his handling of the journalists who had given Ryan so many free passes, even going so far as to confront James Stewart on his Ryan pieces.

Here's a representative passage:

Ryan’s mastery of these details does not signify openness to evidence or a willingness to shape his views to real-world evidence. It actually signifies the opposite. And yet Ryan has grasped that the aura of specificity he has cultivated paradoxically renders the specifics themselves irrelevant.
For a virtuoso display of this principle in action, return to another vintage Ryan moment: his Dave profile from last year, where he awed a swooning reporter by opening up the budget to a random page and fingered a boondoggle. The item Ryan pointed to was the Obama administration’s reform of the student-loan industry. “Direct loans—this is perfect,” Ryan said. “So direct loans, that’s new spending on autopilot, that had no congressional oversight, and it gave the illusion that they were cutting spending.”
The exchange is so perversely revealing that it rewards explanation. For decades, the government helped make college more affordable through “guaranteed loans”—it encouraged banks to lend money to students by promising to repay the banks if the students defaulted. Banks were making billions of dollars in profits at virtually no risk. The General Accounting Office, a kind of in-house fiscal watchdog for the federal government, issued sixteen reports over the years noting how the government could save money simply by issuing the loans itself and cutting out the middleman.
It was the simplest, no-brainer pot of savings you could find—ending pure corporate welfare, just like in the movie Dave. The cause attracted support from think tanks, as well as the moderate Wisconsin Republican Tom Petri, an eclectic reformer who is sort of the real-life version of the Paul Ryan character who appears on television. Two National Revieweditors endorsed eliminating guaranteed loans in an article advocating a new reform conservatism.
The banks lobbied fiercely to protect their gravy train. Among the staunchest advocates of those government-subsidized banks was … Paul Ryan, who fought to protect bank subsidies that many of his fellow Republicans deemed too outrageous to defend. In 2009, Obama finally eliminated the guaranteed-lending racket. It could save the government an estimated $62 billion, according to the CBO.
Not everything in Ryan’s career, and possibly nothing at all, is quite so undeniably venal. You could pluck any other single example out of Ryan’s long history of strident conservatism and he would be able to defend it, at the very least, on ideological grounds. A tax cut for the rich, a hike in military spending—all those could be explained as a blow for the cause of Reaganism. This was an almost astonishingly unlucky break, an instance where he lacked even ideological cover—standing up for higher spending at the behest of a powerful lobby lacking any plausible rationale for its subsidy.
At the moment the page opened to that unfortunate item, Ryan’s heart must have stopped. Here was a reporter trying to cast him as a movie-hero outsider, and he was performing on cue. Yet the book opened to a page that, cruelly, just happened to expose the gap between Ryan’s image and the reality more clearly than anything else possibly could have.
Ryan probably knew, even in that split second, that he stood little chance of exposure. (The overlap between television news reporters and people with a detailed understanding of the federal budget is quite small.) Yet a lesser politician might have panicked, or hesitated, or possibly tried to flip to a different page. In that moment, Ryan revealed the qualities that have propelled him to his current position. As cool as can be, and as winsome as ever, he said, “This is perfect.”

Chait later said he was prepared for a wide range of responses but he had to admit that this post from the left wing site Crooks and Liars caught him off guard:

Praise Jesus and pass the awesome sauce. Paul Ryan's going to be the next Republican Saint, wrapped in a flag and waving down at all of us who are too stupid to understand the complex thinking and amazing nuance of St Paul's brain.Thank you, Jonathan Chait, for this awesome NYMag article telling us how to count the ways Paul Ryan is the Great American Hero. What would I have ever done without being enlightened in such an obsequious way, beginning with the title: The Legendary Paul Ryan?

It is, as Chait says, a fascinating read despite going on for over eighteen hundred words counting two updates (neither of which improves on the original). Part of the fascination comes seeing a writer with such exceptionally poor reading comprehension. She follows every quote from Chait with a reply that seems oddly inappropriate, as if she were listening to him in a noisy room and didn't really hear what he said.

And then there's the self-effacing "I'm not ambitious at all, no sir!" claim that Chait reinforces:

One trope that has marked Ryan’s media coverage from the outset is that he is consistently described as lacking ambition. It’s a sharp contrast with fellow Republican Eric Cantor, to whom the adjective “ambitious” is affixed like a tattoo. Ryan says, and many political reporters believe, that he is immune to the political concerns that distract his colleagues. He “has a level of disdain for the sort of rank political calculations required of people who want to climb the electoral ladder,” explains the Washington Post. Here is a telling description from Politico: “Of the partisan political game, Ryan confessed, ‘It’s not my natural tendency. I’m a policy guy.’ ” The operative word here is “confessed.”

Because wonks lack ambition? This would be why Ryan has abandoned St. Ayn Rand in recent days, eschewing her "I've got mine, screw the rest of you" philosophy for a kinder, gentler piety that "disagrees" with Catholic bishops and pretends to be a bipartisan kind of guy who gets along with everyone! Of course he's not ambitious. Jon Chait has told you so.

Of course, the operative word here is "operative." Chait specifically emphasizes that Ryan is telling us that Ryan's not ambitious. (The word "trope" is also telling.) It's a difficult point to miss, particularly given that a few lines later Chait points out that Ryan "had to elbow more experienced Republicans out of the way to grab his nomination, and then leapfrog other more experienced Republicans to claim the party’s leadership of the House Budget Committee in 2007."

Still, if this were just a badly reasoned post, I wouldn't be recommending you all read it. Seeking out something just because it's bad is mean-spirited and I try to avoid the habit (though the internet does encourage backsliding in that area). What makes the Crooks and Liars piece so fascinating is the way it shows how an interpretation can get embedded so deeply that everything we see confirms that view. As mentioned before, we've all had these moments but most of the time either we catch ourselves or someone shakes us out of it.

It's instructive to see what happens when you just keep going.