It's that sub-advisement you really have to worry about

Matt Yglesias is having trouble understanding John Hancock's explanation of its fee structure. I can't imagine why (via Felix Salmon):

“For internally-managed Funds advised and sub-advised exclusively by John Hancock’s affiliates, the total fees John Hancock and its affiliates receive from these Funds may be higher than those advised or sub-advised exclusively by unaffiliated mutual fund companies. These fees can come from the Fund or trust’s Rule 12b-1, sub-transfer agency, management, AMC or other fees, and may vary from Fund to Fund.”

Brad DeLong digs through the NYT archives for this memorable rebuttal of Charles Murray

From Bob Herbert:

The book shows that, on average, blacks score about 15 points lower than whites on intelligence tests, a point that was widely known and has not been in dispute. Mr. Murray and I (and many, many others) differ on the reasons for the disparity. I would argue that a group that was enslaved until little more than a century ago; that has long been subjected to the most brutal, often murderous, oppression; that has been deprived of competent, sympathetic political representation; that has most often had to live in the hideous physical conditions that are the hallmark of abject poverty; that has tried its best to survive with little or no prenatal care, and with inadequate health care and nutrition; that has been segregated and ghettoized in communities that were then redlined by banks and insurance companies and otherwise shunned by business and industry; that has been systematically frozen out of the job market; that has in large measure been deliberately deprived of a reasonably decent education; that has been forced to cope with the humiliation of being treated always as inferior, even by imbeciles -- I would argue that these are factors that just might contribute to a certain amount of social pathology and to a slippage in intelligence test scores.

Mr. Murray says no. His book strongly suggests that the disparity is inherent, genetic, and there is little to be done about it....

The last time I checked, both the Protestants and the Catholics in Northern Ireland were white. And yet the Catholics, with their legacy of discrimination, grade out about 15 points lower on I.Q. tests...

Fixing performance pay

Derek Neal, Professor of Economics at the University of Chicago makes an interesting argument about the poor performance of performance pay for teachers:

"Many accountability and performance pay systems employ test scores from assessment systems that produce information used not only to determine rewards and punishments for educators, but also to inform the public about progress in student learning," Neal writes in the paper, "The Design of Performance Pay in Education."

These testing systems make it easy, in theory, for policymakers to obtain consistent measures of student and teacher performance over time. But Neal argues that the same testing regimes also make it easy, in practice, for educators to game incentive systems by coaching students for exams rather than teaching them to master subject matter.

"As long as education authorities keep trying to accomplish both of these tasks (measurement and incentive provisions) with one set of assessments, they will continue to fail at both tasks," he adds in the paper, which was published by the National Bureau of Economic Research and is a chapter in the upcoming Handbook of Economics of Education.

...

Separate assessment systems that involve no stakes for teachers, and thus no incentives for manipulation, should be used to produce measures of student performance over time, Neal contends. This two-system approach would discourage excessive "teaching to the test."

"The designers of assessment-based incentive schemes must take seriously the challenge of designing a series of assessments such that the best response of educators is not to coach, but to teach in ways that build true mastering," Neal said.

I'm not sure I'm in full agreement here. For one thing, the problems with our current methods for evaluating student progress are deeply flawed even when not asked to do double duty. Second, in my experience, most of the pressure to inflate scores comes from above. As long as test scores affect the fortunes of administrators, the less ethical superintendents and principals will find a way to influence teachers (even without the option of dismissal, a principal can make a teacher's life very tough).

Just to be clear, almost all of the administrators I've worked have been dedicated and ethical but I can think of at least one guy, two time zones and two decades from here and now, who managed to pressure a number of tenured but spineless teachers into spending weeks doing nothing but prepping for standardized tests.

What we need is a more comprehensive and better thought out system for measuring student progress.

It's possible that statisticians have an odd definition of 'interesting'

That being said, I'm always interested in stories about where the numbers come from, like this article from CNNMoney:

Two recent price comparisons of grocery and household goods revealed that Target's prices are lower than at No. 1 retailer Wal-Mart.

Craig Johnson, president of retail consulting firm Customer Growth Partners, compared 35 brand-name items sold at Wal-Mart and Target stores in New York, Indiana and North Carolina. They consisted of 22 common grocery goods such as milk, cereal and rice; 10 general merchandise products such as clothing and home furnishings; and three health and beauty items.

Target's shopping cart rang in at $269.13 (pre-tax), a hair lower than the $271.07 charged at Wal-Mart.

"For the first time in four years, our price comparisons between the two has shown that Target has a slight edge over Wal-Mart," said Johnson. A smaller study by Kantar Retail found similar results.

Though I don't have enough information to say for sure, the CGP study looks pretty solid (particularly compared to some of the research I've seen from other consultants) and it's backed by additional analysis and a separate study.

What really stands out for me, however, is the slipperiness of assigning even a well-designed metric to something like the cost of shopping at a certain store. In order to get these results you have to buy the same brands of the same items in the same quantities as those in the studies. Your own shopping list would certainly produce different results (though the difference probably wouldn't be all that large).

It's always useful to remember that metrics are, with few exceptions, arbitrary. They may be useful and well thought-out but they should be approached with that caveat in mind.

Denominators

It is always useful to remind ourselves of the correct use of denominators, like in today's offering from Statistical Modeling, Causal Inference, and Social Science:

The article also explicitly discusses the fact, previously discussed on this blog, that it's misleading, to the point of being wrong in most contexts, to compare the safety of walking vs cycling vs driving by looking at the casualty or fatality rate per kilometer. Often, as in this article, the question of interest is something like, if more people switched from driving to cycling, how many more or fewer people would die? Obviously, if people give up their cars, they will travel a lot fewer kilometers! According to the article, in Denmark in 1992 (!), cycling was about 3x as dangerous per kilometer as driving, but was essentially equally safe per hour and somewhat safer per trip.

Transportation safety is a tricky thing and it only gets trickier as you try to define the best possible measure of risk. However, it is worth noting that when results vary as widely as cycling does based on the selection of the denominator then it is worth reporting all of the possible metrics. Otherwise, the person presenting the data is makign a decision as to what is the most relevant comparison.

For example, opponents of urban density may see commuting distances as inflexible and be interested in the risk per mile. On the other hand, advocates for cycling may well point out that the decision to cycle may feed into the decision of where to live.

But it is a good point to remember just how easily convincing measures of association can be misleading.

Google's autocomplete can lead you to some strange and dark places

Case in point.

I'm not reading the funny pages -- I'm studying the implications of comparative advantage

Click the strip for the punchline.

Weekend Thriller Blogging -- the Maltese Falcon

I've been chipping away at the Joe Gores catalog and I decided to check out Spade and Archer, Gores' authorized prequel to the Maltese Falcon. The idea of trying to follow up Hammett was probably not wise but if it had to be done, Gores was the only choice. Not only did he have the literary talent and standing, he also shared Hammett's background as a San Francisco P.I.

Before starting Gores' novel I decided to go back and reread the original. It's not Hammett's best book. That would either be Red Harvest* or the collected Continental Op stories, but Falcon is still very good and it offers an almost unique experience for the reader.

The Maltese Falcon and Shane are the only two cases I can think of where strong, well-written, enjoyable novels were made, with almost complete fidelity, into great, iconic films. To read these books is to be pleasantly overwhelmed by memories of the movies they inspired.**

There is almost a one-to-one mapping of page to screen. This is only possible because both are short novels. Each comes in under two hundred pages. Most otherwise faithful adaptations either have to add material (The Man Who Would Be King) or leave large parts out (The Silence of the Lambs). Almost everything you read in the Maltese Falcon is associated with some unforgettable image.

There is one deviation worth noting. As Pauline Kael pointed out, Effie's reaction to Spade at the end of the book is significant, highlighting aspects of the characters we might have tried to overlook. It is an important difference from the movie but by the time you get to it you're so immersed in the experience, it's almost like seeing a deleted scene.

*I was tempted to mention Yojimbo here but that's a fight for another post.***

** I realize some of you have another set of films to add to this list, but I never made it past Fellowship, so I'll just have to take your word for it.

*** If I do post on Red Harvest and Yojimbo, remind me to toss Savage Range into the discussion

At least we can still drink and drive

Brad DeLong has a list of around two dozen changes and corrections he'd like to see in the paperback edition of Superfreakonomics and he doesn't even get around to this.

Press-release journalism and the NYT's lost default setting

As I've mentioned before, much of what we've heard about the NYT paywall makes me wonder if they've really thought things through. The following link from Mark Thoma raised yet another question:

Microsoft Accusing Google of Antitrust Violations - NYTimes.com

Most shorter news stories, particularly those based on press conferences, released statements or other publicly available information, are pretty much interchangeable with respect to provider. The version you get from the New York Times will be essentially identical to the ones from the Washington Post or the LA Times or NPR or any other major outlet.

The New York Times traditionally got a disproportionate share of the traffic for these stories because it had become something of a default setting. This traffic meant increased ad revenue. Perhaps more importantly, it brought people into the site where they could be introduced to other, less interchangeable features (for example, the film reviews of A.O. Scott or the columns of Frank Rich). These features are the basis of a loyal readership.

I'm sure that the models Sulzberger and company are using take into account the fact that traffic will drop when you put the paywall into effect. Having worked on some major corporate initiatives, I can tell you that is not the sort of thing that is likely to be omitted. What is, however, often left out is the necessary disaggregation. For example, even in well-run Fortune-500 businesses, you will often run across analyses that correctly predict that a change will cause a net gain of ten percent of market share but fail to note that most of the established customers you will lose are highly profitable while most of those you're going to gain aren't worth having.

Interactively nerdy

Pass the cursor over the image.

AP classes and college development

I'm a big believer in acceleration and giving students the opportunity to test out of courses (I always advised students to explore CLEP). I have never been that impressed, however, with the AP approach. It always struck me as badly thought out and prone to play to the weakest parts of our education system.

I'll make a partial exception for calculus. Because of the extensive prerequisites in majors such as engineering, having cal I or, better yet, cal II out of the way can be a tremendous advantage to an incoming freshman. Add to that the fact that the nature of the subject makes teaching to the test much less of a concern.

With that exception noted, I never saw that strong a case for AP. On the whole, I suspect that college level material is better taught by college faculty, particularly given the test-prep approach of many of the AP classes. If anything, I'd like to see more anti-AP programs. Instead of giving college credit for high school courses, give high school students more opportunities to take college courses (either on site or through distance learning or some kind of independent study). There are certainly precedents: even back in the dark ages, I was in a program where as a high school senior I could attend the local college half-time. With the advent of distance learning, email and digital media, the argument for AP has only gotten weaker.

At this point, I should segue gracefully into a discussion of this paper (via TNR) on the impact of AP courses but to be perfectly honest, I'm in a hurry so I'm just going to give you the abstract and let you all talk it over amongst yourselves:

The Advanced Placement (AP) Program was originally designed to provide students a means to earn college credit and/or advanced placement for learning college-level material in high school. Today the program serves an equally important role as a signal in college admissions. This paper examines the extent to which AP course-taking predicts early college grades and retention. Controlling for a broad range of student, school, and curricular characteristics, we find that AP experience does not reliably predict first semester college grades or retention to the second year. We show that failing to control for the student’s non-AP curricular experience, particularly in math and science, leads to positively biased AP coefficients. Our findings raise questions about recent state policies mandating AP inclusion in all school districts or high schools and the practice of giving preference to students with AP course experience in the university admissions process.

Finally, a bill that will "empower and protect teachers"

I wonder if there's a catch?

Test Scores

Diane Ravitch has some comments on the evidence that there may have been some alterations of D.C. test score results:

What will this revelation mean for Rhee's campaign to promote her test-driven reforms? Her theory seemed to be that if she pushed incentives and sanctions hard enough, the scores would rise. Her theory was right, the scores did rise, but they didn't represent genuine learning. She incentivized desperate behavior by principals and teachers trying to save their jobs and meet their targets and comply with their boss' demands.

Rhee's advocates point out that D.C. scores went up on the National Assessment of Educational Progress, the federal test. This is true, but the gains under Rhee were no greater than the gains registered under her predecessor Clifford Janey, who did not use Rhee's high-powered tactics, such as firing massive numbers of teachers.

I think that this type of issue is another reason that making testing into such a high stakes gamble may be problematic -- it could massively incent poor behavior (at all levels). Furthermore, that a more humane approach had the same absolute level of improvement as the draconian approach is worth noting. I am sympathetic to arguments that education is important but it seems that dramatic reforms aren't really beating incremental reforms. I suspect that this behavior may be true of many complex systems (and learning is nothing if not complex) that are challenging optimization problems.

If you haven't used your 20 yet...

This one's definitely worth a click.

In Prison for Taking a Liar Loan
By JOE NOCERA

A few weeks ago, when the Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis.

Soon after that column ran, I received an e-mail from a man named Richard Engle, who informed me that I was wrong. There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. It was his 48-year-old son, Charlie.

On Valentine’s Day, the elder Mr. Engle said, his son had entered a minimum-security prison in Beaver, W.Va., to begin serving a 21-month sentence for mortgage fraud. He then proceeded to tell me the tale of how federal agents nabbed his son — a tale he backed up with reams of documents and records that suggest, if nothing else, that when the federal government is truly motivated, there is no mountain it won’t move to prosecute someone it wants to nail. And it was definitely motivated to nail Charlie Engle.

Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?

No. Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans.

...

Apparently, though, it’s only a high priority if the target is a borrower. Mr. Mozilo’s company made billions in profit, some of it on liar loans that he acknowledged at the time were likely to be fraudulent and which did untold damage to the economy. And he personally was paid hundreds of millions of dollars. Though he agreed last year to a $67.5 million fine to settle fraud charges brought by the Securities and Exchange Commission, it was a small fraction of what he earned. Otherwise, he walked. Thus does the Justice Department display its priorities in the aftermath of the crisis.


It’s not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. Although Mr. Engle took out the two stated-income loans, as liar loans are more formally called, in late 2005 and early 2006, it wasn’t until three years later that his troubles began.

...

The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.)

Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly.

In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments.

After acknowledging that he had been speculating in real estate during the bubble to help support his running, he said, according to Mr. Nordlander’s grand jury testimony, “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.”

Mr. Engle added, “Everybody was doing it because it was simply the way it was done. That doesn’t make me proud of the fact that I am at least a small part of the problem.”

Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire.
...

It gets worse from there