Will reading OE make you rich?

OK, I'll admit that a lot of people saw this coming.

"The nation's most densely populated urbanized area"

This report from the census department highlights as aspect of the urbanization debate that tends to be overlooked (or worse):

The Census Bureau identifies two types of urban areas: “urbanized areas” of 50,000 or more people and “urban clusters” of at least 2,500 and less than 50,000 people. There are 486 urbanized areas and 3,087 urban clusters nationwide.

The nation's most densely populated urbanized area is Los Angeles-Long Beach-Anaheim, Calif., with nearly 7,000 people per square mile. The San Francisco-Oakland, Calif., area is the second most densely populated at 6,266 people per square mile, followed by San Jose, Calif. (5,820 people per square mile) and Delano, Calif. (5,483 people per square mile). The New York-Newark, N.J., area is fifth, with an overall density of 5,319 people per square mile. (See sortable lists.)

Of the 10 most densely populated urbanized areas, nine are in the West, with seven of those in California. Urbanized areas in the U.S., taken together, had an overall population density of 2,534 people per square mile.

The New York-Newark area continues to be the nation's most populous urbanized area, with 18,351,295 residents. Los Angeles-Long Beach-Anaheim is the second most populous (12,150,996), followed by the Chicago area (8,608,208). These areas have been the three most populous since the 1950 Census, when urbanized areas were first defined; however, at that time, Chicago was the second largest. Los Angeles became the second most populous urbanized area in 1960, and the order of the top three has not changed since.

Take into consideration the fact that this is an earthquake prone region where much of the land consists of mountains and canyons that are poorly suited for construction and these numbers become even more remarkable.

California remains in rough shape

The source of this quote is a father of two and Iraq war vet who works for the Atlantic council:

In addition to the barbarism that is our penitentiary system eating away at the basic principles on which we founded our society, our obsession with locking away people for violating arbitrary rules is destroying our human capital. We’re literally choosing locking up drug offenders over investing in our children. That’s madness and it has to stop.

Of course, the author is talking about the state of California (which has been very explicit about making this decision).  At some point I think we need to get over our fetish for incarceration.  The same article points out that the 1980's had a quarter of the rate of incarceration that we do today (comparable to a high crime European country, like Poland).  It is hard to decide what is a reasonable target for absolute rates, but going back to the levels of the early 1980's (and the top levels in Europe today) seems like a reasonable goal.

How we get there is unclear, but it seems like a priority for those of use who argue about education reform.  After all, a huge drop in prison costs (in addition to reducing human suffering) would free up funds to rehabilitate the school system.  It is challenging to increase quality while reducing funding.  But increasing available resources can only help (either directly by changing allocations inside state budgets or indirectly by reducing tax rates).

The rise of DC

Aaron Renn:

So we have New York entrenched as America's first city, and Washington, DC increasingly its new "Second City." Los Angeles, which seems to have never quite recovered from the early 90s defense draw down, and Chicago with its 2000s malaise, seem to be the victims of DC's rise. Another loser is Boston, which has seen its status as a financial hub decline and whose Route 128 corridor of tech, having first lost out to Silicon Valley, now appears to be losing out to NYC.

The rise of Washington, DC as a major growth center is not ideal.  This suggests more reliance between the Federal Government and growth than I would like.  I am far from a libertarian, but if access to government decision-makers is this important (enabling DC to rise above Los Angeles, Boston, and Chicago) then we need to consider if that is a good thing.

A programming question relating to board games

Specifically hexagonal games. I'm trying to write out concise descriptions (almost pseudocode) of some games played on hexagonally tiled board. Something like this checkers variant:

If these were rectangular tiles, the coordinates would be obvious, but with hexagons, I'm not sure which way to go.

Any suggestions?

Exciting academic career opportunity

Remember that Washington Post op-ed about all those great community college jobs with excellent pay and almost no work? (Sure you do, I talked about it two posts down) Well, the school the writer used as his main example has an opening in statistics so I'm sure some of our readers would like to get a resume in.

Business Statistics - Part-time Faculty(

Job Number:

0021Q)

Description

Business Statistics - Part-time Faculty – Germantown Campus

The Montgomery College, Germantown Campus, is currently accepting applications for possible openings as apart-time faculty member teachingBusiness Statistics courses. We are seeking an enthusiastic and dedicated teacher who exhibits a high degree of professionalism, a strong commitment to our students, and demonstrates the ability to motivate and educate in an engaging manner.

Montgomery College accepts applications for Adjunct/Part-time Faculty on a continuous basis.

Applications may be reviewed periodically based on the student enrollment needs.

• The listing of a course in the schedule of classes as “TBA” does not constitute an assignment.
• The hiring decision for part-time faculty involves an academic judgment and shall be determined at Management’s sole discretion.
• During the academic year part-time faculty at Montgomery College may teach no more than 11.5 ESH (equivalent semester hour) per semester and no more than 23 ESH per academic year.
• During summer part-time faculty at Montgomery College may teach no more than 10 ESH (equivalent semester hour) for both sessions combined.
• Compensation for initial salary placement as a new part-time faculty member at Montgomery College is currently $870.83 per ESH (Equivalent Semester Hour)

Canada (finally) removes the penny from circulation

The CBC news story is here.
Why can't we do the same here in the United States?  Is there anybody left who sees a penny as a real unit of value and not a complication for transactions?

More on seventeen thousand -- bounding the problem

As I mentioned before, David Levy has come in for plenty of criticism over his recent Washington Post piece, but there's one more point I'd like to throw in. Here are the passages that caught my eye:

The cost for such sinecures is particularly galling when it is passed on to the rest of the middle class and to taxpayers in states that are struggling to support higher education. Since faculty salaries make up the largest single cost in virtually all college and university budgets (39 percent at Montgomery College), think what it would mean if the public got full value for these dollars.

...

If the higher education community were to adjust its schedules and semester structure so that teaching faculty clocked a 40-hour week (roughly 20 hours of class time and equal time spent on grading, preparation and related duties) for 11 months, the enhanced efficiency could be the equivalent of a dramatic budget increase. Many colleges would not need tuition raises or adjustments to public budget priorities in the near future. The vacancies created by attrition would be filled by the existing faculty’s expanded teaching loads — from 12 to 15 hours a week to 20, and from 30 weeks to 48; increasing teachers’ overall classroom impact by 113 percent to 167 percent.

(First a brief aside: in a service industry, I would normally expect that much, if not most, of operating costs would go to the salaries of the workers who provide that service. 39% is not outside of the reasonable range for this situation but it is low enough to make me wonder if cost cutters shouldn't be asking what happens to the 61% that doesn't go to teaching.)

Let's take a quick pass over these numbers and put some bounds around the possible values and see if they justify the impact Levy's changes would have on students (whose teachers would have less time for preparing lessons, grading, answering student emails, counselling, or going over material outside of class).

Please check my math on this but assuming that your 39% was made up entirely of full time faculty teaching twelve hours a semester and you could get 37% of that faculty to increase its workload by 167% and you could immediately get all of the rest of the faculty to quit, you'd reduce your budget by just under 25%.

We could debate whether reducing a school's expenses by a quarter would be worth the loss in quality, but it would be impossible to find a school that met those assumptions. Most of the schools we're talking about (apparently including Levy's example), have fifteen hour loads. This drops the reduction to just over 20%.

And almost all schools (including Montgomery) have part time faculty or graduate TAs. Without mass firings, doubling the workload of full-time faculty would mainly result in reducing work for low-paid part timers (At Montgomery, the starting rate is less than $900 per semester hour). Now we're looking at less than a 10% reduction in costs.

In other words, David Levy's proposal, which requires shabby treatment of employees and a sharp drop in educational quality, would only produce a five or ten percent drop in tuition.

This is not a serious proposal, it's just another example of someone trying to get some attention by taking a provocative position without doing the actual work needed to support it.

Free roads, health care and This American Life

Shortly after reading Joseph's post, I finally got around to this to this extraordinary examination of the small government movement from TAL. The whole thing is worth listening to but the third act struck me as particularly relevant:

Robert Smith -- It's no accident that Colorado Springs is the place where all this happened. Colorado Springs is not just conservative, it is famous for being conservative. It's the home of Focus on the Family, evangelical churches like the New Life Church, four military bases, Air Force Academy. It is in the most right-leaning congressional district in all of Colorado. Add to the mix outdoorsy types, mountain bikers, ex-hippies, and you get this kind of pioneer leave me alone vibe around here.

The citizens of Colorado Springs didn't just believe in limited government, they made it law. 20 years ago they passed the Taxpayer Bill of Rights. TABOR, everyone calls it. And TABOR-- you may have heard of this because other states have put it on the ballot. But it started right here in Colorado Springs. Under TABOR, if you want to raise or impose any tax at all, you have to get the voters to approve it first.

Jan Martin -- Our voters very rarely will support a tax increase.

Robert Smith -- This is Colorado Springs City Councilwoman Jan Martin, one of the people who deals with TABOR day in and day out. TABOR is like a set of handcuffs for city government. It limits how much you can grow your budget, makes it hard to shift money from one thing to another. The city survives mostly on sales tax, which is great when the town is filled with tourists, right? All those hikers and mountain bikers buying energy bars.

But when a recession comes along, living off sales tax is a disaster.

Jan Martin -- What we experienced when the downturn occurred is, immediately, people stopped buying, which meant our dollars dropped faster than most communities. And we crashed and burned almost simultaneously with the economic downturn.

Robert Smith -- In 2009, tens of millions of dollars the city was counting on didn't materialize. Jan believed TABOR only gave her one choice. She had to ask voters for the tax increase you heard about. And this wasn't easy for Jan. She's a Republican. She owns her own business. She has an MBA in finance. But she thought, I just need to be straight with voters about the situation we're in.

She said, look., the city needs to raise $28 million. That means the average homeowner would have to kick in about $200 a year.

Jan Martin -- To go before the voters in the middle of an economic downturn, I will admit, it was pretty gutsy. But I really felt as an elected official I owed it to the general public to give them an option before the cuts were made.

Robert Smith -- It wasn't even close. The voters in Colorado Springs said no way. Nearly 2/3 of them voted against the tax.

The town responded first by making most city services ala carte (you want streetlights on your block? Send the city a check) and then by extensive privatisation, with somewhat mixed results:

Robert Smith -- Roland was doing more work for less money. That's the dream of privatization, right? But the bigger picture here is more complicated. Remember, Roland isn't the only cost involved. The private landscaping firms add a healthy profit on the top, that's normal. And they had to purchase a lot of the things that the city already had, like equipment.

So did the city really save any money here by outsourcing, by privatizing Roland's job? We asked the city of Colorado Springs this question over and over again. And they hemmed and they delayed. They couldn't find a number. Then they said it's tough to calculate. In the end, all we could get from the city was this. Outsourcing Roland Hawkins and all those other workers might save money in the future.

Because medical costs will rise. Pension costs could also rise. Better to get Roland off the books now, privatize him now. But as for last summer, the first year of the parks experiment, the city couldn't say if they saved a dime.

Overall, the city's budget for parks is about $12 million now, a lot smaller than it was at its height. But that's mostly because the parks department is doing less. They've closed swimming pools and laid off community center employees. They're replacing fewer playgrounds and fences and bridges. And Roland, for his part? He's not going back to the parks this summer. He hurt his back.

What I learned, though, from talking to the people in Colorado Springs is that for a lot of them these calculations don't really matter. They don't care if privatizing actually saves the government money, so long as the government is doing less.

City councilwoman Jan Martin says she hears this all the time. That it's become a matter of faith in the city that private is better. And she tells us a story. In the dark days, after the tax measure was defeated, city council was having another meeting about slashing government.

Jan Martin -- And a gentleman came up to me and actually thanked me for the adopt a street light program. He had just written a check to the city for $300 to turn all the street lights back on in his neighborhood. And I did remind him that for $200 if he had supported the tax initiative, we could have had not only streetlights, but parks and firemen and swimming pools and community centers. That by combining our resources, we as a community can actually accomplish more than we as individuals.

Robert Smith -- And he said?

Jan Martin -- He said he would never support a tax increase.

Robert Smith -- So for him it wasn't the money. He was willing to pay more to turn on the street lights than to pay for all city services.

This points to a difficulty with this debate. The anti-tax, pro-privatisation movement revolves around language of government inefficiency and waste, terms that wouldn't be out of place at a meeting of financial analysts.

But a segment of the movement (and, I suspect a fairly large one) is represented by this man, someone who's aversion to taxes is so strong that he would rather pay half again as much and get far fewer services. This is not necessarily an irrational decision (he might have objected to people in other neighborhoods who paid less getting streetlights as well -- that's not a position I would take but it's a perfectly defensible one), but it's not a financial decision and discussing it in terms of waste and inefficiency won't accomplish much.

This would be a good time to bring Jonathan Chait's seminal essay exploring small government and privatisation as ends to themselves into the discussion, or it would be a good time if it were an earlier one.

I'm going to bed. Discuss it among yourselves.

Roads and Free markets

A really interesting post by Timothy B Lee:

Assembling the land needed for a long-distance road is prohibitively expensive without government assistance. Unsurprisingly, private roads almost never come into existence without extensive government assistance. And that means that the profitability of a "private" road depends crucially on how many competing roads the government allows to exist. 

It's unsurprising, then, that real-world privatization schemes are often explicitly protectionist. A 2004 GAO survey found that four of the five privately-funded toll road projects started or completed in the preceding 15 years included non-compete clauses that restricted the creation of competing freeways nearby. It's much easier to turn a profit when would-be competitors are barred from entering the market.  

Supporters of free-market roads point to the experience of the United States and Great Britain in the 18th and 19th centuries as the golden age of private roads, but those roads were only private in a limited sense. This history is detailed in Street Smart, an edited collection published by the libertarian Independent Institute. Daniel Klein and John Majewski write that in the United States, "turnpikes were encouraged by government, sometimes by granting of exisitng trails or public roadbeds to turnpikes, sometimes guarantees against new parallel routes, and typically the granting of eminent domain powers." They write that they "cannot say" whether these privileges were important to the success of these turnpikes.  

The basic pattern seems to have been the same for British toll roads. Most toll roads replaced previously-existing public roads; the book doesn't say if the new roads were built with eminent domain or other government privileges. Indeed, after thumbing through the entire 500-page book, I didn't find a single example of a country, now or in the past, where most roads were built using ordinary market transactions. The vast majority of "private" roads, around the world and throughout history, came into existence thanks to direct government assistance.

I think that is is important to recognize that some areas of human activity are inevitably going to have at least some degree of government involvement.  Roads are a classic public good -- without them we would be far less mobile and trade would be much more difficult.  But a single actor can block the development of roads, absent a government intervention. 

But the part that is the most interesting is how a public good can be turned into a vehicle for rent-seeking.  As soon as there is a hint of a "non-compete" or "guarenteed revenue" clause in a privatization, you can be absolutely sure that there is not a functioning free market present.  We do not grant non-compete clauses to restaurants or clothing stores.  The ability of these business to fail is part of the entire point of the private sector (creative destruction). 

Free markets in everything is now (and always will be) a myth, just like public markets in everything ended up as a terrible system.   Why are we so resistent as a society to the incredible success of mixed markets? 

Seventeen thousand and change

My first job after getting my master's in statistics in the Nineties was as a lecturer at large state university. It was a full time, 9-month position and I stayed there for four years. During all that time I never broke eighteen thousand dollars a year.

I really didn't mind the low salary. The work was enjoyable and I've always been good at living within my means. Besides, there were adjuncts who had it worse than me. Still, seventeen thousand and change is a good number to keep in mind when you read something like this (by David Levy via Krugman):

With the 1970s advent of collective bargaining in higher education, this began to change. The result has been more equitable circumstances for college faculty, who deserve salaries comparable to those of other educated professionals. Happily, senior faculty at most state universities and colleges now earn $80,000 to $150,000, roughly in line with the average incomes of others with advanced degrees.

Not changed, however, are the accommodations designed to compensate for low pay in earlier times. Though faculty salaries now mirror those of most upper-middle-class Americans working 40 hours for 50 weeks, they continue to pay for teaching time of nine to 15 hours per week for 30 weeks, making possible a month-long winter break, a week off in the spring and a summer vacation from mid-May until September.

Seventeen thousand and change.

It is a deeply dishonest piece filled with statistical sleight-of-hand and numbers that don't add up. Robert Farley does a good (though hardly exhaustive) job of laying out the fallacies. I'm not sure I have much to add to it other than to recommend that as you're reading Levy's piece you stop from time to time and repeat to yourself,

"Seventeen thousand and change."

Weekend gaming -- mutant sprouts

A while back I posted a recommendation for a popular pencil-and-paper game:

On the subject of topology, my game of choice is Sprouts, invented by mathematicians John Horton Conway and Michael S. Paterson at Cambridge University in 1967 (as a general rule, you can't go wrong with a game if Conway had anything to do with it).

The rules are simple:

1. Start with some dots on the paper. The more dots you have the longer the game takes so you will probably just want to start with two or three.

2. Players take turns either connecting two of the dots with lines or drawing a line that loops back and connects a dot with itself.

3. The lines can be straight or curved but they can’t cross themselves or any other lines.

4. Each dot can have at most three lines connecting it

5. When you draw a line put a new dot in the middle.

6. The first player who can’t draw a line loses.

I was thinking about sprouts the other day and a few variations occurred to me. I don't know if they're particularly playable or if they add any interesting aspects to the game, but if you can't put a half-baked idea in a blog, what's a blog for?

Variant 1 -- Free sprouts

Played as above but with the following addition: for the first k moves of a game with n dots, the player, after drawing a line, adds a new dot.

Topologically the result is a game with n+2k dots (keep k small) but with the complication that lines are being drawn without knowing exactly how those lines partition the surface. This is still a game of perfect information but the variation should make it more difficult to think a few moves ahead.

Variant 2 and 3 -- Scored sprouts

Each player starts with a separate sheet of paper and proceeds to connect the dot according to the standard rules. After no more lines are possible, the players score their graphs based on the number of dots.

Score = 6


Score = 7

In variant 1 the player with the highest score wins. In variant 2, the win goes to the lowest.

Also posted at Education and Statistics.

Mark and I both remarked on this post

Noah Smith: 

A homeless girl turns out to be a science genius. I see stuff like this all the time. My brother-in-law grew up in a trailer with a teenage single mom, and he's now completing his PhD. My friend grew up poor in rural Northern California with a drug-abusing single mom, and now she's a neurosurgeon. There is so much human capital hidden in the poverty-stricken backwaters of America, it's absurd. And yet I still read pronouncement after smug pronouncement from guys like Bryan Caplan, declaring that success is all about I.Q., and that it's no use trying to increase economic opportunity because everyone is already just where their I.Q. dictates they should be. What a load of poppcock, rubbish, stuff & nonsense.

 The idea that social position is already perfectly distributed based on merit is reassuring for those in high socio-economic positions but seems dangerous.  At some point I will give my Ayn Rand critique again (the places where Ms. Rand's philosophy is unable to cope with actual people).

But the world is filled with people who have been successful despite being poor or disadvantaged.  That should be celebrated and not suppressed.

Consequences

Matthew Yglesias has a really good point on economic policy:

But of course "the policy of economic austerity" is not a living breathing human being with feelings and interests and values. And the specific human beings who pushed austerity policies on Europe—central bank chief Jean-Claude Trichet and his successor, their colleagues on the ECB board, Angela Merkel and her coalition partners, etc.—have not been dealt personal blows here either. They're all fine. The blow has been dealt to unemployed Irish people who are hoping to get jobs soon. The blow has been dealt to Irish small business operators who have a decent underlying product and were hoping to expand production when customers would have a bit more cash in their pockets. The blow is dealt to Irish kids who are going to school with parental joblessness and economic distress hanging over their heads.

I have been seeing the same line of thinking from Karl Smith over at Modeled Behavior and I think it is overdue in the public discourse.  Policies often hurt individual people, and not usually those who are making these decisions.  I actually don't see this as a failure of government so much as social cohesion and the idea that we all benefit from a strong and well functioning economy.

Policy is interesting in the abstract, but it is worth remembering that bad policy has consequences for specific people in the real world.

More on the growth fetish -- Facebook vs. Groupon

There is a worthwhile exchange going on between Felix Salmon and Pascal-Emmanuel Gobry. I've already quoted Salmon, but Gobry makes some good points as well. Still, the part I found the most interesting is the part I think he got wrong.

Breakthrough technology startups are different from other kinds of businesses in that they either create a new market or violently disrupt an existing one. This means that they almost invariably require to spend lots of capital in order to stake out a defensible market position against their numerous competitors. In particular, many technology markets have winner-take-most or winner-take-all dynamics, either because of network effects or economies of scale…

Felix writes that Groupon had a profitable Q1 2010 and “it’s easy to see how it could have grown steadily from that point onward.” Except that given the characteristics of the daily deal business, particularly the need for scale, what would have happened if Groupon had tried to “grow steadily” and profitably, is that the company wouldn’t be around anymore.

It’s LivingSocial that would have raised over a billion dollars and be worth $10 billion today, Groupon would have been sold for scrap like BuyWithMe and plenty of other daily deals also-rans, and Andrew Mason would be back to doing yoga on YouTube. Groupon would be a footnote.

This illustrates (at least for me), a common error among growth fetishists -- overgeneralizing valid arguments for growth-at-all-costs. The first paragraph above is absolutely on target. There are situations where establishing dominance and critical mass as quickly as possible is incredibly valuable. Cases like Facebook. To make a bad pop culture reference, when it comes to mainstream social networking sites, there can be only one. Once Facebook was in place, all that was left was niches.

Put another way, it would cost more to unseat Facebook than it did to build it. Under those circumstances, Zuckerberg's bury-the-problem-in-money approach to running a business made sense (even if it was aesthetically lacking).

The first mover advantages for Groupon are far less obvious. There's no reason why we couldn't have two online gift card businesses. Consumers would get a wider selection and the merchants would almost certainly see lower fees (there's no way Groupon could charge those rates in a competitive market). Nor are the economies of scale that significant, at least not for the part of the business based on arranging deals with local merchants.

A potential competitor would have to spend a lot of money building a mailing list but probably not that much more than Groupon spent on its list. In short, if a potential competitor were to spend as much money as Groupon has, it might just catch up (particularly given the fact that Groupon is not a very well run company).

In terms of lifetime value, I suspect that the money Groupon spent on explosive growth was badly invested. However, in terms of buzz and stock price, it may have been money well spent as far as the backers were concerned.