Thursday, May 14, 2009


Back on Jan. 1, 2008, I started writing daily posts for this blog. Other than my vacation, I've stuck to that, writing at least once each day, amassing a total of somewhere north of 700 posts in those 500 days. I've tried to come up with novel takes on things each day, not always succeeding, but I've never found the time or the interest in doing "pointing posts," those "Sullivan makes a good point here: <quote>" items with no commentary. And for some time, I've been looking forward to this day, this May 14, when I would hit 500...and now I have.

Let me offer a rough, imprecise taxonomy for blogs. One can posit that blogs fall into four categories:

1) Blogs for money
There are people who blog for a living. Not many, perhaps, and many of these people are affiliated with a larger group or media outlet, but their primary job is blogging.

2) Blogs for some money
2-bloggers blog as part of earning their keep, and a large number of the most famous bloggers fall into this group. I have no idea how important Andrew Sullivan's blog is to his continued employment at The Atlantic; he still writes articles for the print magazine. I'd imagine that the blog has become increasingly important, so let's guess that Sullivan is a 1.2- or 1.3-blogger.

Yglesias, on the other hand, seems to be more of a pure blogger. He works for the Center for American Progress, a kind of think tank, and I'm not really sure what he does for them other than blog. I'd guess he's around a 1.1-blogger.

Folks who do corporate blogs fall into this category. I've spoken before of my admiration for Decidedly, a blog from a company called Dwaffler, that stays largely away from advocacy of their products (OK, they slip it in once in a while) in favor of cogent discussion of issues (primarily decision-making, which is the purpose of their product...but, hey, it's not put right in our faces). I've also seen some simply awful corporate blogs, ones that exist solely as marketing adjuncts with little insight or point of view.

But corporate bloggers generally do not blog to eat. Their primary job is CEO or COO or flack, and the blog is something extra they do, perhaps in an attempt to put a human face on a company, to relate to existing and potential customers. These are 2-bloggers.

3) Blogs for influence
We now fall into the categories of the unpaid. If you blog without remuneration, but hope that you have an effect on people's thinking, you're a 3-blogger. The vast majority of blogs fall into this category; most people aren't selling anything, not even indirectly, they're just offering ideas about subjects they know or care about. The audience can be large or small, devoted or casual, but the blogger still needs to feel that the words are being read and thought about.

4) Blogs for personal satisfaction
4-bloggers are the idealists, the people who put their thoughts out without consideration of an audience. They "have to" write, perhaps to exorcise demons or work through issues, but they do so without regard to whether anyone is listening.

However, 4-bloggers are also the most superfluous, because they have the option of writing their thoughts in a diary (sorry, guys, journal) or into a Microsoft Word file. If they truly don't care what people think, if their offerings are just for themselves, there's no reason to put their ideas out on the most public forum ever invented. For that reason, I don't believe there are many pure 4-bloggers - everyone ultimately wants their words to matter, if only a little, so a goodly number of bloggers are 3.8- or 3.7- or 3.3-bloggers.

Having created this hierarchy, I must, unsurprisingly, try to see where I fit into it. There's a purity to the idea that I write because I must, because I've just got to, got to, let my feelings OUT!, that I'm a 4.

But I'd be lying to myself. I may have started this blog with low expectations, but humans are built to dream. At the beginning, I might have said "4," that Androcass was going to be a device to let me work out my feelings, to serve as an outlet for frustrations at times (by the way, that hasn't worked for me at all - I haven't found that I naturally feel better after expressing myself, but maybe that's just me). But, not so deep down, I certainly hoped that some small audience would enjoy my writing and be engaged with it, that it would inform or provoke, and that (in the best Web 2.0 way) feedback loops would emerge and I would be enriched by the involvement of others.

Furthermore, I've had a chance to be embedded in the sphere of commentary in a way I never really was before. Previously, I read newspaper and magazine opinion pieces, got into a few blogs, but I never engaged with them in the way that I've had to over the past 16+ months. In part, it was to find fodder for my own efforts, but, whatever the reason, I've spent a lot of time in the 1 to 2-blog world (and the 1-commentators who don't blog, who just bloviate away in publications or on television).

And I haven't ended up being impressed. There are a lot of people making six figures who recite party talking points, or mislead to make a point, or lag reality by years only to present it as something they discovered (offshoring is happening, really, Tom?). I'm not so arrogant as to believe I rank with these "seasoned professionals," but I'd put my thinking track record up with many of them. It's not so much me, anyway; I read quite a few bloggers who write well and passionately, out of real knowledge, who put the windbags to shame, and none of them will ever achieve a fraction of the fame, the money, or the influence.

So what I was shooting for hasn't really happened. I have a few regular readers, some of whom comment via posting comments or direct e-mails, but (according to my readership stats) many people visit, sample what's here, then move off, never to be seen again. However the marketplace of ideas works, what I'm peddling isn't selling.

I'll grant that I haven't done the things that "drive traffic." I haven't done much of the, wait around for Drum to write something, write a real quick blog post, then puff it up in Drum's comments. There are other tips and tricks to make one's blog a go-to spot, and I haven't found the time to implement those (and I find some of them kind of unseemly).

I might fare better if I homed in on one or two topics of interest. Some specialized blogs become quite successful, rising past the 3 level and on to the more lucrative positions. I have chosen a certain eclecticity, in that I have things to say in more than area; this blog has always been more a reflection of me than of a specific point of view, anyway.

I've had comments about my tone, but I haven't altered anything in response. Here's why: I've been told that I'm overly negative, too cynical, unduly harsh, that this attitude turns people away. That may be true, but I read plenty of blogs that seem far more down that road than mine, so I don't really see it.

What I have tried to do is ask questions, present alternatives. I think it's important to understand the difference between "positive-sum" and "win-win," and I am, possibly, withering in my opinion of people who understand the difference but fail to point it out because it might undercut their (political) point. I think it's important not to align one's self with either Bill Gates or Lou Dobbs on visa issues, but to ask the questions which would allow us to make decisions and formulate policy; if that's deemed by others as being "harsh" toward anyone at the poles, then I guess I'm harsh.

But the clincher is, I've also read other comments that suggest I
should inject more passion, put more of my outrage into what I write.
I can't square that circle; maybe there's some kind of skill that
allows a writer to be passionate and advocating, but not critical - I don't have that skill, I guess.

The upshot of this is that, as of today, Androcass is sliding into semi-retirement. I've grown tired of working pretty hard at something that actually seems to be moving down the hierarchy, that is of its own weight approaching 4-hood. I have no doubts I've had some good ideas, and some that I've found novel ways of presenting - I'm happy with a higher percentage of my posts than I would ever have anticipated when I began this.

For some time, though, it's been clear to me that the cost-benefit is going the wrong way. I'm not accountable to a little mini-community; heck, my most ardent reader and contributor has disappeared off the face of the earth (something which served to support my already-made decision). There are other things I want and need to do, hours that are better spent in other pursuits. Over the past 500 days, this blog has become far too central to my life, and I need it to stop.

Don't take that to mean that I'm going to pull a vanishing act. I like this Androcass persona, and the very act of thinking and writing has allowed me to polish and refine my thinking on all sorts of topics. If I'm in your feed reader, please leave me there, because I'll be back from time to time, as passion demands (it's possible I'll feel compelled to post something tomorrow, though it would ruin the nice symmetry of "500"). I have a bunch of topics I can't quite get myself to part with (any day now, I expect to finish my classic post titled, "Korea - Should Truman really be getting involved?).

But I may not post tomorrow, or over the weekend, or the rest of the month, I just don't know. Maybe I'll pour my energy into bike riding, or music, or doing things around the house (do I hear the wife cheering?). It makes little sense to do so to a blog that is moving down the hierarchy, that will never bring anything other than a mix of satisfaction and frustration.

To those of you, whether commenters or not, who have been regular readers, I thank you. Whether active or passive contributors, you have enriched my life, and I am most appreciative. Catch y'all down the road somewhere.

Next top model

Why do economists all end up advocating the same positions, free trade, free markets, and all the other sorts of things that have been shown to have flaws that stunned those very economists when they were confronted with a real economy?

John Kay discusses the limitations of economic models here:

Since the 1970s economists have been engaged in a grand project. The project’s objective is that macroeconomics should have microeconomic foundations. In everyday language, that means that what we say about big policy issues – growth and inflation, boom and bust – should be grounded in the study of individual behaviour. Put like that, the project sounds obviously desirable, even essential. I confess I was long seduced by it.

Most economists would claim that the project has been a success. But the criteria are the self-referential criteria of modern academic life. The greatest compliment you can now pay an economic argument is to say it is rigorous. Today’s macroeconomic models are certainly that.

But policymakers and the public at large are, rightly, not interested in whether models are rigorous. They are interested in whether the models are useful and illuminating – and these rigorous models do not score well here.

Mark Thoma quotes Barry Eichengreen:
What got us into this mess, in other words, were not the limits of scholarly imagination. It was not the failure or inability of economists to model conflicts of interest, incentives to take excessive risk and information problems that can give rise to bubbles, panics and crises. It was not that economists failed to recognize the role of social and psychological factors in decision making or that they lacked the tools needed to draw out the implications. In fact, these observations and others had been imaginatively elaborated by contributors to the literatures on agency theory, information economics and behavioral finance. Rather, the problem was a partial and blinkered reading of that literature. The consumers of economic theory, not surprisingly, tended to pick and choose those elements of that rich literature that best supported their self-serving actions. ... It is in this light that we must understand how it was that the vast majority of the economics profession remained so blissfully silent and indeed unaware of the risk of financial disaster. ...
And from Thoma himself:
There are two uses of economic and econometric models, one is to use the models to understand how the world works, the other is to use the models to forecast. And while, of course, one of the goals of understanding the economy is to be able to predict it, it is simply not something most academic economists do (and the best models for forecasting are not necessarily the same as the best models for learning about how the economy works). Business economists do lots of prediction and forecasting, but academic economists? Not so much. We come along long after events have occurred - e.g. we're still analyzing the Great Depression to some extent - and try to use those events (as well as data from normal times) to try to understand how the economic world works, how policy can improve performance, etc.
[The preceding doesn't explain why academic economists take checks to do just the sorts of things Thoma says they can't do well - I'm sure there's a model to explain that.]

In a nutshell, here's the problem. Economists model what is most tractable to model, and a large economy with small players who can as a group be predicted is reasonably easy to model. It's not perfect; occasionally real people do crazy things like bid up the price of real estate beyond all historical precedent or reason, and as we saw, the models weren't able to cope with the implications of that.

If we look at the assumptions that undergird economic models, we have a roster of somewhat abstracted but perfectly logical ideas, each of which is imperfect if you want to describe real reality, but seem close enough. And, for the middle ground that is usually inhabited by the real world, they seem to work well enough.

Then along comes something extreme, something unprecedented, and the models fall apart - they simply weren't built to take into account things that have never before happened. That the extreme events are well within possibility is something the model builders prefer to ignore.

But there's something else, a feedback effect that is less noted. Once you have built your model, staked your professional flag on it, you're stuck with it and the vision of the world it encompasses. If you model free trade, and it demonstrates that free trade offers magical value-added effects, you then have to buy into a world in which free trade is always good, always right. (That's why even reputable economists refuse to refute a trade flack who makes profoundly misleading statements.)

And with that belief comes a series of subsequent conditioning. Any basic model of free trade only shows that there are gains to the two nations engaging in that trade. It doesn't demonstrate anything at all about the internal distribution of those gains, or some of the obnoxious utility effects. But your whole academic life now depends on free trade, so you have to ignore those things that are unpopular or inconvenient (and, if pressed, you fall back on the "my model doesn't include political effects" or some such hedge).

The real mistake is that we listen to these ivory tower dwellers, these folks who make amazing math while forgetting that it's supposed to model something the rest of us call reality. We shouldn't be amazed that the models failed us in the current crisis; we should be amazed when they tell us anything useful at all.

[For a somewhat more technical explication of models and assumptions, see this from Willem Buiter.]

The free world

This is a favorite topic of mine, the idea that seems prevalent that there is a whole lot of free stuff that isn't being captured in GDP, but has real value, and we should count it to see how great the virtual world is, and so forth. I touched on this last week in a post where I talked about Yglesias's idea that low-selling books should be virtually given away rather than sold for big amounts of money.

The larger issue is expressed well in an older post by Yglesias:
One noteworthy trend we’re experiencing of late is the rising prominence of social production—the creation of valuable information goods on a non-commercial basis. Probably the clearest example is Wikipedia, a hugely useful service that doesn’t produce any economic “value” in GDP terms. Of course valuable activity that doesn’t register in GDP is nothing new—just ask moms spending time taking care of their kids. But the transition to the digital economy is changing things in important ways. In particular, it’s simultaneously making it cheaper than ever to produce and distribute information goods, but harder than ever to capture revenues from information goods.
This is true, but Matt sees this in extremely positive terms, particularly with the idea that retirees will embrace the free economy:
In the future, it might be common for grandpa to spend a couple of hours a day tinkering with open source software. Or maybe he’ll make it his business to attend city council meetings and write on the web about them. People will write whole books and distribute them for free to people’s kindles. A lot of this material may have a “crank” quality to it. But much of it will be genuinely well-informed, and reflect a lifetime of knowledge. Already, I can see in DC’s local blogosphere that there’s a fine line between an annoying busybody and a vital source of information. As the cohort of people with the most time on their hands to just pursue their interests becomes more digitally literate, I think we’ll probably see an explosion of non-commercial activity in a variety of fields. And one important source of success for commercial enterprises will be finding ways to hybridize commercial and non-commercial elements of the production/distribution process.
He kind of limps to the close (endings are tough for me too):
One important implication of this is that we’re almost certainly shifting from a world in which a large and important set of activities aren’t captured in the national economic statistics to a world in which a large, important, and growing set of such activities isn’t captured in the conventional statistics.
I think this is all way too positive. Ultimately, an economy is about doing something or making something that can be exchanged (generally using the medium of money) for something of value that you want. All this free activity is cool and neat, but a whole lot of it comes from a community that is fortunate to have the leisure time to do things that happen to be of interest to others.

Wikipedia is useful (don't tell John McIntyre I said so), but few are lining up to pay for it. There is a hobby quality to it, and to a lot of what passes for so-called "social production." The Internet is great in that a lot of things that people might have done for fun can now be made useful for other people, but we shouldn't confuse that with the workings of a real economy. Some of the most successful projects of the past few years have uncertain realities in a financial sense, and rely on the contributions of people who choose to work on them...and can choose not to work on them.

It's nice to think that a whole army of grandpas are going to go out and donate their time to things that profit a lot of people who are better off than they are, but that's not a sustainable resource that anyone can count on. There's a reason that we have newspapers that assign people to cover city council meetings and write about them and get paid for them - it's called work. I don't think the populace should have to work their civic knowledge around Granddad's annual trip to Florida.

The light at the end of the tunnel...

Time doesn't permit me to develop this theme fully today, but we need to begin to think about what will happen after this recession/depression is over. There is a tacit assumption that the only realistic options are V-shaped, U-shaped, or W-shaped, with only a very few even contemplating the possibility that L-shaped may be far more likely.

We have just lived through a series of booms that wildly inflated our expectations of what we should expect from our economy. And it's possible that there is a "true" level to which we will revert, and it may not be the big-growth model that we assume. It could well be that the lower leg of the "L" is where we should have been all along, that the inexorable nature of the logisitic curve has finally caught up with us, and that we will sink into a prolonged low-growth mode.

What does a computer programmer cost? $50-60K, because that's what we're used to paying? Well, no, they're goods like anything else, so the real answer is, whatever the market demands. Increasingly, we can get perfectly serviceable programmers for $10-15K, so that de facto becomes the cost. To assume that the "American premium" will somehow maintain that big a differential is darned naive. (Substitute "manufacturing worker" or any other movable profession and the argument is the same.)

But, if we pay our computer programmers less (or employ fewer of them), there will be less money floating around for purchases of consumer goods and the like. One could argue (and many have) that displaced programmers will move on to work that is at least as lucrative, but that seems increasingly unlikely given the kinds of jobs that look like growth professions (solar panel installers? wind turbine makers? home health care providers? None of these seem like the stuff of upper middle class aspirations, no matter how necessary they are).

It is possible that Americans are simply overpaid with respect to the rest of the world, that our wages and prices are simply too high in a globalized competitive world. That may be due to historical precedent that is no longer relevant, but it's hard to argue that it's sustainable.

And, in a global sense, there's probably nothing wrong with that. The United States is likely due for a readjustment in light of world market conditions; maintaining the status quo is unwieldy and, quite possibly, unfair and exploitative.

But it does imply a change. Many want to think that we'll just move over and share the top step with billions of others, but that probably can't happen in a world of finite resources. The rise of others will mean some fall for us. It doesn't have to be catastrophic, but it will require some rethinking.

This might seem deflationary, if wages and then prices fall to something closer to world-acceptable levels. Every economist will say that that would be an utter disaster, that it would change our financial landscape in all kinds of unpleasant ways. And that may be right, leaving us only two options. We could inflate our currency; nominal wages and prices would stay roughly where they "should" be, but there would be all sorts of consequences from that, most unpleasant. Or we could see a massive fall in the dollar, as we equalize our wages and prices through foreign exchange. We would see a huge increase in exports, and some industries would find the U.S. labor market more attractive. Since the dollar is the world's reserve currency, there would also be some mighty nasty results from this.

There are a number of mechanisms which might counter this trend somewhat, but I don't see them being sufficient to stem off the larger problems that come from equalization. I hope so, of course, but I can't be too optimistic.

Tim Duy, via Mark Thoma, has an essay that seems slightly more positive, but leaves us, in the end, with at least some version of what I've outlined:
Bottom Line: The economy looks to be turning a corner relative to the downward cyclical force of last year. But this is only a partial victory, as the factors that that started us down this path - namely, a debt-supported consumer spending dynamic - remain in play, and will likely remain in play for years, arguing for a long period of slow growth, punctuated by short-lived bursts of positive data. In such an environment, and considering the importance of government support to sustain financial stability, the odds favor continued policy easing. Those looking for a more positive scenario are pinning their hopes on either an unlikely rapid return to past patterns of consumer behavior, an unlikely rapid evolution in patterns of economic activity that are not consumer dependent, or a decoupling of emerging market economic activity from the US (which could pose a different set of policy challenges).
Brad DeLong believes that we will be sustained by something that has blinded us, so far, to the extent of our problem, the handcuffed dollar-holding foreign governments:

The next generation, therefore, will see a very interesting dance. Call it reverse finance colonialism? Call it something. Foreign governments will be seeking high-return assets for their enormous portfolios without selling dollar-denominated wealth. Consequently, they will have to focus on U.S. corporate securities. With such large-scale investment comes ownership and with ownership comes control. No government will want to play the role of passive investor, with the attendant risk that its partners will tunnel the wealth out from under its grasp, leaving an empty corporate shell.

So what is likely to come to pass is not the socialism feared by the Right—at least not ownership of the means of production by the U.S. government. Instead, it will be ownership of U.S. companies by foreign governments—and on a scale we’ve never before seen.

Can anything stop this progression? Yes. A collapse of world economic growth—which would create a very dangerous and angry world. Or a sudden return to thrift on the part of American consumers—so that we can finance the industrialization of the rest of the world rather than having them finance our consumption. But neither is likely.

That will leave Americans confronting a new and unprecedented phase of globalization. Government agencies in Beijing, Dubai, and Brazilia will have a large financial interest in everything from the health-care policies of American factories to the compensation packages of corporate executives and the apportionment of seats on corporate boards. And their interest will matter: They will, after all, be the people who have the money—just as Americans were the people who had the money in the years after World War II.

So we'll be able to sustain our lifestyle to some extent, but only at the price of becoming financial captives to the countries that can prop up their bad investments only by throwing more money into the pot. I'm not sure DeLong follows his own thinking quite far enough, but it's difficult to see a way in which scenario ends well for anyone.


Drum mentions one of the real unmentioned issues in testing:
Now, the whole point of high-stakes testing is to provide us with hard, quantitative assessments of how our kids are doing. You simply can't be a believer in this stuff and not care about whether the tests are meaningful from place to place and year to year. And yet, as Bob says, this issue gets only an occasional mention each year before being quickly dropped down the memory hole until another year's test results come out and someone happens to casually mention it again. It's almost enough to make you think that a lot of these folks are more interested in using tests as a political cudgel than they are in whether kids are actually learning something. Almost.
This is such a huge issue. If you look into the literature on the subject, you'll see a lot about "objective norming" and the like. It all sounds very statistical and scientific, and it certainly generates no end of PhDs in education.

But creating tests is very hard, even in isolation. When you freight them with conveying more information than they can easily, such as allowing comparisons across space and time, you create a near-insuperable problem. Think about it: How would you create two tests in anything that are sufficiently different so as not to allow cheating, but similar enough that two different groups of students will score proportional to their "true" levels of ability?

Even if you could create tests far better than seems possible, how do you know the populations are really the same? There is an assumption that a 2008 group of 7th-graders is roughly the same as a 2009 group, but you don't know that, and you have no way to tell whether an increase in scores comes from: 1) A group that happens to be smarter; 2) A test that turned out to be easier; or 3) An actual improvement in knowledge that comes from education. (Again, the testing bodies will assert that they do have ways to correct for the first two, but I have little confidence in the fourth-decimal point precision that they assert.)

Yet, every year, the results roll out, and they're used to threaten or close schools, discipline teachers and administrators, allocate funds, and as a symbol of American pride or shame. That's putting a whole lot of weight on something that has inherent statistical problems. It's a real shame we're so uncomfortable with plus/minus, that we demand a false accuracy that alters lives.

Take the next step

Yglesias, a couple of weeks ago, on national identification of companies:
He [Tyler Cowen] points out that not only do Toyota and Honda manufacture cars in the United States, but these are publicly traded firms. Americans can—and do—own shares in both firms, and could own more if we wanted to. Conversely, an “American” company like Apple actually does very little production in the United States. Nestle is “Swiss” but it’s a giant multinational corporation and Switzerland is a small country so the vast majority of its operations are elsewhere.
So let's follow the logic a little further and ask ourselves why we use taxpayer money to prop up one set of multinationals at the expense of another set, and why the economic talking heads don't leap to calling that what it is...protectionism.

If we put a tariff on every foreign car of $1000, every reputable pundit would yell Smoot-Hawley (except for Congresswoman Bachmann, who would yell Hoot-Smalley) and decry this action as Hoover-style Depression-inducing.

Let us, however, give $1000 per car to an auto company that happens to house its executives in and around the Detroit area, and that's called principled support of a major American industry. I really don't get the distinction.

Update: for a somewhat economisty view of this which makes sense, see Claus Vistesen by way of Edward Hugh.

Wednesday, May 13, 2009

Walking the middle

We're having a discussion on yesterday's post about whether paying for labor is a plausible alternative to whining about it and importing people. My conclusion was that we should be rational about it, explore all options, instead of leaping to expedience. North Dakota does have other ways of getting doctors than to eliminate H-1B quotas. Rational examination might still lead us to the importation of doctors, but it might not; the challenge commands us to think more broadly than the first (and possibly cheapest) solution that comes to mind.

But I don't want to rehash that here. What I want to talk about is the tendency we all have to over-contextualize arguments people make, to focus on the back story instead of what's really being said. I've had comments on this blog (and in private e-mails) that deal, not with what I'm writing, but with the motivations of those who provide the evidence. There is enough validity to that view to make it worth considering, but it is not sufficient to allow the arguer to ignore the actual argument.

I have often cited sources that come from people who are clearly more anti-immigration than I am. I do that because the conventional media seems to ignore a lot of the evidence that conflicts with the common wisdom that Americans aren't good enough to fill certain jobs (the PR-fueled, CEO position). And if you read what I write, really read it, you will see that I'm taking a more nuanced view than, simply, we must close our borders. To lump me in with the people who do believe that is, while convenient for you who want to disagree with me, spurious and insulting.

Let's take the H-1B question, at least one aspect of it. There are people who believe that the number should be 0, and their views have become marginalized. There are other people whose self-interest drives them to believe that the number should be essentially infinite. And there is the actual number, based on historical accident more than science, of 65,000.

Where I have tried to walk is the uneasy middle, because I really want to understand what the "right" number is. Unfortunately, that stance means that I have to disagree somewhat with both sides, that I don't have the false comfort of saying, on the one hand, that abuses in the program imply that it should be abolished, or, on the other hand, that there's a (rather bogus) study that "proves" that H-1B applications create jobs. Moving in either direction would, I assure you, be far easier; I could jump in bed with one side or the other and sway along with one mantra ("H-1Bs are bad, bad, bad") or the other ("H-1Bs are good, good, good").

I'm not contending that I am unaffected by my own experience, that's asking a bit much. But I do believe I can remove myself from the midst of whatever biases I have, at least enough to ask the right questions. For example, I've worked with H-1Bs who had no business programming a computer, and certainly should not have been allowed in a position where they could undercut native talent. That's happened enough times to make me think that, more than perhaps, the quota is too high.

But that's a first-cut reaction, and I like to dig a bit deeper. So I ask myself how we actually come up with the people who receive these visas. And I look at the conventional media, which pretty much accepts the idea that H-1Bs go only to the "best and the brightest," but is weak on details. It turns out that there is no great selectivity there, that we're not necessarily skimming the cream from other countries. Additionally, the biggest H-1B users are Indian offshoring companies, who have their own motivations for bringing in their countrymen for a few years, then sending them back to the subcontinent.

If we really take the time to look at this, or any other, issue, we find that there is a complexity that doesn't quite line up with political simplicity, that, if we're trying to find truth, we can't just line up with Bill Gates or Lou Dobbs. Each may have contributions to make to the dialogue, but neither seems to capture the full difficulty of the problems inherent in immigration policy - each is quite selective in their choice of facts.

But each of them may have facts to contribute to the discussion, and it behooves the inquirer to look at both sides and try to determine what truth can be found. Sadly, our news providers seem incapable, most of the time, to appreciate this. It's easier to brand Gates an eminent statesman and assume that his wealth gives him special insight into topics that are well beyond his ken (but within his sphere of self-interest). In this way, extremes are relabeled "conventional wisdom," and any dissent becomes relegated to the fringes; you're either with Bill Gates or you're part of the radical nutjob Dobbs contingent.

That may make the job of commenting on things a lot easier, but it's also colossally lazy. Some of the people who disagree with me are guilty of that (and I am, at times, just as guilty). It's hard to question assumptions, to look skeptically at what both sides are saying, especially when you can sort people into two classes ("agree with me, disagree with me").

I'm pretty sure that the 65,000 number for H-1Bs is "wrong," because it was not determined based on much of anything that I can tell, and because it doesn't change in response to any externalities. Is it too low, or too high? Well, that depends on what our goal for the program is, and that's not something that either side spells out particularly well.

[I thought of trying to hash some of the two sides out here, but this isn't the post for that, because I'm using the H-1B question to illustrate the thought process.]

Hey, facts are tough, but that doesn't make truth something we should ignore. Since I don't have the ability to run an experiment on the H-1B question, my guess is that there are gains and losses whichever path we select. If we dropped visas to 0, some people would be better off, some would be worse. If we expanded them to 200,000, same thing. If I can acknowledge that, try to figure out who falls into each category and determine the magnitude of the life change, then so can everyone else. Of course, that wouldn't be as much fun as the shouting off the top of the head that most people seem content to do, but that doesn't mean we shouldn't try.

Tuesday, May 12, 2009

Where have all the doctors gone?

Rob Sanchez, in his most recent Job Destruction Newsletter, writes about a new Senate bill that would effectively lift the H-1B caps on the importation of foreign doctors. As Rob points out:
In conclusion, the Conrad "improvement" program is a backdoor attempt to raise the H-1B cap. That's because if more foreign medical students can get a Conrad waiver there will be more H-1B visas left over for programmers and engineers. We can expect more bills like this that whittle away at the H-1B cap without having to actually raise it.
This is likely true, and brings up a larger point that I'll probably get around to writing about tomorrow, but I wanted to pick up on one statement in the press release from the senator who's sponsoring this change:
The physician shortage in America is a growing crisis. By 2020, some projections show the nation may fall short by as many as 200,000 doctors. This shortage will be felt hardest in rural areas in North Dakota -- and across the nation.

The Conrad State 30 Program has brought more than 100 doctors to North Dakota communities that otherwise would have experienced a lack of physician coverage.
Need I talk about this again? I guess so. This is the same argument that we hear about the need to increase H-1B visas, that we simply cannot find all the qualified people we require to do...whatever it is the speaker thinks needs to be done.

Let me help the rural areas of North Dakota -- and across the nation -- with their problem. Fill a briefcase with cash, let's say a million dollars worth. Go to the Minot International Airport, catch a flight to Minneapolis, then on to Milwaukee, and finish in Boston, it takes less than a day. Go walk around a medical center, offering the briefcase to any doctor who's willing to commit to two years. I bet you'll find someone who will come.

[Actually, to go up even earlier in the quote, I'm not sure what it means to have a shortage of 200,000 doctors. We could make more simply by letting more into our medical schools, and immigration policy wouldn't have to enter into it at all.]

This is yet another in a long list of assertions that ignore how markets work. Any such statement should be followed by, "at the price we're willing to pay." You can get doctors to North Dakota or anywhere else, just as you can attract students into certain fields of study, just as you can compete with the industry leader in a certain technology - if you're willing to pay for it.

Now I'm not contending that that isn't hard sometimes. Finding a million dollars for two years of a doctor may seem like an intractable problem, just as wresting someone away from Google's search team might present a real challenge to Microsoft's recruiters.

But those are options, and they shouldn't be removed from the discussion just because someone sees a more expedient route if they can just push (lobby? pay?) to have laws changed. Immigration has increasingly become the solution of first resort, when it should only be part of the mix as one possibility. I've written before that there may be times when certain markets have a short-term shortage that requires importation of labor, but, if that happens, any relaxation of visa quotas should be accompanied by a longer-term strategy to alleviate that shortage. Clearly, that second part never actually happens; instead, we change our policies yet again to make the relaxation permanent.

I'm all for attracting the "best and the brightest" to our shores, but I know too many talented developers who are unemployed or underemployed or underpaid to believe that magical people from overseas are going to upgrade the profession, especially when a large number of companies aren't seeking out the best and the brightest, just the cheapest and most easily exploited. Sure, it's easy just to churn out the visas and give American companies and governments what they want, and it's a lot harder to look at the long-term implications of our decisions and be rational about it. But being hard shouldn't serve as a dterrent to doing what is right.

Rush to judgment

Kevin Drum:

From Rush Limbaugh, commenting on the deteriorating economy:

In the Oval Office of the White House none of this is a problem. This is the objective. The objective is unemployment. The objective is more food stamp benefits. The objective is more unemployment benefits. The objective is an expanding welfare state. And the objective is to take the nation’s wealth and return to it to the nation’s quote, “rightful owners.” Think reparations. Think forced reparations here if you want to understand what actually is going on.

The tendency of liberals to shout "racism" a little too often is not one of my side's most attractive qualities. But it's a damn sight less disturbing than the tendency of conservatives to ignore racism when it comes crawling out from under rocks on their side. Limbaugh's message could hardly have been more obvious if he'd donned blackface and performed a soft-shoe in his studio.

Is there any real proof that this guy speaks for the interests of large numbers of people? Yes, his radio show draws big ratings - for a radio program - but we're still talking somewhere under 5% of the population. This number might be significant at the margins, but only if Limbaugh's leading his listeners somewhere they wouldn't already be going.

And I don't think that's true. I really doubt there are any Obama supporters who flip on Rush, then say, "Wow, he makes a lot of sense," and join the dittoheads. He's an entertainer playing to the same audience, the people who nod their heads and tell themselves that Rush really reflects their point of view.

Yet he gets an amazing amount of attention from people who ought to know better. To accept Rush Limbaugh as a transformative force is akin to believing that Ashton Kutcher is a technical visionary; why, then, is the first belief so common and the second so ludicrous?

If I had to posit a reason, I'd say it's because we look for significance in success. Limbaugh has a lot of listeners, at least compared to other radio programs, so there must be some kind of importance there. American Idol gets big ratings and has the word "American" in it, so must represent the deep manifestation of the American Dream that all individuals have a weight, whether externally manifested or internally realized (there's your thesis topic for today, kids).

Maybe popularity doesn't always imply significance. Maybe Limbaugh's 13 million listeners wouldn't miss him if he went off the air tomorrow, maybe he's just a habit. And maybe we should all stop caring about his predictable and specious rants that insult our intelligence.

Monday, May 11, 2009

Great minds think alike

I may have sorted out my computer problems, so I'm finally able to catch up with some blogs I read regularly.  One of those is that of sportswriter Joe Posnanski, who writes copiously among all the other work he does for the Kansas City Star and, now, Sports Illustrated.  (And he has a new book coming out 9/9/09, which I expect to be quite good, though it will have to go some to beat his last one.)

At any rate, he wrote last Friday about streaks in baseball, reiterating the evidence that there really is no such thing as a "hot hand," something that seems counterintuitive.  The most hallowed record in sports, the 56-game hitting streak of Joe DiMaggio, has been shown to be, actually, pretty likely (that is to say, someone in the history of baseball should have done it, not necessarily DiMaggio).

Coincidentally, that's pretty much the same thing I was writing about on Wednesday, that any specific occurrence might be quite unlikely, but that something of note would happen is very likely.  At a single point in time, for example now, it is almost certain that something interesting and improbable is going on, whether in sports or anything else.  Streaks and records are fun, I certainly enjoy them, but there is a kind of inevitability in them, if not any specific one.  So take a lot of what you read about improbability with a grain of salt.

[By the way, if you like baseball, go on to read the rest of Posnanski's post.  He talks about some amazing hot streaks in history, and any post that remembers Rico Carty is fine by me.]

Educational triage

It's been, hard as it is for me to believe, almost three weeks since I promised a follow-up to this post, one in which I discussed (yet again) the difficulty of waving a magic wand and creating 3,000,000 great teachers. It worked off a taxonomy created by Carol Burch at Decidedly, in a post where she abstracted out eight qualities that might be used to define quality in teaching. It was a good post, and the qualities did a fine job of covering the waterfront of the kinds of things we should want in our teachers, but I felt there were still good-sized problems:
So the initial question, how do we find people who are top-notch across the board?, morphs into, how do we manage the trade-offs that are inevitable? And that's the part that I never see discussed. The solution always comes down to: find good teachers, and break the unions so that we can get rid of bad teachers, and education will become great for every student.

We assume that the evaluation function is perfect, but let me pose it to you: how would you design an evaluation process that would tell you how well a teacher "understands students holistically"? I'm not ridiculing the concept, I'd like to see every teacher do that, I'm just wondering how we rate a teacher on it.

But, even if we somehow get past that problem, we're still left with the challenge of how we manage the reality that most teachers will come up short on one or more of those. There's some lip service paid to the idea of Great Teachers mentoring the newcomers, but I've never heard of such a system working totally well. And some of those attributes may be more genetic than malleable (I have no idea how you teach someone to build trust in others, at least not without a commitment to one-on-one instruction that is unlikely in cash-strapped school districts).
What I believe we have is a problem not of aspiration, but of possibility. We want all our schools to be great, to maximize the potential of students and thus make them happy, productive members of society, so we create policies that, were miracles to happen in execution, would get us there. If, somehow, 3,000,000 great teacher candidates were to show up, we want to have the infrastructure in place to attract and keep them in the profession, so we push for higher pay and better conditions and smaller class sizes. And, invariably, we end up disappointed, with another 25-year plan in place that "might" solve the problems, starting the cycle all over again.

As I've written before, one of the problems is that we don't set real goals for the system as a whole. We are stuck with the idea of creating "educated" humans, and we're getting pasted by other nations' systems that have far more specific goals. We come up with specific goals, not for what someone might do with that education, but for a proxy: standardized test scores. And that fails to work, so we change the proxy goals, we "get tough" on principals and teachers, and we sit back and watch the line...remain essentially flat.

Oh, we think we have goals, that of getting every student into college, get that four-year degree, jump into the middle class, but that goal is increasingly opposed to the reality of the jobs we're creating. So we pretend that we aren't putting millions of students through vocational training, that we're teaching them to "have the skills" necessary to exist in a flexible, ever-changing society, even though we can't define what those skills might be nor determine how to teach them.

One of the brilliant PR constructs of our time is the way that politicians and policy makers have found studies that purport that all student achievement is dependent on teacher quality and, to a somewhat lesser extent, administrator quality. That reductionism allows us to ignore the very real effect of home life and nutrition on the ability to educate our children, because those are problems that would require some effort on the part of those politicians. Far easier just to put it all in the hands of the teachers, then we can see the "get-tough" upper-level administrators rail at how "we won't accept excuses for failure from our teachers" (see: Michelle Rhee of D.C.).

But education is inextricably embedded within society, and trying to sever that link so the problems are easier ("if only those blasted unions would play ball, we'd have world-class schools") is a cop-out. We need to go back to the beginning, figure out what our schools are for, and create policies that have a chance of advancing the nation and its citizens.

First, we need to embrace what we used to call technical education (before that, manual arts). This is by no means a personal desire; what little shop I took was an unqualified disaster, as I firmly belonged on the academic track. But many of my fellow students did not, and would have been far better served by education that met their needs and their skills.

I don't mean that we should track kids too early, and we should still provide a basic education in everything so there's a common ground in being an American. But we already subsidize Internet service and pay for public libraries, so even the most vocational of high school graduates will have ample opportunities during his or her life to move back into a more academic existence (though I concede we'll need some social changes to overcome some of the stigma of that path).

Instead of putting every student on the same college-prep assembly line, and propping them back up when they fall off, at least until they turn 16 or 17 at which point we call them failures and let them fend for themselves, wouldn't we be better off expanding opportunities and recognizing that the real job market and personal attributes call for a larger vision as to what education should be?

But I've written about that before, so let me get to my second idea, one that I offer not in a wholly committed way, largely because it's impractical and would be seen as elitist and non-PC. But it's an idea that might serve as a bridge to help the talented while we figure out how we provide a decent education for every child, something we seem unable to do now.

It's triage, in which we save the kids who have a chance to thrive by pulling them out of the toxic school environments in which they're forced to try to get ahead. We use the same standardized tests that are failing to save education to at least save some.

Every year, we take the top X students from the tests (X would have to be determined by practical concerns and money), and take them out of their environment. Not only do we move the student to a school with good teachers and decent facilities, we move their families as well, with job opportunities and subsidized housing. The promising 7- or 8-year-old will be allowed to grow in the best environment our society can provide, and we enjoy the fringe benefit of helping entire families.

Of course there are problems with this idea, some real, some illusory. I'm going to ignore NIMBY concerns because this idea wouldn't hurt anyone - I'm not recommending wholesale demographic changes, just a sprinkling of good kids and their families throughout robust communities that can easily survive this meager effect.

A more realistic criticism is that this idea would put the youngest children in a position of being responsible for the well-being of their entire families, and I'd be daft if I didn't have some misgivings on that score. But this, and other criticisms, have to give way to the larger sense that we are failing most those who need the schools most to work, and we need to do something other than continued posturing and hearings and laws and programs that never seem to accomplish anything.

I know that, in Chicago, some might say that the public schools are already offering some of this through charter and magnet schools. But these are iterative, not transformative, steps, compounded by the practical unreality of asking schoolchildren to commute two hours each way every day to get an education that is, after all, promised to them by law and by tradition.

I doubt that anyone would take this idea seriously; the charges of racism and brain drain would be sufficient to derail it. But we have to do something, and throwing 10% more salary at teachers isn't going to cut it any more than vouchers or charters or whatever other magic beans that the educationist establishment has in its rucksack. Let me state the problem one more time: current theory suggests that the only way to give a proper education is to find 3,000,000 great teachers. Unless you have a plan to get that done, it may be time to try something else.

Note: understand I'm not saying that, were we to implement triage, we give up on certain school districts. It is simply right to provide a high-quality education to every single American child. But we can't even define "high-quality" right now, much less provide it, so we need to get off our duffs and try to help the high-potential children who, who knows, might offer the larger solutions some day.

Sunday, May 10, 2009

Mother's Day

I lost my mother a few years ago (it was at the mall, between the Orange Julius and the 5-7-9, rim shot). No, she passed away, and so this day becomes, for me, more one of remembrance than of celebration.

This will not be one of those essays that tell you to treat your mother well, to value her while she's still here...not because you shouldn't, just because you can read that anywhere, especially today. No, what I would like to urge people to do is to try to see their mothers, whether they're still around or not, as humans, with the strengths and weaknesses of all humans.

You see, I had issues with my mom, serious life-shaking issues. When she passed away, we were not on the best of terms, and I have probably felt some guilt over that...but only briefly. I have also probably blamed her for that (which is not wholly unjustified)...but only briefly.

Because to see blame or guilt requires "shoulds," a set of assumptions as to what the relationship with a mother should be. And applying that set to the real person who was my mother somehow diminishes her, reducing her to a television mom who plays a certain role in my life, and I in hers, and everything should play out the way it would in a Hallmark Hall of Fame very special presentation.

But I'm not, say, Kyle Chandler, and my mom wasn't Ellen Burstyn, and we didn't have a scriptwriter creating false conflicts and even more false resolutions so we could achieve closure by the time the credits rolled. We were real people, struggling with our lives, our places in the world, our other relationships, our weaknesses, and, every so often, our lives would intersect in ways that were positive, as we built each other up, and, sometimes, we would bring out the worst in each other, as we could use our mutual knowledge to try to ease our own pains by hurting the other.

My mom was an interesting person, but not in the cliched ways. She lived through the Depression but had no interesting life lessons to convey from her untroubled passage through that decade. My father passed away when my brother and I were quite young; rather than creating him as a symbol of veneration, Mother never got over the hassles his death created for her, and her anger prevented us from ever getting a clear picture of the man.

But she was also a pioneer of feminism, not by choice after consciousness-raising, but by necessity because she had to support her family, however resentful she might have been of having to do so. She was ruggedly independent past the point of stubbornness, and was admired and appreciated for that by a wide range of people (even if her sons often failed to reap the benefits of that attitude).

Quite frankly, there are things about her I don't particularly miss - I have not, even at the remove of several years, been able to chuckle at her more obnoxious qualities. She could be a royal pain in the, well, one area of the body is not enough to describe the irritation. I am not now at, and may never get to, the point where the negatives become endearing.

But she wasn't a symbol, and I can't blame her for not being one. She wasn't June Cleaver or Margaret Anderson, but she was one fierce lady, and I'm glad I knew her, and I miss her on this Mother's Day. So, Mom, wherever you are, have an extra martini and an extra cigarette on me.

Saturday, May 9, 2009

Speculations on significance

I've been having Internet connectivity problems the past couple of days, so who knows if this post will even make it, but I'll give it a shot anyway. As a result, there were a number of hanging-fire posts that require links and quotes, and I won't be able to give you those (because I have few links that are working right now).

What I can do is expound, briefly, on the significance of the Internet. It's a topic I've taken up before, and I tend to have a conservative view of such things. My usual question is, what would happen if X disappeared tomorrow, how would life change?

If we woke up tomorrow and the internal combustion engine had simply ceased to exist or to work, our lives would be dramatically altered, largely because we have about a century of building institutions around it. Where we work, where we live, our leisure-time activities, these choices have mainly been predicated on the idea that we have a tool that allows us to, for minimal expense really, travel hither and yon with relative ease. Had we no cars, our homes would be insupportable, our stores would be unsupplyable, and it is not at all clear (though an interesting counterfactual to mull on) what we could to survive.

And we can substitute any number of things for X and come up with similar results. Electricity, water distribution, the use of steel in construction: We can posit a world in which these things weren't developed, but it's difficult to see how we would get from the world we have now to a world in which those things didn't exist.

To me, the Internet has not yet reached that level. I'm not trying to minimize its importance in transferring information about the world, and it has brought about many changes. If the Internet suddenly disappeared, there would be huge inconveniences to a lot of people and organizations that have made it an integral part of their existence.

Yet, the pre-Internet institutions still, for the most part, continue to exist. We still have universal mail service, paper on which to write our letters, and stamps with which to mail them. We may get our news online, but we still could wander down to the newsstand and pick up a paper if we had to. The new networks such as Facebook and Twitter, whatever their potential might be, are still not necessary to the living of anyone's life; you can still join a bowling league if you want to.

Obviously, anything in that preceding paragraph might change, especially in the media universe. We may be very close to the moment when a major American metropolitan area ceases to have a newspaper of record, abandoning the field to the World Wide Web. But, even then, a large number of people will get their news from the radio or television, and the Internet will continue to be one option among many.

If you want to argue that the trend is clear, that the Internet will one day have at least the importance of the automobile or any other invention, I'm not disposed to disagree with you. But the overheated rhetoric, the embarrassing TIME essay by Ashton Kutcher about the founders of Twitter (I'd link to it if I could), the bandwagon-jumping of people who should know better, all this is still based more on a view of the future, not the reality of the present. We haven't yet scratched the surface of all the ways we might end up using the Internet, but it will take a lot of work to make that happen. So maybe we can tone down the fervor, OK?

Friday, May 8, 2009

Butterflies are free...why not books?

I'm not sure what Yglesias is thinking here. It seems that he's unhappy about having to pay $33.59 (on Kindle; $95 if he wants a paper and glue copy) for a philosophy book (which Yglesias admits is "relatively obscure"):

Given that the marginal cost to Cambridge University Press of giving me a Kindle copy of the book is almost $0 it seems a bit absurd for the price to be so high. What’s more, according to the CUP website: “As a department of the University of Cambridge, its purpose is to further the University’s objective of advancing knowledge, education, learning, and research.” It seems to me that knowledge, education, learning, and research are not being advanced by seeking to extract exorbitant monopoly rents from relatively obscure philosophy books. Would not knowledge, education, learning, and research be better advanced by making such books as widely available as is practical? Obviously, in an era of physical books even a commitment to such a policy would imply a fairly high price. But electronic publishing via Kindle, it seems to me, ought to change the occasion.

We live in a world where, in principle, it ought to be viable for CUP to offer Peter Railton’s books for sale quite cheaply....That, it seems to me, would be a world in which knowledge, education, learning, and research are being advanced.
Perhaps Matt is so fixated on the Internet that he's decided everything should be free, though his own book (not even available for Kindle) sells at a discounted rate of $15.57 at Amazon. But his argument doesn't hold up at all.

First of all, let's dispense with the Kindle vs. tangible book point. I can pretty much guarantee you that 408 pages, even including printing, handling, and delivery, doesn't require a premium of $61.41. Clearly, the price comes from other considerations than just those of production costs.

Second, why does the obscurity of the book matter? Sure, Railton might sell more books if each was priced at $5, or $1, whatever the medium, but the publisher has made a decision that the right price point is $95 or $33. This exposes a common myth, that markets exist to get products to people; that's untrue, of course, markets exist to maximize profits. If CUP can make the most money selling 1 copy a year, they'll price it in just that way (I'm deliberately ignoring the odd aspects of university presses).

And that point is true regardless of the popularity or sales of the book.

Let's move on to the nub of the argument, that books should be priced in such a way as to advance "knowledge, education, learning, and research." You know, I'd love that too. I have all kinds of books that were bought for just those purposes, and I would certainly love it if all of them had been virtually given away.

If you want to contend that Matt's point is specifically about Cambridge University Press because of the statement he found on their web site, well, that's just not enough. Presumably every publisher could list similar goals, even if profit is a little higher in the mix for a commercial publisher, but CUP has employees and a building and expenses that need to be covered, and that's not going to happen if they're just freely disseminating information.

And why would any author sign up with a publisher that told them, "You're not going to make anything from your work because we're here to advance knowledge"? (Of course, one could argue that the book isn't publishable by a mainstream publisher due to its obscurity; then why is it publishable at all?) Yglesias himself writes a blog that may advance knowledge, and he's paid for that, even though his organization could advance more knowledge if he gave them his blogging skills for free.

Thursday, May 7, 2009

Oh, details, always with the details

Robert Reich today on the outcome of the Treasury Department "stress tests":
The outcome of the "stress tests" will be that the banks needing extra capital will get it from the Treasury. But where will the money come from, now that the TARP fund is almost exhausted and Congress is dead set against providing more bank bailout money? The Treasury will simply swap debt for equity – turning what the banks owe the government into shares of stock in the banks. Presto. Ailing banks will get more capital, and Tim Geithner won’t have to go back to Congress to ask for it.

But by this sleight-of-hand, the public takes on more risk. Much of the money we originally gave Wall Street took the form of senior debt. We were preferred creditors, meaning that in the event of bankruptcy (or some form of it) we’d get repaid first. But as shareholders, we’d get nothing. As we’ve seen time and again during this economic crisis, shareholders lose big.
Wait a second. Let's go back:
But by this sleight-of-hand, the public takes on more risk.
Professor Reich goes on to discuss the likelihood that, should we become the major bank shareholders, we might well not make the money back (though that doesn't seem to be the common assumption of the administration and most economists), and it's not clear at all how governance is done in a publicly-owned bank (my guess: business as usual, see AIG for details).

It seems to me that pretty much everything that's being done right now pushes risk onto the most vulnerable, and anything that might reduce risk (national health care, for example) is deferred or delayed or otherwise left for later.

Perhaps this is inevitable. After all, the nation as a whole has spent itself and leveraged itself into a remarkably risky position, and none of this can be unwound without involving the "regular people." Clearly, a good portion of what we're experiencing now is actually the realization of the risk we deferred year after year.

But risk rarely spontaneously decreases, it takes positive innovation to do that. Otherwise, most actions just move risk around. For example, the invention of circuit breakers made the use of electricity far less risky than it had been. Traffic lights, the use of automobiles - we could come up with any number of examples.

The financial world, however, has spent its time on innovations that do not in fact reduce risk, but move it around. Sometimes that's been desirable, as it is for commodity futures, in which the risk is removed from the farmer who just wants to focus on growing a healthy crop, and given to a trader who's comfortable with the downside potential (but believes his or her innate smarts will offer upside).

What we've seen over the past few years is the negative side of innovation, a host of complicated-sounding products that have simply moved risk around, and not always to those who are willing to embrace it. We've also had a lot of puffery, much of it expounded by seemingly trustworthy types, to the effect that, for example, the stock market always offers positive returns over the long haul. And we've bought into that puffery, believing that risk has somehow been removed from the system when nothing of the sort has happened.

That hits home only when a family wakes up and realizes that putting Junior's college fund into a can't-drop-in-price house, or worse yet, into a big screen TV, actually pushes their risk (and Junior's) into unacceptable territory.

We can explain a few other things through this spreading of risk (if you want to read some real-life examples of risk-shifting, I direct you once again to Peter Gosselin's excellent book High Wire). Income inequality is a direct consequence of spreading inappropriate risk around the economy.

It's also the case that there is a global risk, and, as we take steps to reduce the risk in other countries, we assume that much more ourselves (creating more certain income streams for Indian computer programmers makes returns for American programmers that much more uncertain - I'll leave it as an exercise as to whether there are other compensations that make up for that).

There is clearly a political opportunity for someone to pick up on and speak to the increasingly risky lives of Americans. It could be done by intelligent re-examination of our national priorities, adjusting spending even as we provide appropriate stimulus; this is unlikely, as chronicled today by EconomistMom. Or we can slip into foolish demagoguery, which appears to be the approach of the Republican Party.

What we could do is reprioritize, accept that our chickens have come home to roost, and intelligently reorder things so as to deal with the reality of a poorer nation than we would like to believe we have. I am not hopeful.

Wednesday, May 6, 2009

Win-win vs. positive-sum

I really shouldn't have to go through this again, but a panel discussion on Charlie Rose last night makes it clear that we have a long way to go. The discussion concerned free trade; unfortunately the panel was severely skewed, offering a former U.S. trade representative, two economists, and the hapless Senator Sherrod Brown (D-OH), who was the only one trying to provide any dissent from pro-free trade orthodoxy. He offered very little that was coherent, especially in light of the relentlessly sunny views expressed by Susan Schwab, Jagdish Bhagwati, and Alan Blinder.

Let me take up one point that came up a lot in the testifying by former Bush trade representative Schwab. She tried several times to conflate "positive-sum game" with "win-win," and everyone just sat there and let her get away with it. I have no doubt that Bhagwati and Blinder get the distinction, but calling her out would have undercut an argument that they fully supported.

As I went through in some detail last month, the two concepts are not at all identical. Win-win does imply positive-sum, but the opposite is most definitely not true, particularly (but not absolutely) when there are more than two parties to a transaction. It is quite possible to posit that trade is a positive-sum game, yet still find that there are winners and losers, that large numbers of people will not net any benefit.

Let me try another example. Let's say I ask Charlie Rose to give me $10, and also ask him to get 99 of his friends to give me $10. I take this $1000 and, through a magical process (oh, let's call it free trade), I turn it into $1500. I then give Charlie back $800, tell him that returns weren't guaranteed, and walk away with $700. The system as a whole is wealthier by $500 (positive-sum, oh yeah!), but we have a win-lose-lose-(98 more lose's) proposition; Charlie and all of his friends are worse off than they were before.

It is popular to try to identify these two principles as equivalent. "Positive-sum" sounds kind of wonky, while "win-win" is clear and positive and cool. But all we can absolutely say about free trade is that it's positive-sum; we cannot, using classical economics, determine the distribution of those positive returns.

To be fair, there was a little discussion of the fact that some people do lose from free trade, and Sen. Brown tried to make the point that those people are almost invariably Americans. But the rest pooh-poohed the idea that the number of losers was significant, and Blinder in particular threw out the standard canard that all we need to fix the problem is enhanced benefits, retraining, trade adjustment assistance - you know, all those programs that aren't really working all that well now.

In general, I'm for free trade. It gives me access to goods I would not otherwise have, probably at somewhat lower prices than a purely domestic market would offer me. It makes me feel good to know that we're giving the rest of the world's people the opportunity to improve themselves through some means other than direct aid.

But that doesn't mean we should use specious arguments to get there. One of the more uncomfortable moments in the discussion was when Blinder contended that it was a failure of the economics profession that it hasn't "persuaded the general public of the virtues of comparative advantage and trade across nations," as if the problems presented by free trade could be washed away with the right marketing campaign. Americans may not be as well-informed on such matters as we would like, but they can see what's happening right in front of them.

I will point out, yet again, that our systems are human constructs, made for the benefit of actual people - if they don't work right, we need to fix them so they achieve the goals of our society.

Confusing "positive-sum" with "win-win" is misleading. Lumping free trade in labor together with free trade in goods is misleading; the markets are very different, and have differing objectives. Vague hand-waving as to how we might redistribute some of the gains from free trade doesn't accomplish anything. There's a tendency to inflate the gains from trade to make the orthodox view more acceptable. And the "fair trade" people have a point, should we really allow corporations to make huge returns off of environmental and labor law arbitrage?

My basic point is that this issue is far more complicated than drawing a two-country, two-good graph and pointing to the gains (which is about as far as most economists seem to want to take it). There are real costs to real people when we allow their careers to be offshored; they are, in effect, subsidizing the people who are taking advantage of that opportunity. Maybe that's OK, but I'd sure like to see economists and politicians and businessmen have to express it in just that way, rather than shouting down the people who point it out.

Streaks and stats

On Baseball Musings, the fine summary site run by David Pinto, he quotes another site on the current winning streak (now at 17) of Milwaukee over Pittsburgh:
Let’s assume, for a second, that the Brewers have a 60% chance of beating the Pirates in any given game. The chances that they win two in a row at that rate would be 0.6*0.6, which equals 0.36, or 36%. A three-game sweep? The odds of that are 21.4%. The odds of the Brewers winning 17 in a row? The chances of that are 0.17%. Even if you assume the Brewers have a 70% chance to beat the Bucs, the odds jump to 0.23%. If we bump the odds of a Brewers win in any given game to 80% (which is pretty high, even for the Pirates and Brewers), this sort of thing only happens 2.3% of the time.
I wrote the following comment:
That analysis is fine, as far as it goes, but it's more valid to look at the probability that any matchup over a period of time might bring about that result, in which case the chances are considerably higher.

We are looking, right now, at a result that's caught our eye simply because it's improbable. But there are 30 MLB teams, and 435 possible matchups. A back-of-the-envelope calculation with the 60% figure shows us that there's actually a 52.3% probability that one of the 435 matchups leads to a 17-game streak.
I wrote that this morning, and time precluded me from doing a better job. So let me unfold that a bit more, and correct a big mistake I made.

The original quote incorrectly figures the probability of any one team beating another team 17 straight times given a single probability of winning (we know that's untrue, as the percentage should actually fluctuate quite a bit depending on starting pitchers, home field advantage, injuries, and what have you, but the overall unlikelihood is roughly correct). It gets off to a rough start, in that the probability of winning three in a row is 21.6%, not 21.4%. The probability of 17 in a row is actually (0.6^17), or 0.017%. (With 70%, it is 0.23% - drat, that's where the first number should have seemed wrong to me - I told you I was in a hurry earlier.)

As I stated in my original comment, there are 435 (30*29/2) possible matchups between two teams in a 30-team league, so, if you're looking for the probability that some two teams will feature a 17-game streak, you have to use that (unless for some reason you really are focusing just on the Milwaukee-Pittsburgh competition).

So, and here is where I revise my original comment, the probability that one of the 435 matchups will contain at least one 17-game winning streak will be (using 60% - I know that's wrong, I'll get back to it in a minute) 1 - (1 - 0.017%)^435, or 7.1%. At 70%, the number rises to 63.7%.

Now, it's obvious that not every one of those matchups can be at 60% or 70%; one would assume from symmetry that they should average out at 50%. While I could write a quick program to simulate the range of winning percentages, that's a bit more of a project than I would prefer to take on today. I'll just use 50% for all matchups, which puts a floor on the result (I should explain; any deviation from the 50% figure creates a higher probability of such a streak, and you can see that by considering the case where one team has a 100% chance of winning a game against the other team, where a 17-game streak, or longer, is self-evident).

At 50%, the probability that one team can beat another 17 times in a row is very small, 0.00076%. Even with 435 matchups, one would expect to see a streak like this only 0.33% of the time, about 1 in 300. But that's the number at one point in time, and there are numerous opportunities to see a streak of this type.

I won't essay the math on how often we should see such a streak over the whole of major league baseball; the noise threatens to overtake the real information after a while. I will offer a simplification to at least gauge a result, that this problem is analogous to that of any 17-game winning streak. In that case, we should see a streak of this length 1 in 131,072 times. But we have 30 teams, and the streak can start in any one of the 162 games in a season, so we might expect to see a streak like this every (131,072/(30 * 162)) seasons, which is right around 27.

In this light, that this is the longest such streak since 1970 would make us think that, just maybe, we shold have expected this before now. It certainly doesn't seem that this quote from the original article, "When one team loses to another seventeen straight times, it's not just a case of good vs. bad. It's a case of good vs. bad with a sprinkle of bad luck and an incredible rash of improbability" is true at all.

Tuesday, May 5, 2009

A couple of follow-ups

1) Sunday, I wrote about Kevin Drum's struggles with Nassim Taleb's The Black Swan, a book that, for no particular reason, has vaulted the author into the pantheon of pundits. His unremarkable observation that "bad things happen," cloaked as it is in self-indulgent tracts of virtually unreadable prose, struck me as a very few good ideas in search of a book.

Kevin found it "odd" and "intensely annoying":
The problem is that Nassim Nicholas Taleb basically sounds like a crank. His prose has all the usual markers: everyone else is an idiot (this includes philosophers, economists, historians, journalists, and pretty much all social scientists, among others); he's the only one who truly understands the world as it is; there's a monocausal explanation for this almost universal lack of understanding in others; and there's a tiny cast of other unappreciated geniuses who do get it (Benoit Mandelbrot, Karl Popper, G.L.S. Shackle, Daniel Kahneman, etc.).
But what of the content (and Taleb certainly pushes against the idea that we can separate style from content)?:
Generally speaking, he wants to persuade us that we know less than we think and that forecasting the future is a mug's game because history is primarily governed by huge, unpredictable events that come out of nowhere (black swans). But this is sort of a banal point: scholars have been arguing about the importance of contingent events vs. broad historical trends forever, and the difficulty of predicting technological breakthroughs is well-trod ground. Worse, Taleb doesn't add much to what's already been said about it. Just the opposite, in fact. In one chapter he cherry picks some inventions here and there to help make his case, but even using his own hand-picked examples he's not very convincing. We all know that penicillin was discovered by accident, but the computer? Taleb seems to think it sprang out of nowhere, but that's sure not how I remember it. It was a big invention and a huge discontinuity, but it was hardly unpredictable and hardly an accident.
Kevin seems to be surprised that there is so little there there, but is willing to concede that he may have missed the point. I would say, Kevin, you didn't miss the point at all; the real challenge is to explain why so many others have been so influenced as to make "black swan" a hot term, and Taleb a media star.

2) As for the disappearance of the great blog Carrie's Nation, in a comment to my follow-up post, 2Truthy unfolds the speculation that she shared with Melvin Toast on her fine blog, to wit:
In a nutshell, the entity known as 'Carrie's Nation' was likely one or more professional researchers working for a firm that pulled the plug at the end of April. That explains the blogger, CC's sudden and mysterious disappearance. Job over, on to the next disparate gig, maybe with tax codes. Detroit housewife? Fine. Sure.
That may be so, and fits the facts as we know them as well as any other explanation (including 2Truthy's offer of CC's suicide as an explanation, and mine of the Obama Indian technology cabal pulling the plug and sending her off to Gitmo).

If that is so, then there is actually a kind of Turing Test insidiousness to the Carrie's Nation experience, no matter how much I might tend to agree to the purpose to which it was put. The creation of a back story, complete with blog posts containing out-the-front-door pictures of a snowy day; the personal e-mails that I exchanged with CC; the idiosyncracies that, at least, seemed grounded in quotidian life: If all of these are fictions, I am left with a peculiar feeling.

Again, accepting 2Truthy's theory requires me to accept that a lie lay at the heart of Carrie's Nation. I have discussed my reasons for cloaking my real identity, but I am still the person I have revealed here. My name wouldn't add anything to the discussion, but every material fact I have written is, indeed, a fact. I can't really say that I like the idea that CC may have been a corporate figment, partially because my own representation of "her" is put in question, but more because it casts doubts on anyone who adopts a nom de plume for whatever reason.

So a part of me resists the theory, even as time and logic dictate acceptance. If that's the case, then perhaps 2Truthy is the passionate alter ego of George Will (he doesn't really believe the stuff he writes, so expresses his true feelings under an alias), mcfnord the online avatar of Bill Gates - heck, maybe I better go check my driver's license to make sure I'm not some consortium of think tank-ers writing my little blog each day.

Monday, May 4, 2009


Robert Reich explores the question of Why Obama is Taking on Corporate Tax Havens, as the president takes aim at foreign sheltered income, especially when there are so many more important things to do. This now becomes the, oh I'll say, 67th thing that people on both sides of the aisle have questioned:
So why take them on now, when the President is also taking on universal health insurance and global warming, and trying to get the economy going again?
Reich's post is typically interesting, as he knocks down a couple of reasons. Professor/Secretary Reich doesn't believe that closing these loopholes will necessarily save American jobs, as the companies might have less money to employ people, or might just leave the U.S. altogether.

He doesn't think Obama is urging a crackdown because he wants to fulfill a campaign promise; after all, he's already backing down on modifications to NAFTA. What could it be?

Reich offers a couple of ideas: 1) Obama may be putting forth a bargaining chip that he can take back in return for support on universal health insurance; and 2) he may be using this as a revenue source to pay for his health plan. Either of these could be true, though we still haven't dealt with the larger question: Why is Obama taking on so much, when he (should be/could be) focusing on the economy with the intensity of a laser?

Here's what I think may be happening. I believe Obama takes a holistic view of America, that he has a vision that encompasses pretty much everything. Further, he knows that he will never have a better chance to implement many of the policies that will get us where he wants to be.

He sees universal health insurance, paid for by relentless efficiencies; a strong economy based on free market principles, but with stepped-up regulation to ensure equity; significant progress toward energy independence; improved education opportunity leading to work opportunity; and a bunch of other stuff. Most importantly, he sees all of these things as parts of a new system, interconnected in necessary ways, rather than as a laundry list of up-or-down items that may or may not be done (which is the typical way Congress works).

I applaud this, even though I disagree with some of the specifics. Personally, I think that the U.S. is going to have to do some serious prioritizing over the next decade or so, and that we may never get back to the bubble-induced trend line that we were on, but that view is not incompatible with Obama's. We could establish a set of priorities that move toward the Obama view of the future, then explore what we might have to do to get there (I'd imagine a serious reduction in what we call "defense" will be required, but that's just one example).

As I've chronicled in this blog in the past, I don't believe in many of Obama's specific prescriptions; he seems as captive of "conventional wisdom" as anyone else. However, given the contradictions into which we're led by the orthodoxy of either party, I'd rather see someone with a vision of America's future try to lead us there, no matter how flawed that vision, than see a continuation of the policy-by-policy, calculated within a strategy for re-election, view that has dominated American politics for far too long.

Sunday, May 3, 2009

Lotsa luck, Kevin

From Thursday, Kevin Drum, talking about the media reaction to the swine flu:

So will we ever know if SF 2.0 was The Big One? If it kills a billion people, yes. If it doesn't, no. We'll just have to keep wondering. Which, to my surprise (and to change the subject completely), turns out to be a big chunk of what Nassim Nicholas Taleb writes about in The Black Swan. After I was (properly) smacked down over my airy dismissal of Taleb a few days ago, I finally decided that maybe I ought to actually read his book instead of relying on the odd blog post about it, and I have to say that it's not at all what I expected. So far, anyway. It's a real mishmash of odd potted historical anecdotes that go nowhere, interesting insights about human nature, opinions about historical contingency that are strangely unmoored from even an acknowledgment that lots of other people have thought about this subject before, and conventional observations about things like confirmation bias and the limits of induction. However, Taleb swears that he's a doer, not an idle idea spinner, and by the time I'm finished I'll get some genuinely concrete advice about how to deal with uncertainty and the limits of knowledge in real life.

We'll see. I'm a little skeptical based on the first few chapters, but I suppose Taleb himself would warn me that even a long string of mediocre chapters doesn't mean there won't be a phenomenal one that will rock my world when I least expect it. If I finish it this weekend, I'll report back.

Had Kevin asked me, I could have told him that there is no black swan in The Black Swan, but I guess he'll just have to figure that out on his own.

Saturday, May 2, 2009


Everyone's got a blog now. People, from famous to not, are creating Facebook pages, though there are those few stubborn holdouts who cling to their MySpace pages. And now there's Twitter, and even the most hardened reporters are jumping on board; Philip Hersh of the Chicago Tribune is tweeting, even though he admits it will mostly consist of links to other stuff.

Of course, there's the recently reported stat that Twitter loses more than half its devotees each month, though there are theories that the number is inaccurate because of the way the data is collected (it may not be fully accounting for phone usage). But that's a bit off-topic.

I have no idea how the internal workings of our newspapers are grinding these days, but I would guess that Hersh didn't wake up the other day and say to himself, "I feel the need to tweet." I believe that it is much more like my speculation in my March post, The future of journalism, in which I mused that there would be ever greater pressure on news reporters to turn out endless streams of copy for platforms of all types, whether they be print or a blog or Twitter or so forth.

So my question is, what will be the threshold of acceptance for a platform to be added to the list? If someone comes out tomorrow with Twitter+, a site that requires one to write messages of 141-280 characters, how will organizations know when they should jump on that bandwagon? After all, we know that the most popular blogs are overrepresented by the writers who started up around 2003. Facebook probably seemed more useful before everyone had a page. And I have to think that new Twitterers are likely to be lost in the noise. So there's likely to be quicker movement to the next big thing, even if it turns out to be not so big.

I'd expect a lot of time to be wasted as people and organizations chase the future, and I wonder just how evanescent our information is likely to become.

Friday, May 1, 2009

He's back!

As he promised, John McIntyre, erstwhile copy editor at the sad Baltimore Sun, is back on the web. So we were only without him for a couple of days, which is a very good thing. You can enjoy his, well, I can't say it better than he:
Observations on language and the craft of editing, with additional reflections on subjects of no necessary connection with the former topics. Comments are welcome, and commenters are invited to keep a civil tongue in their heads.
at You Don't Say (that's right, unlike Larry "Bud" Melman, a name that NBC kept when Dave Letterman moved to CBS, the Sun has allowed Mr. McIntyre to take the name with him). [And I give the Sun credit for providing the link, without which I might have had trouble following this blog.]

His first non-welcome post is about the national conference of the American Copy Editors Society. I guess they're all in Minneapolis, at least if you read the sports section of the Chicago Tribune today to discover that the Marlins scored their game-winning runs in the 9th inning yesterday - I was watching the game, and could swear that the runs came in the 10th, but who am I to argue with a great metropolitan newspaper?

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